Automakers Want to Sell DIRECT TO CONSUMER & Dealers Are PISSED | Episode 1104
About this episode
Ray and Zach dig into automakers pushing direct-to-consumer sales and why dealer groups are fighting back—highlighted by a Washington state lawsuit targeting Scout Motors’ DTC plans. They compare the regulatory reality across states, note that Tesla proved DTC can scale, and debate whether dealer franchise networks will adapt or lose meaningful share. The conversation also ties in Carvana’s rapid growth as pressure on traditional stores, plus a broader question: do dealers still add value beyond community sponsorships?
Scout Motors
"a Volkswagen subsidiary, a connected to Volkswagen company, Scout Motors, who had wanted to sell direct to consumer for a long time now."
Scout Motors is a car company tied to Volkswagen. They’re trying to sell cars straight to buyers instead of going through local car dealerships.
Scout Motors is an automaker brand connected to Volkswagen. In this segment, it’s described as trying to sell cars direct to consumers, which is a business model that can bypass traditional dealer networks.
Volkswagen subsidiary
"a Volkswagen subsidiary, a connected to Volkswagen company, Scout Motors, who had wanted to sell direct to consumer for a long time now."
Volkswagen has related companies (subsidiaries). The segment is saying Scout Motors is one of those connected companies, and that’s why this DTC dispute is bigger than just a small startup.
This refers to Volkswagen’s corporate structure where a separate subsidiary is involved in the DTC push. The point in the segment is that Scout Motors is connected to Volkswagen, which matters because it signals a major traditional automaker entering the DTC conflict.
direct to consumer
"Scout Motors, who had wanted to sell direct to consumer for a long time now. They are now being sued by the Washington state Auto Dealers Association."
Direct-to-consumer means the car company sells the car to you directly, not through a local dealership. Dealerships often don’t like it because they lose sales and related business.
Direct-to-consumer (DTC) is a sales model where an automaker sells vehicles straight to customers, usually through its own websites and delivery process, rather than relying on franchised dealerships. The key friction is that dealer groups often view DTC as taking away their role in pricing, inventory, and service revenue.
Washington state Auto Dealers Association
"They are now being sued by the Washington state Auto Dealers Association. This comes on the heels of many other automakers trying to get in on the fun of selling directly to consumers."
The Washington state Auto Dealers Association is a dealer trade group representing franchised car dealers in Washington. In this segment, it’s suing Scout Motors, reflecting how dealer organizations often challenge DTC efforts through state law and franchise rules.
Tesla
"back in April, and this was over in Marketplace from National Public Radio, Tesla fought to sell cars direct to customers, and now other car makers want in."
Tesla is an electric car company. They’ve been pushing a direct-sales approach, and the segment uses that as an example of what other brands are now trying to do.
Tesla is an EV automaker known for selling cars directly to customers rather than relying on the traditional dealer model. This segment references Tesla’s legal fight over DTC sales as a precedent for other automakers attempting similar strategies.
EV brand
"[134.9s] I mean, when Scout announced that they were going to [139.6s] resurrect the brand as an EV brand,"
An EV brand is an automaker identity built around electric vehicles as the primary product line. Here, the host is saying Scout is being resurrected specifically as an EV-focused brand, which often pairs with direct-to-consumer sales strategies.
California
"[162.3s] I'm not sure, but I think in California, [166.1s] they've been approved to sell direct to consumers."
California is mentioned as a state where direct-to-consumer selling may already have been approved. The host uses it as an example of where dealer opposition and state rules intersect.
Colorado
"[169.0s] And I want to say Colorado, but I'm not 100% certain about that. [173.8s] Colorado is one of the states where the dealers are actively"
Colorado is brought up as another state that may allow direct-to-consumer car sales. The host also says dealers there are trying to stop Scout’s approach.
Colorado is mentioned as another state where direct-to-consumer sales might be approved, though the host is uncertain. It’s also described as a place where dealers are actively trying to fight Scout’s direct-sales push.
dealer network
"[185.4s] The idea is that in most of the states, [190.6s] rules and regulations are that if you've never had a dealer [195.8s] network in the state, and you are new to the state,"
A dealer network is the set of local car dealerships a brand uses to sell and support its cars. The hosts are saying some states allow direct sales more easily if a brand doesn’t already have dealerships there.
A dealer network is the organized system of franchised dealerships a brand uses to sell and service vehicles in a region. The transcript discusses rules that treat brands differently depending on whether they already have an established dealer network in a state.
customer-centric
"is that dealers will be forced to recognize that they need to change the way they sell cars, that they need to become more customer-centric, more transparent."
Customer-centric means the business is trying to make the buying experience better for the customer. Here, the hosts say dealers may have to be more open and less pushy to keep up.
Customer-centric describes a sales approach focused on the buyer’s experience—clear pricing, fewer surprises, and less pressure—rather than maximizing profit through dealership tactics. The segment suggests dealers may be forced to adopt this mindset to compete with direct-to-consumer models.
too little, too late
"But couldn't it be too little, too late? Tesla has demonstrated that, hey, direct-to-consumer sales work at scale."
“Too little, too late” means the fix might not help because it arrives after people have already moved on. The hosts are wondering if dealers will change in time to compete with direct sales.
“Too little, too late” is an evaluation of whether changes come after the damage is already done. In this segment, it’s used to question whether dealers’ required shift toward transparency and customer focus will happen in time to matter.
legal bills
"and saying, screw it, we're going to incur the legal bills. It's worth pursuing it."
“Legal bills” means money spent on lawyers and court fights. The hosts are saying some automakers are willing to pay those costs to push through changes to how they sell cars.
“Legal bills” here refers to the costs an automaker expects to pay for lawsuits or legal challenges related to changing how cars are sold. The segment frames it as a calculated expense to pursue direct-to-consumer sales despite dealer resistance.
Rivian
"And this way Rivian obviously is doing it. We have..."
Rivian is an EV maker that the hosts say is selling in a more direct way to customers. They’re using it as another example of the direct-sales trend.
Rivian is an electric-vehicle brand mentioned as using a direct-to-consumer sales approach. In the segment, it’s grouped with other brands that are bypassing or pressuring the dealer model.
dealer franchise network
"[536.1s] I think it's late, but I think the dealer franchise network is so entrenched [548.4s] in the fabric of our country that they will lose some market share"
This is the traditional setup where local dealerships sell cars under an agreement with the brand. If the brand starts selling directly, those dealers can lose customers and sales.
The dealer franchise network is the nationwide system of independently owned dealerships that operate under franchise agreements with automakers. When automakers try DTC, they’re effectively competing with this entrenched distribution and sales structure, which can affect market share and how customers experience buying.
Caravana
"[586.0s] I think your point, it's happening with Caravana. [588.2s] Caravana sold, what was it, almost a thousand cars? [609.4s] It's not Caravana."
Carvana is a company that sells cars mostly online instead of making you shop at a traditional dealership. The hosts are bringing it up as proof that this kind of buying experience can pull customers away from dealers.
Caravana (Carvana) is an online-first used-car retailer that became well known for selling cars with a mostly digital buying process and home delivery. In this segment, the host uses Caravana as an example of how DTC-style sales can take share from traditional dealers.
brand store
"[593.0s] 998 CDJR products at the brand store. [596.7s] Yeah, so for Caravana, there's a huge story in the industry right now,"
A brand store is a retailer location or storefront that sells cars for a specific automaker brand, rather than being a multi-brand dealership. In DTC discussions, brand stores are often part of how automakers try to control the customer experience end-to-end.
franchise dealer model
"We have Slate, like Riven. [819.8s] It's another attack on the franchise dealer model. [821.9s] And I think dealers are pissed and they're panicking."
The franchise dealer model is the normal setup where local dealerships sell cars for a brand. The host is saying direct-to-consumer threatens that middleman role.
The franchise dealer model is the traditional system where automakers sell vehicles through independently owned dealerships that operate under franchise agreements. The host frames DTC as an “attack” on this model because it reduces the dealer’s role in sales and marketing.
Federal Trade Commission
"One of them is the Federal Trade Commission putting them on notice, [851.6s] making them aware of the fact that the old way of advertising and things of that nature"
The Federal Trade Commission is a U.S. agency that helps protect consumers from unfair or misleading business practices. In this segment, it’s being used as an example of pressure forcing the auto industry to change how it advertises and sells.
The Federal Trade Commission (FTC) is a U.S. government agency that enforces consumer-protection and competition rules. Here, the host claims the FTC put dealers on notice that older advertising practices won’t be treated the same way going forward, pushing compliance changes.
clean up your act
"Telling them point blank, you need to clean up your act. [865.1s] Local state dealer associations are holding conversations with their dealers saying,"
Here, “clean up your act” means dealerships need to change how they advertise and sell so they follow the rules and treat customers better. It’s basically a warning that the old approach won’t be tolerated.
In this context, “clean up your act” is shorthand for compliance and conduct changes—especially around advertising and sales practices—prompted by regulators and shifting industry expectations. It’s not a literal phrase about behavior; it’s about aligning with rules and consumer-protection standards.
dealer associations
"Local state dealer associations are holding conversations with their dealers saying, [873.4s] you need to clean up your act."
Dealer associations are groups that represent car dealerships in a region. The host is saying these groups are telling dealers they’ll need to adjust how they operate.
Dealer associations are organized groups representing franchise dealers, often at the state level, that coordinate policy positions and communicate with their members. In this segment, they’re described as holding conversations with dealers about changing practices in response to DTC pressure and regulatory scrutiny.
Carvana
"[955.6s] Carvana, one of the most incredible things they're doing right now. [958.5s] And honestly, we're doing this with some of our initial certified dealer partners too."
Carvana is a car-selling company that tries to make buying a car mostly online. The point here is that they can sell without the usual dealership sales team running the deal.
Carvana is an online-first used-car retailer known for selling cars with minimal in-person involvement. In this segment, the hosts use Carvana as an example of a direct-to-consumer sales process that cuts out dealership staff from the transaction.
certified dealer partners
"[958.5s] And honestly, we're doing this with some of our initial certified dealer partners too. [962.4s] No sales person involved in the sales process."
“Certified dealer partners” refers to dealerships that are approved by a program or platform to participate in a specific sales process. In this context, the hosts suggest they’re using some approved dealers while still reducing the traditional dealership staffing involved in the sales transaction.
transparency
"[977.3s] that can go out annually if the process was either direct to consumer, more Carvana like [983.7s] leading with transparency, et cetera."
Here, “transparency” means being open about the deal—like showing the real price and fees clearly. The host is saying that approach can make the process cheaper and easier.
In car retail, “transparency” typically means clearly showing pricing, fees, and the terms of the deal so buyers can understand what they’re paying for. The hosts frame transparency as part of a DTC-like approach that can reduce friction and cost in the sales process.
affordability crisis
"[985.5s] Maybe that's one way to solve the affordability crisis is take some of the slack out of the system. [990.5s] That, dad, is what gets me excited about what we see with,"
The “affordability crisis” means buying a car has become too expensive for a lot of people. The hosts think simplifying the buying process could help reduce some of the extra cost.
The “affordability crisis” is the idea that many buyers can’t afford current car prices and monthly payments. The hosts connect it to transaction costs and dealership process “slack,” arguing that streamlining sales could lower the overall burden.
extinct
"[1008.1s] And so I think dealerships need to look at this as a moment where it's like, [1010.9s] if we don't add value to the equation, we're going to go extinct."
They’re using “go extinct” to mean dealerships could lose customers if they don’t offer something valuable. The idea is that the market will change and dealers have to adapt.
The hosts use “go extinct” as a metaphor for dealerships losing relevance if they don’t add value beyond what a streamlined sales process can provide. It’s not a technical automotive term, but it’s a key framing device for the episode’s argument about dealer evolution.
gross commission
"[1069.3s] Why are we paying, what's gross commission to a salesperson? [1072.1s] 20% of gross profit, 25% 30% of gross profit? [1076.6s] It depends because there's a cost there."
“Gross commission” is the salesperson’s pay based on how much profit the dealership makes on the car. So if the profit is higher, the commission is usually higher too.
“Gross commission” refers to salesperson pay tied to the deal’s gross profit (the money left after the car’s cost, before other expenses). The host is contrasting commission rates and how much of the deal’s gross profit goes to salespeople.
factory spiffs
"[1092.0s] I can tell you eight, 10 years ago that between what the dealership paid as a percent for commission, [1104.8s] whether it be a minimum commission deal or above that, between factory spiffs and bonuses for [1114.1s] hitting sales objectives, that on average, the commission was about 500 bucks per car sold."
“Factory spiffs” are extra bonuses the automaker pays out when a dealer sells a certain number of cars or meets a goal. They’re like performance incentives on top of normal sales pay.
“Factory spiffs” are manufacturer-funded bonuses paid to dealers or sales staff for hitting specific sales targets or selling certain models. They can significantly change how much a salesperson earns beyond base commission.
sales objectives
"[1104.8s] whether it be a minimum commission deal or above that, between factory spiffs and bonuses for [1114.1s] hitting sales objectives, that on average, the commission was about 500 bucks per car sold."
“Sales objectives” are the goals a dealership has to hit—like selling a certain number of cars in a time period. If they hit the goals, salespeople may earn extra bonuses.
“Sales objectives” are specific targets a dealership or sales team is expected to meet, such as monthly unit counts or performance against a quota. Bonuses and spiffs are often tied directly to these objectives.
personnel-wise
"[1140.0s] If things are done differently, if things are more efficient in the dealership, [1145.0s] would you need less sales management if things are done more efficiently? [1151.0s] Absolutely. [1152.9s] And I think that's one of the arguments that we at CarEdge have been making for years"
“Personnel-wise” just means “in terms of how many people you need.” The host is saying a simpler, more efficient process could mean fewer staff members involved in each sale.
“Personnel-wise” is shorthand for how staffing levels affect dealership costs and efficiency. The argument here is that a more streamlined process could reduce the number of salespeople and managers needed per car sold.
Slate
"They're suing Scout. They'll probably sue Slate. They'll sue anyone and everyone because they have so much money, which reminds me,"
Slate is another company the host says dealers will likely sue. It’s part of the point that dealers are pushing back with legal threats.
Slate is mentioned as another company that dealers may sue. It’s used to illustrate how aggressively dealers are responding to new entrants and DTC-style competition.
reinsurance
"we have a reinsurance company set up, so every single warranty we sell sits on a reinsurance in Bermuda, and I'm talking billions, hundreds of billions of dollars in profit after all the expenses."
Reinsurance is insurance that insurance companies buy to reduce their risk exposure. Here, the host claims dealer-sold warranties are “sitting on” reinsurance in Bermuda, meaning the financial risk is spread through an insurance/reinsurance network rather than being held entirely by the seller.
warranty
"so every single warranty we sell sits on a reinsurance in Bermuda, and I'm talking billions, hundreds of billions of dollars in profit after all the expenses."
A warranty is the promise that if something breaks, the company will help pay for repairs. The host is saying dealers’ warranty money is connected to insurance companies behind the scenes.
In this context, “warranty” refers to the coverage sold to customers (often extended or vehicle service contracts) that protects against repair costs. The host claims those warranties are backed by a reinsurance structure, tying dealer profit to insurance finance.
Bermuda
"so every single warranty we sell sits on a reinsurance in Bermuda, and I'm talking billions, hundreds of billions of dollars in profit after all the expenses."
Bermuda is known for having lots of insurance and reinsurance businesses. The host is using it as an example of where the money and risk for warranties can be handled.
Bermuda is a major global hub for insurance and reinsurance companies. The host mentions it to explain where the reinsurance backing for warranties is allegedly structured, highlighting how international finance can be tied to car retail profits.
self-recony going on
"I think there's a lot of self-recony going on in the auto industry right now for dealers…"
The host is basically saying dealers are having to change how they do business because the industry is moving in a new direction. If they don’t adapt, they’ll lose customers.
This appears to refer to “self-reinvention” or “self-reconfiguration” by dealers as the industry shifts toward more direct and transparent sales. The core idea is that dealerships must change their processes and marketing to stay competitive.
windows sticker
"…How about a windows sticker? How about a Monroney label? I mean, there was a time when there weren't Monroney labels…"
The window sticker is the paper on the car’s glass that shows key details like the price. It helps you see what the car is supposed to cost before you talk to anyone.
A “window sticker” is the visible pricing and specification sheet on a vehicle, commonly associated with the Monroney label on new cars. It’s used to communicate MSRP and other required information at the point of sale.
Monroney label
"…How about a windows sticker? How about a Monroney label? I mean, there was a time when there weren't Monroney labels, where it wasn't required to have a manufacturer's label on the vehicles showing what the asking price is."
A Monroney label is the official price sticker on a new car. It’s meant to show the car’s price clearly so buyers aren’t guessing what the asking price really is.
A “Monroney label” (named after the Monroney Act) is the required manufacturer price label placed on new vehicles that discloses the vehicle’s MSRP and key pricing details. It’s intended to standardize how pricing is presented so buyers can compare offers more easily.
dealer grading
"A friendly reminder, we grade car dealers so you don't have to waste your time with the bad ones, the ones that charge insane dock fees or add-ons and bait and switch on prices."
They talk about a system that grades dealerships so you can find better ones. The idea is to avoid wasting time with dealers that add surprise fees or pressure you.
The hosts discuss using a dealer-rating system to help shoppers avoid bad dealerships. This is presented as a way to reduce wasted time and improve confidence in the buying process.
dock fees
"The good dealers... the ones that charge insane dock fees or add-ons and bait and switch on prices."
Dock fees are extra charges a dealer adds on top of the car’s price. They can feel unfair because they increase what you pay after you thought you had the price figured out.
Dock fees are dealer charges added to a vehicle’s price for handling or processing the car, often justified as administrative costs. They’re controversial because they can make the final price higher than what shoppers expect.
add-ons
"the ones that charge insane dock fees or add-ons and bait and switch on prices."
Add-ons are extra items or services the dealer tries to sell along with the car. They can raise the final cost, so it’s important to know exactly what you’re paying for.
Dealer add-ons are optional or semi-optional products and services bundled into the sale—such as protection packages, accessories, or warranties—often priced aggressively. They matter because they can inflate the transaction beyond the advertised price.
bait and switch
"the ones that charge insane dock fees or add-ons and bait and switch on prices."
Bait and switch is when a deal is advertised one way, but then the salesperson tries to get you into a different (usually more expensive) deal. It’s basically a trick to change what you thought you were buying.
Bait and switch is a sales tactic where a seller advertises one price or offer (“bait”) but then pressures the buyer into a different, more expensive deal (“switch”). In car sales, it often shows up as changing terms late in the negotiation.
out-the-door pricing
"We have certified dealers that guarantee a certain level of experience all in out-the-door pricing up front, no surprise add-ons, fast pricing, no pressure experience,"
Out-the-door pricing means the final total you’ll pay for the car, including taxes and fees. The point is you can see the real number up front instead of getting surprised at the end.
Out-the-door pricing is the total price a buyer pays, including the base vehicle price plus taxes, registration, and typical dealer fees. It’s meant to prevent surprises later in the transaction.
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