Automotive Case Study: Industry Analysis for NADA

Faced with pressure from a growing chorus of government agencies (e.g. Federal Trade Commission, Department of Justice), certain economic academics, some consumer advocates, and one highly visible automaker all suggesting that the dealer franchise system was a relic from the past and only added costs to the distribution and sales of new vehicles, the National Automobile Dealers Association (NADA) determined that it needed a “white paper” to demonstrate the consumer benefits of the franchise retail system. In 2013, we were asked by NADA to produce such a document which was published in early 2014.

Although the dealer system (and its precursors) had been existence for nearly 100 years, going through periodic cycles of expansion and more recently significant downsizing, the existence of franchised dealers largely remained anchored as the distribution/sales/service model despite constant attempts to undermine or discredit the dealer system. The advent of the Internet which created new pathways for sales of many products, yet new vehicle sales remained within the province of the dealers in all 50 states and to some degree protected from manufacturer competition by various state laws. (The laws were mostly designed to protect local dealer businesses from unfair or predatory practices of their much larger and financial capable OEMs.) Various groups now sought to eliminate or modify dealer franchise laws to allow direct manufacturer sales everywhere.

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