Tesla Faces Tough Regulatory Hurdle From State Dealership Laws

First time accepted submitter vinnyjames writes "States like Arizona, Texas, Massachusetts and North Carolina either have or have recently added legislation to prevent Tesla from selling its cars directly to consumers. Now there's a petition on whitehouse.gov to allow them to sell cars directly to consumers." Laws that protect auto dealerships aren't newly created for Tesla, though, as explained in this interview with Duke University's Mike Munger.

Except, Tesla won in NC

[MoFoQ]

Tesla victory in NC [engadget.com]

go figure...once they go on test drive....they love it.

Re:Why does this law exist?

[Spy Handler]

It's not forbidden in the U.S. by the national (federal) government. Some local (state) governments do forbid it to protect a class of people called "car dealers".

Why you ask? Same reason the British forbid Indians from making their own salt: to protect the profits of a certain group. It's not unique to the U.S., I'm sure it happens all over the world. Is it fair? No it isn't.

Re:Now there's a petition on whitehouse.gov...

[lgw]

As someone who has actually bought a car from an out-of-state dealership and had it sent to me, I can say that not only is it legal, but that states have special forms of registration just for this purpose (I still paid registration fees in the state the car was shipped from, but they were very small and accompanied by a warning that'd I'd owe a fine if I tried to register the car in that state within a year).

Rentseeking

[cervesaebraciator]

There once was a reason for laws such as this to exist on the local level. Whether one thinks it a good reason, I leave to the individual judgement. Here's an excerpt from an article [theamerica...vative.com] that explains succinctly:

While auto-dealership laws go back to the ’20s and ’30s, the dealers’ nationwide legal grip on selling cars was established by state legislatures in the postwar era out of concern that the Big Three would establish networks of their own dealers. It was a time haunted by bigness, as Americans stared at the giant corporations that had swelled to dominate the economic landscape and feared that consumers would soon become subject to whatever whims the companies cared to impose on them. Smaller businesses feared General Motors, General Electric, and the rest of corporate America for the same reason those companies could promise a lifetime of employment followed by a generous pension: they seemed immortal. As Kenneth Elzinga of UVA explained recently at an ISI Faculty Seminar, there was a palpable fear that big companies would slash their prices below cost until all their smaller competitors were driven out, and then, having the market to themselves, they would dramatically raise prices.

For the auto industry this was particularly feared, as 1950s cars were, compared to today, terribly unreliable. The state antitrust laws that prohibited manufacturers from selling direct also set limits on entry and exit in order to ensure that a car company could not decide a region to be undesirable and just pull up stakes, leaving the customers they had sold long-term products to without a source of spare parts or service. Legislators feared that allowing manufacturers to set up their own dealerships would make the communities subject to the whims of the latest Detroit strategy document, so they sought to break up the process. With independent dealers, states hoped to insulate themselves from concentrated corporate power and force it to serve their communities if it wanted to sell to them.

Thus the laws were originally intended to protect consumers on the local level. Now, especially in the face of subversive business models like Tesla's, matters have changed. Local dealers are in closer league with manufacturers, the latter often even providing financing for purchases [wikipedia.org]. The arrangement is mutually beneficial: manufacturers can prevent upstarts like Tesla from getting a foothold in the market; dealers, acting as middle-men, can reap the rich benefits of rentseeking [wikipedia.org] through powerful lobbies targeted toward state governments. N.b., however, this arrangement does not prevail in all states.

Re:Repeat ad nostrum.

[tlambert]

And where was the political outrage towards Apple when they opened their own stores, for causing "unfair" competition with the other retailers?

(Obligatory computer analogy in this car thread.)

There were tons of complaints by tons of people; they were unable to buy the laws because the resellers were not franchisees. Here's a short list of pissed off people:

All U.S.: http://www.sfgate.com/business/article/Apple-dealers-biting-back-Mac-sellers-say-2636871.php [sfgate.com]
Australia: http://www.macworld.com/article/1027780/australia.html [macworld.com]
France: http://www.padgadget.com/2011/12/30/apple-reseller-sues-apple-in-france/ [padgadget.com]
Portugal: http://appadvice.com/appnn/2012/07/portuguese-reseller-interlog-fails-sues-apple-for-hefty-sum [appadvice.com]
LA and Boston: http://appleinsider.com/articles/11/02/22/apple_repair_consultants_upset_over_changes_to_apple_retail_referral_policy [appleinsider.com]

The current Apple pissing contest is over the changes to the repair referral channel. They're going to lose to Apple's wishes there, too, since what Apple sells is a holistic customer experience rather than selling only consumer devices.

Re: Now there's a petition on whitehouse.gov...

[ClickOnThis]

Lets transpose tucker to today.
The consortium (a-pull, prounounced ahh-pull) took Tucker to court for patent infringement. A-pull stated that the Tucker breached many existing parents, including: 4 wheels, headlights, steering wheel, seats, brakes, windows, an engine, side mirror, ignition, the list goes on.
A-pull fanboys rejoiced when the courts upheld the 2013 verdict and sent Tucker corp bankrupt. "This is a win for protection of consumers", stated A Congress Member, when asked a about the outcome.
Sound familiar?

"Sound familiar?" Well ... no, it doesn't. Tucker won his trial, although he did go bankrupt. His trial wasn't about patent infringement, it was about securities fraud.