There is a sentiment that somehow this reduction in the number of dealers will save the manufacturers massive amounts of money. Dealers are not a cost center for their respective manufacturers. A study by the Casesa Shapiro Group found that auto dealers provide a vast distribution channel “at virtually no cost” to their manufacturer. Dealers have millions of dollars invested in order to provide prime retail space to manufacturers at no cost. This a major cost shift from the manufacturer to the dealer.
It is much like the shelves of a grocery store. The dealers provide shelf space (most of it the prime shelf space in the store) at no cost to the manufacturer. Were it not for the dealers, the manufacturer would have to own that shelf space in order to display their vehicles.
The dealer network is a huge asset to an automaker. Dealers are the automaker’s customer; dealers buy the vehicles, parts, special tools and other items from their manufacturer. In other words, dealers equal revenue for their manufacturer. It makes no sense to cut into your customer base in good times, much less during an economic downturn like the one we’re in right now. A radical reduction of dealers will devastate a manufacturer’s revenue and market share.