Tesla Faces Tough Regulatory Hurdle From State Dealership Laws 309
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.
Now there's a petition on whitehouse.gov... (Score:4, Interesting)
Re:Now there's a petition on whitehouse.gov... (Score:2, Interesting)
It doesn't really matter since the federal government doesn't have jurisdiction anyway. It wouldn't be much different from the federal government telling states that they can't have their blue laws. In this case it just happens to be car dealers rather than bar owners.
Well...a petition to the White House is ridiculous. However, I can see you'd be able to challenge the law in a Federal Court. Tesla manufactures its cars in California, and when I buy one online, I'm buying it from California, where it's a perfectly legal sale. Then they're delivering the car, which is already mine and fully paid for, to me in NC. Prohibiting that sale is interference with interstate commerce, which the state government doesn't have jurisdiction in. That's definitely in the federal government's court.
Now the Texas law that is just trying to prohibit non-dealerships from giving test drives in the state is another story. They're not stopping the sale there, just making it more difficult for you to decide if you want the car.
Re:So why not have Tesla dealers? (Score:4, Interesting)
From what I understand, Elon Musk wants to control the Purchase Experience as close as Apple does with their computers.
Remember the time before Apple Stores? When you went into a computer store to buy a Mac, the sales guys would try to sell you anything else but not a Mac. Because it was so much easier for them.
With the Apple Store, that all changed and the purchase experienced is fully managed by Apple.
Elon Musk, being an adherent of Steve Jobs' approach, also wants to display his products in the best possible way and he believes that only sales people who exclusively sell Tesla cars (i.e. stores that only sell Tesla cars) can sell it right and that these people should then be also employed by Tesla Motors.
I get that and if I was him, I would do the same. This is really a crucial time for Tesla (and electric cars in general) and I wouldn't want any GM, Ford or Chrysler-sales person trying to sell my cars - next to all the other cars he has on display...
Re:Middlemen: the official plague of the modern ag (Score:5, Interesting)
Re:Why does this law exist? (Score:4, Interesting)
Thanks for the answer.
I probably was not accurate enough in my question. Question was rather "how this happened and still happens..."
Now, a little search provides a really good link I found: http://www.justice.gov/atr/public/eag/246374.htm [justice.gov]
I thought there was a real reason historically but it just seems that car dealers effectively lobbied their state governments to introduce these "Franchise Laws" after they were established. And it was in order to "... protect their investment in real estate and showrooms, etc..." - So, as you said, the traditional protectionist malaise as everywhere (reminds me of the stupid solar industry in Europe which actually managed to convince the EU Commission to introduce tariffs on Chinese solar panels... up to 67% ... now the Chinese are striking back with tariffs on European products *sigh* - will this never end?)
Re:Why does this law exist? (Score:4, Interesting)
For anyone interested, NPR's Planet Money team ran a very good story back in February on this topic. If focused on the entrepreneur behind carsdirect.com, who ran into the same obstacles in the 90s when he tried to set up a Web site to sell cars directly to consumers.
http://www.npr.org/blogs/money/2013/02/19/172402376/why-buying-a-car-never-changes [npr.org]
Re:Middlemen: the official plague of the modern ag (Score:5, Interesting)
So the argument against removing the laws (for all auto manufacturers) and making the dealers "sell" themselves to the auto manufacturers is what exactly? That dealerships lobbied really, really hard to sell you a product that they add no value to? Can you say "crony capitalism"?
Dealerships should be optional (Score:5, Interesting)
Having purchased a Tesla Model S the experience is the exact opposite of when I purchased a Toyota. Tesla's showrooms do not sell cars. They show them. When I went to the showroom I could ask questions without any pressure to buy the car. The only way to buy a Tesla is on their web site so there's no sales critters trying to get a commission. There are a myriad of options to choose from which allows you to get the exact car you want. I got the paint color, interior color and all the options I wanted. It went to the point where I chose the wheel colors and whether or not to have a rear carbon fiber spoiler (I chose not to). There's also no haggling over price. Tesla basically builds to order without having to deal with an inventory of cars. You order your car and they deliver exactly what you ordered, or in my case I picked mine up at the factory and took the tour.
At the Toyota dealership I didn't have much choice. I could choose any car as long as it was on their lot, plus there's the high pressure sales. The only thing worse than one of their car salesmen is a used car salesman (which they also sell there).
Dealerships don't really protect the consumer. As far as I'm concerned, they're leeches. A relative of mine bought a Fisker Karma and the dealerships are basically helpless since Fisker is more or less bankrupt in all but name. The warranty is basically worthless as is any pre-paid service and parts are unavailable. Since Fisker laid off their engineers even support is limited even if paid by the owner. The dealership my relative goes to is better than many. Many dealerships completely dropped any and all support for Fisker so the owners are completely SOL. There's nobody to even perform routine service on the vehicles.
I groan every time I have to have something fixed that's not under warranty at Toyota. They charge a premium for the service since they know that with a Prius you're unlikely to take it elsewhere.
Dealerships also wouldn't make nearly as much profit on service either. Tesla has vowed to not make a profit on service, but then again, service should be a lot simpler than a gasoline powered car. There's no transmission to service or wear out, only a simple gear reduction. There's no 5K mile oil changes, the motor is lubricated for 12 years. There's no fuel pumps or spark plugs to replace.
Since the number of cars sold is fairly low, a dealership would also be selling o
Tesla service consists of a 12,500 mile inspection, replacing the wiper blades and brake pads if needed (brake pads should last basically forever), rotate the tires, replace the cabin air filter and possibly flush the coolant. Service also may include hardware upgrades, software upgrades are distributed over 3G and can be applied by the owner whenever it's convenient.
Tesla has vowed to not make a profit on service. When I broke one of the clips on my roof they had to replace the entire panel next to the glass sunroof. If the panel were on my Prius, the dealership would probably charge $200-300 just for a replacement panel plus a fortune in labor. Tesla charged me $100 and $175 labor to replace it, which after explaining what they had to do to replace it was a bargain.
Things are quite different now than they were in the 1950.
Re:Federal Case (Score:4, Interesting)
All goes back to Wickard v. Filburn, under FDR's long-standing administration. Perhaps the most destructive Supreme Court ruling in our modern era. At a time when America was fighting Fascism abroad, this decision probably did the most to entrench Fascism, corporate hegemony and cronyism in the United States, usurping the natural rights of free citizens as well as transferring power from the state level to Federal government agencies.
The logic behind the Wickard v. Filburn decision seems to stand in opposition against the small government ideals of conservatives, the civil liberties of individuals as espoused by liberals, and the value of a free market as advocated by libertarians, yet this attitude seems to be growing more pervasive throughout our government, especially on the Federal level, with rarely any outcry from voters, the politicians they elect, or from hardly any of the many outspoken critics of our government and society. What is behind this sheeple mentality?
Re:Middlemen: the official plague of the modern ag (Score:4, Interesting)
Don't forget another reason for resellers - manufacturers don't want to deal with 1 piece orders constantly - it's way too much overhead for them. It's cheaper for them to sell 100 units to one person, then that person to sell it to 100 people, than for the manufacturer to sell to those 100 people.
Also, resellers can handle warranty issues locally - manufacturers then can deal with the reseller to handle it - e.g., the reseller can exchange 5 units to customers, then the manufacturer can send 5 extra units as replacements. Less overhead for the manufacturer, and local sellers may know their market better.
There are exceptions - like Apple, who can handle it all vertically, but they tend to be the exception. Even then their ordering systems aren't as slick as say, Amazon's.
Re:Now there's a petition on whitehouse.gov... (Score:5, Interesting)
And that's also precisely why they won't.
Anything that falls under "shit they SHOULD do" also usually falls under "stuff that will piss off special interests"
Middlemen everywhere (Score:3, Interesting)
Usually it is in our best interest to go through a middleman as it ends up with savings for everyone. The middleman usually buys in bulk (thousands of items) and then sells to us (1 at a time) at a markup. The manufacturer gets the benefit of a steady, predictable cash flow while we get the convenience of buying one at a time.
Of course, that's how it usually works. Not everyone wants that though. In today's connected world we can pay a premium straight from the manufacturer for items custom created directly for what we need. Cars, as large capital investments for most people, are a perfect example of this - especially as the "premium" is usually the same price that you would be charged from the middleman anyway. For middlemen to survive they need to provide a "value added" effect to the merchandise and I do not see that happening with most car dealerships.
tl;dr version: You use middlemen every day, usually love it, but if they don't provide extra value they shouldn't exist.