The Rise of Massive Car Dealerships in Small Towns

⚙️Kellogg, Idaho, a small town with a population of 2,255, is home to the nation's largest Jeep Ram dealer, Dave Smith Motors.

💰Despite its remote location and low median income, the dealership thrives due to Dealer Franchise Laws that protect dealerships and give them exclusive control over their regions.

🌐The internet and the rise of electric vehicles have challenged the dealer monopoly, with Tesla leading the way in direct sales.

📜State laws heavily favor dealerships, supported by their strong political influence and economic impact on local communities.

🚗Traditional mom-and-pop dealerships have been replaced by corporate behemoths like Lithia Motors, which generate billions in revenue and dominate the auto market.

Why is a small town like Kellogg home to the largest Jeep Ram dealer?

—Kellogg, despite its small population and remote location, thrives as a car dealership hub due to Dealer Franchise Laws, which protect dealerships and give them exclusive control over their regions. These laws allow the dealership to serve customers from all over the country, even flying them in from states like Alaska and Florida.

How do Dealer Franchise Laws affect the auto market?

—Dealer Franchise Laws create a monopoly for dealerships, as they require cars to be sold through middlemen and prohibit manufacturers like Ford, Toyota, and Honda from opening their own stores. This exclusivity gives dealerships tremendous power and control over pricing and inventory.

What challenges does the internet pose to traditional car dealerships?

—The internet has disrupted the traditional dealership model by enabling customers to research and purchase cars online. This shift in consumer behavior threatens the dealership monopoly and forces them to adapt to new ways of selling and serving customers.

How are electric vehicles impacting the auto market?

—Electric vehicles pose a challenge to traditional dealerships because they require less service and generate less aftermarket revenue. Dealerships historically rely on profits from parts and service, so the widespread adoption of electric vehicles could affect their profitability.

Why do state laws heavily favor dealerships?

—Dealerships have strong political influence and contribute significantly to local communities' economies. They sponsor local organizations, create jobs, and generate sales tax revenue. As a result, state laws tend to protect dealerships and support their continued dominance in the auto market.

00:00Kellogg, Idaho, a small town, is the home of Dave Smith Motors, the nation's largest Jeep Ram dealer.

04:07Dealer Franchise Laws gave dealerships exclusive control over their regions, protecting them and allowing them to thrive.

09:34Tesla's entry into the market challenged the dealership model, as they chose to sell directly to consumers.

11:27State laws continue to heavily favor dealerships, supported by their economic impact and political influence.

13:14The internet and the rise of electric vehicles are disrupting the traditional dealership model and shifting the balance of power in the auto market.