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New Jersey Auto Dealers Don't Want to Face Tesla 342

Posted by timothy
from the what-we-need-is-more-regulation dept.
cartechboy writes "It feels like this story is becoming repetitive: X state is trying to ban Tesla stores, or the ability for an automaker to sell directly to a consumer. Either way, it's all aimed at Tesla. Now it's New Jersey's turn as a hearing today could end up banning Tesla stores in the state. Naturally Tesla's displeased with this and is crying foul. A rule change that is expected to be approved today would require all new-car dealers to provide a franchise agreement in order to receive a license from the state. Obviously Tesla (the manufacturer) can't provide a franchise agreement to itself (the distributor). The proposed rule would also require dealers to maintain a 1,000 square foot facility, the ability to show two cars, and service customer cars on site. Tesla doesn't meet that last requirement at any of its galleries, and most of the Tesla stores are located in shopping malls which mean they are smaller than 1,000 square feet. Tesla's arguing the New Jersey Motor Vehicle Commission is overstepping its bounds. Will Tesla be able to defeat this new rule in New Jersey as it has overcome issues in many other states?" (Also covered by the Wall Street Journal.)
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New Jersey Auto Dealers Don't Want to Face Tesla

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  • by Ichijo (607641) on Tuesday March 11, 2014 @06:52PM (#46458903) Homepage Journal

    The proposed rule would also require dealers to [have] the ability to show two cars...

    The number two is ridiculous [wikipedia.org] and can't exist.

  • by Anonymous Coward on Tuesday March 11, 2014 @06:54PM (#46458917)

    The solution is to bitch publicly like this for now, but the reality is they need a workaround. They need to set up a separate company much like Coke had a separate bottler. Have them do local service and be the jiffy lube of Tesla and join/kiss ass of all these regional moderately powerful/rich douche bags.

  • by Anonymous Coward on Tuesday March 11, 2014 @07:29PM (#46459185)

    Many members of Congress own car dealerships or are closely associated with those who do.

    Being protected monopolies, they are very profitable.

    Surely you've noticed that all the products of technology get cheaper every year except cars?

  • by Anonymous Coward on Tuesday March 11, 2014 @08:45PM (#46459851)

    The right wing should be opposed on free-market principles. The left wing should be opposed on environmental grounds. So which politicians should be in favour of this regulation again?

    The pragmatists & cynics who need local, wealthy donors to bankroll their campaigns.

    From the movie:

    There is no America. There is no democracy. There is only IBM, and ITT, and AT&T. And Dupont, Dow, Union Carbide, and Exxon. Those are the nations of the world today [in 1976]. What do you think the Russians talk about in their councils of state? Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments just like we do. We no longer live in a world of nations and ideologies Mr. Beale. The world is a college of corporations inextricably determined by the immutable by-laws of business. The world is a business Mr. Beale. It has been since man climbed out of the slime.

    https://www.youtube.com/watch?v=zI5hrcwU7Dk&t=2m15s

  • Mischaracterization (Score:5, Interesting)

    by ildon (413912) on Tuesday March 11, 2014 @10:09PM (#46460371)

    This is a complete mischaracterization of what's going on. It's not that they don't want to compete with Tesla, it's that they want a cut. Right now, it's illegal for automakers to own car dealerships in most states, because when cars were in early adoption the state government didn't want to allow a situation where a car manufacturer pulled out of a state completely because it was unprofitable, leaving the citizens of that state unable to buy cars easily. So dealerships are independent from the manufacturers. Tesla is bypassing this 100 year old, out of date system, because it no longer makes sense, but the dealers aren't afraid of electric cars, they just want to make Tesla "play by the rules" and let the dealers sell (or not) the Tesla cars, so that they an make a profit off them like they do every other car manufacturer.

  • by TubeSteak (669689) on Tuesday March 11, 2014 @10:43PM (#46460531) Journal

    Surely you've noticed that all the products of technology get cheaper every year except cars?

    After adjusting for inflation, a 1970 VW Beetle with optional AC is about the same price as a 2014 Nissan Versa or Chevy Spark (both come standard with AC).

    That's 34 years of technology (including air bags, ABS brakes, and traction control) for almost exactly the same price as a 34 year old car.

  • by David_Hart (1184661) on Wednesday March 12, 2014 @12:04AM (#46460883)

    This is a complete mischaracterization of what's going on. It's not that they don't want to compete with Tesla, it's that they want a cut. Right now, it's illegal for automakers to own car dealerships in most states, because when cars were in early adoption the state government didn't want to allow a situation where a car manufacturer pulled out of a state completely because it was unprofitable, leaving the citizens of that state unable to buy cars easily. So dealerships are independent from the manufacturers. Tesla is bypassing this 100 year old, out of date system, because it no longer makes sense, but the dealers aren't afraid of electric cars, they just want to make Tesla "play by the rules" and let the dealers sell (or not) the Tesla cars, so that they an make a profit off them like they do every other car manufacturer.

    If you follow the logic a bit further, what the dealers are truly afraid of is that if Tesla gets an exception, the other manufacturers will also want the same exception. Once Manufacturer's own showrooms and sell online they will be able to undercut dealerships, putting them out of business. Either they stand up for the current rules that created their business market or it dies.

  • Re:Don't get it (Score:4, Interesting)

    by MrDoh! (71235) on Wednesday March 12, 2014 @12:45AM (#46461037) Homepage Journal
    Surely even the start of the nation, throwing Tea into the harbor was a protection racket with Hutchinson not wanting legitimate trade cutting into his smuggling operation. It's not just the last 100 years, it's been there from the start, then with slavery, and continues today with this sort of control. No, those freedoms haven't really ever existed.
  • by danheskett (178529) <danheskett@NOSPam.gmail.com> on Wednesday March 12, 2014 @01:18AM (#46461161)

    And in the end, car dealerships do deserve to undergo a radical change in their structure. They are inherently bad for customers.

    For one - they make money in ways that customers are not aware of. The most insidious being "point spread". You walk in, buy a car, and they make money selling the car (fair), future service either under warranty or direct to the consumer (fair), and more importantly, on the financing. You might qualify for a certain rate, but they get a big chunk of the difference between your best qualifying rate and what they convince you to pay. So you qualify for a 3.5% rate, but they get you sign on the line for 9.9%, and they get roughly 50% of the point spread between 3.5% and 9.9%, which on many financing arrangements, is far more than the profit involved in selling the car to begin with.

    Second, they do an only okay job with service. They do not typically do as a good job as independent shops, and for warranty work, face little competitive price pressure.

    Finally, they are effective local monopolies and do not always respond to market pressure. Because of brand monopolies, there is not as much competition as they would have you believe. The car market is deeply segmented, and so there are not as many brand choices in a price/demographic band as you might think. On paper there are 15 manufacturers selling through dealerships in a market. But for a single random consumer, there are likely 3 or 4 options that meet the basic criteria of type and price range.

    In many small towns or areas, the local car dealer is the wealthiest person in town. There is a lot of profit standing between the car maker and the consumer. And in the end, this excess is needs to be wrung out of the system. Manufacturer's should not be able to prevent car dealers from selling and servicing cars, but long-term, the concept of a franchised car dealership needs to be scaled back. Channel conflict is inevitable.

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