Also, the vendor becomes insulated from customer demands.

Why patch things or work your ass off, when none of your customers have an alternative? (especially if PE buys the business or CEOs get a stock price focus and gut engineering to keep-the-lights-on levels)

There's a quiet irony in car dealership networks being fucked like this. They spend so much money ensuring their government-mandated monopoly, only to fall victim to a different kind of monopoly.

> government-mandated monopoly

Could you expand on this, aren't U.S. car dealerships private businesses competing in a (mostly) unregulated market?

> direct manufacturer auto sales are prohibited in many states by franchise laws requiring that new cars be sold only by independent dealers.

https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes

not a monopoly per se, but "forced demand"

To be specific, the objective of state statutes is to block direct manufacturer auto sales. The objective is achieved in a roundabout way: the statutes written prevent the establishment of physical dealership locations owned by the manufacturers. They are not broad enough to restrict direct sales. This means that some creative sales techniques can be used, if you:

(a) don't need to have cars in a lot,

(b) can sell online,

(c) tolerate some uncertainty while interpretation of status is fought in court.

Then, you can (in many states), sell cars directly.

Tesla does all 3 as they usually don't have (a) inventory and in some cases, the law doesnt prohibit showrooms (b) seem perfectly comfortable selling you the car online (and critically, customers are ok with this too) and (c) have money to fight for settlement of the issues.

Theres even more creative sales now - tesla is actively setting up sales ops in Indian reservations - which have their own sets of the laws outside of specific states.

Edit: added (c) which is certainly an important factor in many states

Doesn't just about everyone hate dealing with a dealership? Shouldn't it be very easy to vote to fix that in a democracy?

See “Public Choice Theory”: https://en.m.wikipedia.org/wiki/Public_choice

Or watch the BBC comedy “Yes, Minister” and “Yes, Prime Minister” to grasp how government (as well as most large companies) actually works.

Yep. Basically, in no election we can practically foresee, is this going to be a politically salient issue. The voters aren't motivated enough about it, and the interest groups involved are mostly aligned on keeping the status quo. Elections put people and parties into power, not individual ideas.

Direct democracy (https://klissarov.eu/en/books/platform-of-the-pp-direct-demo...) can change the status quo - if enough people get up from the couch and do vote for it. It just needs to reach a critical mass - but at the moment people are too lazy and wait for someone else to do the job.

Not when dealers pay politicians to keep it that way.

Even if you ran a petition and forced a state ballot measure, dealers would run a propaganda campaign to make it sound like a pro-Tesla measure.

"they're giving YOUR RIGHTS away to BIG CORPORATIONS. Vote NO on Bill 9928"

when, of course, that very line was funded by large corporations. such is life in Modern America

I think that's true for tech savvy nerds, but my mom loves her dealership. Part of it might be the experience of leasing vs owning, where the dealership often does maintenance for free during the lease.

where the dealership often does maintenance for "free" during the lease

FTFY. She's still paying for it!

It depends. Most jurisdictions allow for a ballot referendum to put measures to a popular vote. This has gotten more difficult with signatory requirements that have gotten larger in most states, mostly orchestrated to keep the dominant parties in power and limit grass roots efforts in general.

Going through existing congressional process means getting at least a champion on board and overcoming dis/misinformation from many insider corporations, often large local donors.

edit: From my understanding,successful campaigns via referendum tend to cost anywhere from $2-20 million usd. Often involving paid signature gathering and local advertising.

The "problem" with referenda is they often forcibly enact policies that the elected politicians, judges, bureaucrats, and other organized political actors don't want. Since these people decide what the government actually does, they often find ways to ignore, work around, or in some cases outright overturn, "settled" referendum results. Making it more difficult to get questions on the ballot outside of the ordinary political process is just streamlining things from their perspective.

Too bad it's a Republic.

“Republic” (any system in which top-level government offices aren't personal property of the officeholder) and “Democracy” (any system in which government serves and is accountable to the general population—usually through voting on candidates and/or specific policies—rather than vice versa) are not mutually exclusive.

It’s pretty common for modern Western governments to be both of (Democratic, often also Federal) Republic and (Representative, sometimes with minor areas of Direct) Democracy.

To put a finer point on it: actual experts in the study of government routinely refer to the US as a democracy. It’s absolutely not a sign of better familiarity with the topic to “correct” that usage—it’s a sign of low side of middling familiarity, specifically.

Debate whatever you want, we do not have a direct democracy, which is what most people hear when they hear "Democracy". It's Representative Democracy. Supposedly.

That isn’t what most people think of when they hear “democracy” in the context of describing countries like the US as a democracy. Lay-usage and expert usage are in accord here. It means more-or-less liberal and with voting that significantly affects how the state runs and/or who runs it. That’s all, and that usage doesn’t confuse anyone. If we didn’t use “democracy” for that we’d just have to come up with something else, because it’s a very useful term to have. But everyone just uses “democracy” and that works great.

It's what a nonzero number of Americans hear.

You're talking to one, who knows others.

Democracy as defined is a goal we have. Not something all (maybe most!) Americans would claim to enjoy.

You mean you thought tejohnso believes the US is a direct democracy, because of that post?

They, like many others, probably have a somewhat fuzzy grasp on what the meaning of word democracy is, due to the way it's used.

Honestly, I can't even think of an alternate(, but still charitable,) interpretation of:

"Shouldn't it be very easy to vote to fix that in a democracy?"

Suggest one, if you can?

Goalposts shift from

> most people

to

> a nonzero number of Americans

Holy motte and bailey, Batman.

Why don't you keep this thread on-topic, and reply to:

> "Shouldn't it be very easy to vote to fix that in a democracy?"

> we do not have a direct democracy, which is what most people hear when they hear "Democracy".

That hasn't been the dominant use of the term for centuries, but, sure, you keep pretending.

No, you're right, we're bringing (federated republics with some vestige elements of) democracy ALL OVER THE WORLD!

It's a federated representative democracy with some issues, some of the components of which have some level of direct democracy.

It is also a republic. It could be a republic even if it was a pure direct democracy somehow without "issues" - in fact I struggle to see how a direct democracy without issues could be something other than a republic.

> some of the components of which have some level of direct democracy.

What, HOAs?

State level initiative and referenda processes.

The percentage of people who want a law to pass is negatively correlated with the chance of it passing.

If voting could change anything it’d be illegal.

Kinda like auditing.

That's the opposite of a monopoly. It's intentionally breaking up vertical integration.

Car dealerships exist in what is probably the most favorable regulatory environment of any business. It's a side effect of owners of car dealerships often being the wealthiest people in a locale, and being politically active. If you look up donations to your local and state politicians, you'll probably find several of the largest donors have last names that happen to match that of the local Ford or Chevy dealership network.

They have rules that protect them from competition from manufactures, rules that protect them from them from competition from other dealerships (i.e., Ford can't allow a dealership to open across the street from one they don't like), in many states, there are special rules for inheriting a dealership.

No, they only exist because state laws prevented manufacturers from selling directly to customers.

They'd originally existed because manufacturers didn't have enough resources to sell directly to customers, and they'd probably still exist (in a smaller capacity) today even if manufacturers could sell direct. Because there still are some manufacturers that sell low enough volumes in the US that it would probably still financially make sense for them to lean on a dealer network.

But for sure, Ford, GM, Toyota, Stellantis, etc would probably love to sell direct.

So you're saying dealerships are more of a monopoly than manufacturers selling directly to customers?

> their government-mandated monopoly

Anyone can open a dealership, except manufacturers, and it looks to be a reasonable and non discriminatory process. Critically, the government does not mandate the minimum or maximum number of dealerships in an area, so competition is not harmed in any way. This really does not seem like a monopoly issue.

Good luck trying. Dealerships hold municipal governments by the balls.

Well.. where I live.. most municipal governments tax car dealerships to the point where they all exist mostly in one county that doesn't tax them as much. In the county that does, they have every incentive to open more, and dealerships have healthy competition and turnover.

It doesn't seem like there are any 800lb gorillas in the market where I live.

Unpopular opinion: Manufacturers like this model, in the sense that artists "like" ticketmaster.

Dealerships take a lot of inventory and capital risk away from manufactures. Most (unlike Tesla) do not what to deal with retail customers directly.

People will hate on car dealerships until the automakers remind everyone (again) why dealership protection laws were passed in nearly every state in the first place.

You basically see this with Tesla: refusal to comply with local lemon laws, the CEO personally banning customers from buying his cars, repairs that take months, service centers hundreds or thousands of miles away.

My entrepreneurial mind immediately thinks: Let's create a better solution to revolutionize this industry and make the old, expensive incumbents obsolete. We can drive to the affected car dealers and migrate them one by one.

Of course, I'm not going to do it and it's probably extremely hard :)

I'd rather we remove laws that ban direct sales.

https://www.justice.gov/atr/economic-effects-state-bans-dire...

Enterprise vendors have gotten better at locking in customers on multi-year contracts which takes away some of the biggest upside to chipping away at the market. Often a challenger will come in and snag a few smaller deals but the Monopoly has a plethora of options to swat it away - rev up their larger more experienced product team to compete, lobby for regulation, poach from the challenger, acquire the challenger, tank prices in the one area the challenger has traction, and much more.

I read a particularly disgusting book called "Competitive Strategy" by Michael E. Porter, that plainly explains how and when to carry out each of the monopoly-preserving actions you have listed

From what (little) I know, Porter's generally considered to be the expert on Strategy. What did you find disgusting about the book?

I guess we are coming from different worldviews. These were IIRC collectively referred to as "retaliation" by the incumbent firm and none of them sat very well with me as conducive to innovation.

- lobby for regulation

- poach from the challenger

- tank prices in the one area the challenger has traction

I believe Porter also mentioned trying to secure vendor lock-in.

Not familiar with Porter, but being an expert doesn't necessarily make you ethically untouchable. Warren Buffett for example is well known for investing in companies with aggressively anti-competitive behaviours.

wait.. why is "rev up their larger more experienced product team to compete" bad?

It's not "bad" it's just a factor to consider when planning market entry, like a start-up trying to get these dealers on their platform.

At least it's not the healthcare industry...

It is extremely hard!

Dealerships don't make most of their money (or any money, really) selling cars. They make their money from service, and selling info to 3rd parties (ever notice when you buy a new car, you will receive mail from SirusXM for a year after). In order for this to work, their systems are all tightly integrated. When you buy a new car, the dealer will know when you're due for service. When you have your current car serviced more than a certain amount, the dealer will know you're in the market for a new car.

So, it's not possible to swap out only the service management piece of CDK or only the sales piece, or only the CRM piece. They all have to work together. The reason I know is I happened to contract with the IT department of a very large dealer network at the time they were undergoing a migration from Reynolds to CDK. A year into the migration process...they pulled the plug. Moving even from one large incumbent to another was too much work.

Good luck breaking in on that as a brand new baby startup! I think you'd probably have better luck completely disrupting the car sales process from the ground up.

CDK didn't just run the DMS. They operated the physical networks at the dealerships, managed the the PCs, the phone system, even leased the dealers their printers. CDK was DEEPLY integrated into the dealerships.

People try all the time. The usual problems are 1) CDK doesn't just do the DMS, they have a whole bunch of connected software that interoperates with it, and so you can't just spin up a DMS to compete. And 2) A bunch of the value CDK brings to the table is supporting the business with things like compliance (laws relating to car dealers change constantly, there are teams at CDK which keep up with all of this regulatory stuff as their full time job).

That's my perspective, as someone who has worked at CDK.

If you want something corroborating that, go look at r/serviceadvisors and see why people say they can't switch to anyone from CDK. The tiny dealers are the best candidates for moving, everyone that's reasonably big has too many needs the other DMS providers do not address (yet).

I encourage a complaint to be filed.

https://www.justice.gov/atr/complaint-center

https://www.ftc.gov/advice-guidance/competition-guidance/ant...

That 90% is for both of the two biggest DMSes, CDK and Reynolds & Reynolds. Both DMSes have been around since the '70s or so, so they're probably considered a safe option by a lot of dealers.

Ah, you're correct. However, the linked litigation doc argues that the two have an agreement not to compete with each other. It also explains that it's very disruptive for a dealership business to transition to a new data management system.

I believe the litigation was about data integration, due to the mentions of Authenticom. Authenticom was a vendor my company used until we needed to start getting data directly from R&R. (IIRC we were a third party on a lawsuit related to that.)

Switching DMSes is likely disruptive, but is still pretty common. We've had dealerships do it every now and then.

Is R&R still that large? A few NADAs ago I approached them to see about getting a direct integration. Only one of my customers was R&R at that time. ReyRey acted very elitist and told me that they had no interest. Fast forward to this last NADA where I approached ReyRey again with only three customers. I asked them if we could integrated with three and they stated that they would even do a single customer. Quite the change of tune. I asked ballpark what it would be and they said "low 5 digits". Not even CDK is that expensive with their certification process.

This will also be interesting to see how it affects their their long in-development and repeatedly stalled Fortellis product. They are attempting to release it as a DMS agnostic solution which I did not think that other DMSes will gravitate to just because it comes out of CDK. This attack is just another reason for a competitor DMS to not use it.

R&R is still one of the largest. The elitism was definitely something I saw when I wrote the RCI integration at Dealer Wizard around 2014. I've heard they've been trying to change the culture internally. I'm not sure how that's going, but it'd certainly be welcome.

Does Fortellis even accept other DMSes? I've dealt with it a bit to integrate with eLeads (now CDK CRM), but there didn't seem to be much on there apart from CDK's APIs.

From a hiring standpoint, the culture at R&R is “beyond absurd” / “jumped the shark”. They utilize an IQ test which has many extremely “cultural” questions — quite a few questions have nothing to do with IQ, just trivia you’d only know if you’re from a very specific background (white, old). Things along the lines of “What celebrity died in 1997 in a car crash involving paparazzi?” (Princess Diana) … “what sport did Jack Nicklaus play?”. I fit the profile they are looking for, and knew all the answers to these questions, but I still felt they were "beyond the pale".

This is for software programming. Their salary ranges are also unbelievably low and they avoid interviewing anyone with even moderately strong qualifications (which would be considered "mediocre" qualifications in any tech hub).

> CDK Global has massive market share 90% when measured by number of vehicles sold

I suspect we're missing some nuance in that 90%. US dealerships are dominated by UCS(Reynolds&Reynolds) and CDK. ADP and DealerTrack have a fair amount. I used to provide support for three of those.

ADP is CDK as of a few years ago. I've seen a fair number of Auto/Mate stores in addition to DealerTrack, but not as many as CDK and R&R.

why didn't Silicon Valley try to disrupt this market?

Seems to me like now is a good time to raise some money around this particular issue.

they did - see Tesla

How much of a disruption was that? Teslas still can't be sold everywhere (such as anywhere in Michigan)...

I personally can't immediately envision what the disruption would look like. Do you have any notions? Tekion is one of the newer DMSes to be built with modern architecture and be cloud-native versus the retrofit of all the other DMSes (which were retrofits of other types of solutions before they were automotive). I would love to see something be the Uber or Airbnb for Deal Management.

What would the value add or differentiator be? If you try to go with cheaper, the incumbents will take note and adjust their prices accordingly (it's software, prices are much more flexible than physical stuff).

Close to this market - ShopMonkey is doing it for general garage work, and we, GlobalWorkshop, are doing it for high end/custom vehicles (restoration/restomods/small motorsport teams).

I'm pretty sure one of our recent trialling companies have been using CDK and desperate to get away from it for their restoration work.

"It hasn't been updated in years" was the quote last week..

It's complicated. The amount of industry knowledge needed is huge - not something someone with good software expertise can just leave on the fly.

It's also been, traditionally, a crazy business with dozens and dozens of vendors that a dealership can choose from. CDK and Reynolds might have pretty big market share, but a lot of that is because they integrate with zillions of tiny vendors.

Lastly, I just don't think there's been enough money in it to try. The industry as a whole is lucrative but you're not gonna get rich trying to dominate a single aspect of it. COVID represented a permanent shift in how software was viewed in the industry. Dealerships have to spend more on higher quality software, because they simply can't afford to stay in business without it.

The closest company I can think of that's trying to disrupt this is Tekion.

Maybe part of the problem is the reliance on the cloud. Will the pendulum ever swing back to on prem?

Workloads are starting to converge back to on-prem and there hasn't been so much pressure on only cloud. Hybrid approaches seem to be prevailing (for much larger co's)

Specifically, 83% of enterprise CIOs plan to repatriate at least some workloads back to private cloud/on-prem according to a Barclays CIO Survey program

On-prem is less likely to get patched and it's somewhat more work for the criminals to breach each installation individually but overall it's probably less secure.

Well it's single point of failure vs distributed resiliency.

You could hack your local dealership but if they can't sell, the customers just go to the dealership down the street, which serves as a very high incentive to get your systems back up and running.

>EDIT: this is actually the combined market share of CDK + Reynolds, who have a non-compete agreement

I would bet money they have non-competes and no-hire agreements with more companies than that - the entire industry is full of it

IIRC our market share is closer to 70%. It also includes businesses that people don't usually think of but are broadly similar to car dealerships in business model and therefore can be served with nearly identical software. Heavy equipment, etc.

R&R doesn't have as wide a product offering as we do, and the upstart DMS providers trying to disrupt the market are even narrower than that. For all its problems, CDK is dominant for good reason.

Wow so you work at CDK. I wouldn't wish the sh-t storm you guys must be going through on our worst enemy.

I was talking with one of your clients today (we're not competitors) and you just don't realise how far screwed some of these companies are right now.

It actually made an instant upsell today of 'here's our additional cloud sync' feature. No questions, no umming and ahhing, it's just 'yep done, add it, turn it on'. Heck we probably undersold it by 10x.

I hope you guys start getting some sense of normality soon and get systems back online.

I can't argue against market dominance purely based on product. However it looks to me like the dominance is exacerbated by a raft of anti-competitive practises such as colluding with other big players and placing artificial restrictions on dealer and third-party data.