The early cars were sold by automakers to customers directly or through a variety of channels, including mail order, department stores, and traveling representatives. For example,
Sears made its first attempt at selling a gasoline-engined chain-drive high-wheeler in 1908 through its mail-order catalog and starting in 1951 the
Allstate through select its stores and the catalog. The first car dealership was opened in 1889 by Fred Koller in Reading, Pennsylvania and sold cars manufactured in Cleveland, Ohio. This would have been the first dealership solely dedicated to automobiles, as opposed to horse-drawn carriages. The first Ford dealer was opened by William L. Hughson in San Francisco in January 1903. The first woman car dealer in the United States was Rachel "Mommy" Krouse who in 1903 opened her business, Krouse Motor Car Company, in
Philadelphia,
Pennsylvania. Today, direct sales by an automaker to consumers are limited by most states in the U.S. through franchise laws that require new cars to be sold only by licensed and bonded, independently owned dealerships. The number of car dealerships in the US peaked in 1927 at 53,125 and steadily decreased over the next decades. By 1960, there were 33,658 dealerships; by 1980, 23,379; and by 2001, 22,007. Many modern dealerships are now part of corporate-owned chains with hundreds of locations. Dealership profits in the US mainly come from
servicing, some from
used cars, and little from new cars. Most automotive manufacturers have shifted the focus of their franchised retailers to branding and technology. New or refurbished facilities are required to have a standard look for their dealerships and have product experts to liaise with customers.
Audi has experimented with a hi-tech showroom that allows customers to configure and experience cars on 1:1 scale digital screens. In markets where it is permitted,
Mercedes-Benz opened city centre brand stores.
Tesla, Inc. rejected the dealership sales model, claiming that dealerships do not properly explain the advantages of their cars over vehicles with an
internal combustion engine, and thus they could not rely on third-party dealerships to handle their sales. However, in the United States,
direct manufacturer auto sales are prohibited in many states by franchise laws that requires new cars to be sold only by franchised dealers. In response, Tesla operates city centre galleries where prospective customers can view their cars which can only be ordered online. These stores were inspired by the
Apple Stores. Tesla's model was the first of its kind, and has given them unique advantages as a new car company.
Economic theory In economic theory, car dealerships can be characterized as franchisees and automobile manufacturers as franchisors. A
franchise relationship can be beneficial to both parties, as the franchisee can sell a well-made and attractive product while the franchisor can rely on the franchisee to incur downstream costs and use its local relationships to sell more products and services.
Regulations that protect car dealers Car dealerships have lobbied for regulations that increase the survival and profitability of car dealerships:
Criticism Economists have characterized these laws as a form of
rent-seeking that extracts rents from manufacturers of cars and increases costs for consumers of cars while raising profits for car dealers. Multiple studies have shown that regulations that protect car dealerships increase car costs for consumers and limit the profitability of manufacturers. This has led to consumer campaigns for establishment or reform, which have been met by huge lobbying efforts by franchise holders. New companies trying to enter the market, such as
Tesla, have been restricted by this model and have either been forced out or been forced to work around the franchise model, facing constant legal pressure.
Electric vehicles According to a 2023 survey by the Sierra Club, two-thirds of US car dealerships did not have electric or hybrid vehicles for sale. Reasons for this include supply chain difficulties, as well as a need for car dealers to make substantial investments in new employee training and infrastructure to be able to sell, service and maintain electric vehicles. ==Car dealerships in the European Union==