ElI5 why do we have car dealerships?
In: 160
Assuming you’re referring to the situation in the US, it is mostly for historical reasons around anti-trust and monopoly power.
About a century ago, the rapidly growing car companies had a lot of abusive and aggressive practices. As an example, Henry Ford demanded things like local franchise auto shops have exclusivity and ONLY work with Ford vehicles, and that they keep a supply of ALL parts on hand so they could instantly service any vehicle in their lineup. Some of the other big companies did the same.
The exclusivity of the big companies shut out a lot of smaller competitors. In 1908 there are 253 automakers. By 1929, there were 44, but the vast majority in the US were Ford, GM, and Chrysler. All three had exclusivity deals, and took heavy demands on companies that sold them.
The trust-busting movement came into full swing, first against the railroads, but also grew against many other monopolistic industries. States found it was easiest to start with their local laws. In the 1930’s and 1940’s, a bunch of laws came into effect trying to break up the power of the big three auto makers. Laws prohibiting direct sales. No exclusivity deals with local franchises. No exclusivity on support. Manufacturers were forbidden from competing with franchised dealers, as they could easily undercut their sales. Etc.
The result is what we see today, manufacturers get non-exclusive licenses to dealerships, who sell whatever sets of vehicles they can negotiate. Stores compete against each other in ways that are generally healthy for the market. Manufacturers compete against each other through dealerships, but thanks to the various laws forbidding exclusivity many dealerships receive the incentives from multiple manufacturers, also keeping the market stirred up in many consumer-friendly ways.
There have been attempts to break it up, most notably Tesla in recent years that still isn’t allowed to have direct sales to consumers in many states.
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