The Great Disruption Comes to Auto Dealers

At the turn of the millennium, when I was in business school, the auto dealership business model seemed ripe for disruption. Dell Inc. was already doing a bang-up business building computers to order. It seemed only a matter of time before General Motors Co. did the same, and we could buy our cars easily over the Internet rather than having to haggle with a dealer.

Ah, the optimism of youth! Ten years later, auto dealers are still very much with us. It turns out that building and selling cars is a bit more complicated than doing the same with computers. Oh, and auto dealers are extremely well connected in Congress and especially in state legislatures; they are often among the richest people in a legislator's district, which has translated, over the years, into protective franchise laws that make it very hard for automakers to prune their dealer networks.