Who Should Sell You Your Next Car? The Battle Between Automakers and Dealerships

Justin S
Created by: Oct 22, 2026 | Modified by: Oct 22, 2026

For over a century, buying a new car has followed a familiar process. Automakers build the vehicles; independent dealerships purchase them and sell them to consumers. But that traditional arrangement is facing growing pressure as some newer EV manufacturers such as Tesla, Rivian, and Lucid push for the ability to sell vehicles directly to customers. Their argument is simple: if they build the car, why should they need a middleman to sell it? While this may seem like a sound argument on paper, the issue is far more complicated than it might seem, and the outcome could significantly affect the automotive industry and how Americans purchase new vehicles.

The traditional dealership system developed partly because manufacturers needed a nationwide network of businesses to display, sell, arrange financing, accept trade-ins, and provide maintenance and warranty repairs. Independent business owners invested their own money in building and maintaining vehicle showrooms, service departments, employees, and vehicle inventories. In return, they received the right to sell a particular brand within a franchise arrangement. Independent dealers are the backbone of some local economies, as they pay taxes where they operate. The dealerships employ local workers and have a strong presence in local communities, as they are viewed as a part of the town and city where they operate.

This is one of the main reasons why many states introduced laws to protect dealerships from manufacturers that might otherwise open competing stores or use their financial power to pressure independent dealers. Today, these laws make direct manufacturer sales difficult or impossible in many states, although exceptions vary by state and manufacturer.

Electric vehicle companies have become some of the strongest challengers to this system. Tesla established a direct-sales model, while Rivian and Lucid have also pursued sales through company-operated locations and online platforms. These companies argue that traditional franchise laws limit competition and prevent them from offering a more modern buying experience. Their efforts have increasingly drawn attention as consumers become comfortable researching, configuring, and purchasing expensive products online.

The Potential Benefits for Consumers

The biggest advantage of direct sales is the possibility of a simpler, more transparent buying experience. Some people feel burdened by the process of negotiation with a dealership for a better price or more allowance on their trade-ins. Many consumers also report being frustrated trying to understand unexpected dealer-related fees. For these reasons some consumers can appreciate the appeal of ordering a vehicle online at a clearly displayed price.

A manufacturer-controlled sales process could reduce haggling, make pricing more consistent, and give customers a more direct relationship with the company that builds their vehicle. It could also make it easier to configure a car to specific preferences rather than choosing from whatever happens to be sitting on a dealer's lot.

By eliminating the middleman and distribution-related expenses, it is possible that the consumer can see some savings. While improving inventory management and cutting out dealers could reduce costs, the manufacturers would still need to pay for customer support, showrooms, and other retail operations. Any savings would depend on the business model and whether the company actually passed the savings on to the buyers.

The main drawbacks of cutting out dealers

There are good reasons the dealership model has survived for so long. Local dealerships provide test drives, in-person assistance, financing options, trade-in evaluations, and service facilities. They also invest their own money in vehicle inventory, allowing customers to compare different models in person. By shopping at a local dealer, you are not only supporting your local economy, but you are also eliminating some of the hassles that come with online vehicle orders, such as delivery delays and technical issues. You can literally walk into a dealership and walk out with a brand-new car the same day.

Dealerships compete with one another, too. What consumers often do not realize is that dealers often sell cars cheaper than they purchased them for in order to move inventory. A buyer who dislikes the price offered by one store can contact another dealer selling the same brand. Under a direct-sales model with fixed pricing and limited locations, that kind of same-brand competition is likely to completely disappear. So, if you are the type that really likes finding the bargain, the direct sales model is not likely to appeal to you.

One of the biggest concerns when removing local dealers from the marketplace is what happens when something goes wrong. Do you have to arrange with the company to come pick up the vehicle at a centralized service facility far from your home? Do you need to take it to an independent repair facility and hope the manufacturer reimburses you for the repairs? The truth of the matter is that online-based car sellers without strong local networks cannot stand behind their product as well as those sold by local dealers.

Traditional dealers are independent businesses with their own management and local service operations. A manufacturer selling directly would assume more responsibility for its retail network, and customers would need to know where to turn for repairs, warranty disputes or other problems.

Another vital point that should not be overlooked is that car dealerships are part of local economies and eliminating them will affect local employment and local tax revenues. Keep in mind small-business owners have invested heavily in dealership franchises. Their concerns are not simply about protecting profits; dealerships employ thousands of people and often serve as important businesses within their communities.

What Does This Mean for the Future?

The most likely outcome is not necessarily the complete disappearance of dealerships but a gradual shift towards different ways of buying cars. Some manufacturers may continue using traditional franchise networks, while others push for direct sales or develop hybrid arrangements that combine online ordering with local delivery and service.

For consumers, it is a bit of a mixed bag; for some, it could be a positive development, while for others, it could leave them with very little choice and negotiating leverage. While competition between these two sale models may encourage traditional dealers to become more transparent, reduce unnecessary fees, and improve customer service, it is unlikely to be viewed as a net benefit to the current structure. The direct-sales companies would really need to ramp up their local presence in order to demonstrate that they are capable of delivering reliable service and support post-sale.

Ultimately, these changes feel more like a net negative to the consumer, as they limit consumer’s access to local inventory and services and eliminate a lot of local businesses in favor of a streamlined sale process. This is yet another way that big companies are working to gain more market share and profits at the cost of local businesses. Consumers should have the freedom to decide how they want to buy, whether that means visiting a local dealership, negotiating with a salesperson, or placing an order directly online. The only thing that cutting out local dealers will do is increase corporate profits and limit consumer choices.