When automakers created the franchise dealer network in the 1910s, they believed they had invented a means of passing off enormous inventory costs to an army of salesmen. But as dealers became the sole point of contact with the auto-buying public, Detroit has often regretted the decision.
Today, simply getting a car to the customer adds more than a third to the sticker price. If manufacturers could just cut the dealers out of the picture, they could increase their margins significantly.
When auto shoppers started flocking to the Web to kick virtual tires years ago-8 out of every 10 car shoppers now browse online before making a purchase-carmakers believed they finally found a cost-effective way to make an end-run around the dealers. Nice try.
They ran head-first into a wall of state laws and other regulations that prohibit manufacturers from selling their vehicles directly to consumers-rules set in motion by Detroit itself decades ago.