A new way to sell cars

I never intended this to become a car blog, but I seem to be fixated on the subject right now. Today's New York Times Magazine has a picture of a Think car on the cover (along with Al Gore, Bill Joy, John Doerr, and who I think are Ray Lane and Randy Komisar--I haven't seen either one of them for a long time). The Think is an electric car made in Norway; the cars were once imported into the U.S. by Ford, when all manufacturers had to offer electric cars in California, and if you live in Northern California, you can still see a few parked at Palo Alto's city hall. However, I don't want to talk about the Think in particular, or the article in NYT Magazine about Kleiner Perkins, but rather about how cars are sold.

The current car dealer system in the U.S. is at least 80 years old. It was built in a time when transportation of cars was extraordinarily expensive, so it made sense to warehouse cars at dealerships across the country. Face-to-face selling was the only model that made sense. However, dealers today are going through an economic disaster, thanks to the high cost of credit, which makes keeping cars on the lot much more expensive and makes it much more difficult for individuals to buy the cars. According to a podcast from Autoline a few days ago, the CEO of AutoNation predicts that thousands of dealers will go out of business in the next year, compared to a few hundred in an average year.

We now have a new generation of car manufacturers in the works--companies that are selling high-value electric and hybrid cars to a generation of buyers who grew up with the Internet. The dealer and service model can, and should, change to address these new realities:

• Perhaps the least radical change would be the no-inventory dealer. In this model, the dealer only keeps demonstration models on the lot, and every car ordered comes from either regional depots financed by the manufacturer or directly from the factory.  Dealerships could be much smaller (you could literally have dealerships within shopping malls), and service could be provided at another, much lower-cost, site entirely.
  
  
• The more radical option would be online ordering. Virtually every car manufacturer already has a vehicle pricing and configuration system on its website. Consumers could configure and price vehicles, and then submit them to the manufacturer, which would locate cars closest to the customer's specifications in its own inventory. The consumer would have the option of buying a car from inventory, or if nothing close enough is available, ordering a custom-built car. (For very expensive cars, the expectation is that everything would be custom-built.)
  
  My belief is that the manufacturer would be able to provide better financing options than most individual dealers. Once the financing is obtained, the car would be shipped directly to the consumer. Service would be provided by locally-owned and operated service centers.

In the 21st Century, cars don't have to be sold the same way that they were sold in the early 20th century, especially for new manufacturers who don't already have thousands of dealers to placate.  These models could lower costs for everyone and make it easier to bring innovative new cars to market.

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