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Retailers, consumers and prices

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January 13, 2010

honda1(Written by correspondent James Kelleher)

The U.S. auto retail market — long controlled by franchised dealers and state laws that critics call anti-competitive and inefficient — will open up in the coming years and Honda will not be left in the dust, a top U.S. executive for the Japanese automaker said. 

Honda has already been confronted by the new paradigm in the retail motorcycle market, where upstart rivals from rapidly emerging nations have begun selling bikes directly to consumers — or very nearly so — using sporting goods stores and other unconventional channels, John Mendel, executive vice president of auto sales at American Honda Motor Co, said at a conference held in conjunction with the Detroit auto show.

“What we’re trying to prevent is someone doing to retail automotive what Blockbuster did to the video store and what Netflix has done to Blockbuster,” Mendel said at the Automotive News World Congress.

He emphasized that dealers, protected by state franchise laws that in some cases make it a criminal offense for a manufacturer to sell a vehicle directly to a consumer, would remain an important part of Honda’s distribution strategy.

But in a world where consumers are now able to order whatever they want on the Internet and have it delivered the next day, Mendel said the prognosis for the traditional sales process, which can include hours of paperwork at the dealership after the customer makes a purchase decision and can tack on thousands of dollar in extra costs, was not good.

“We haven’t cracked the code,” he said. “But we know someone is ultimately going to change it.”

Asked if he thought the push toward the new dealer-light sales strategy would be a function of Chinese and Indian vehicle manufacturers entering the global stage, Mendel said, “Could be anybody. Could be GM. Could be people in the room. But the best way to create the future is to create it.”

Critics of the current system, including the Consumer Federation of America, say laws that force consumers to buy from dealers add $1,500 to the price of every vehicle sold and saddle carmakers with an inefficient distribution system that contributed to the industry’s woes.

(Reuters photo)

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