Wednesday, September 29, 2010

Make the rules or your dealers will

QUESTION: which industry has best manipulated the laws to protect itself from the forces of competition?

ANSWER: Car Dealers.
States earn about 20 percent of all state sales taxes from auto dealers. As a result, new car dealerships, and especially local or state car dealership associations, have been able to exert influence over local legislatures. This has led to a set of state laws that almost guarantee dealership profitability and survival -- albeit at the expense of manufacturer profits.

The bankruptcy of GM and Chrysler gave them an opportunity to reduce the number of dealerships, but legislatures are making it even harder to close dealerships. This leaves the American car manufacturers at a big competitive disadvantage:
...whereas Toyota sells about 2,000 cars per dealership each year, and both Honda and Nissan sell more than 1,000, Chrysler and GM sold fewer than 500 per dealership in 2008, and only about 600 per year in earlier years of this decade. In other words, U.S. manufacturers could drastically reduce the number of their dealerships and remain competitive with import-based

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