8 ms·
Car Dealers Sue Tesla, Citing State Franchise Laws
- OafTobark 14y agoThese bullshit laws need to be updated. Its no different than someone making anything and then being unable to sell it themselves.
- ed_blackburn 14y agoHow can such a law be anything but bad for an economy?
- loceng 14y agoWell, it creates jobs ... that aren't needed or helpful to others (they're not educating children or providing healthcare services) and inflates costs (profit and money for salaries).
- chongli 14y agoYeah, in other words an example of the broken window fallacy.
- esurc 14y agoThe rationale I've heard is that consumers benefit from having a local service location for the brand. Based on that logic, the state limits the franchises to avoid "ruinous competition" (not my phrase) that would threaten that consumer benefit. The first time I heard the phrase "ruinous competition" used this way, I nearly jumped out of my chair. But this is why the OP mentions the challenge that Tesla will have in providing local repair service. If it can crack that problem, it may open the door to manufacturer shops of other car models as well.
- shawn-butler 14y agoThese laws came into existence to protect dealers from predatory actions taken by manufacturers against the public interest. They have their roots in the Great Depression era when Henry Ford dumped inventory on dealers with "offers they couldn't refuse." There is a huge imbalance of power in this relationship. Since their creation the statutes have been captured by special interest just like every other regulation.
- tomjen3 14y agoThe dealers don't care about the economy. They care about themselfs. Politicians just want to get reelected.
- manaskarekar 14y agoThis just sounds like desperate clawing of a doomed business model to me.
- datalus 14y agoIt certainly is, quote from the article: "Let's say consumers really liked buying from a factory store. That would put dealers in a tough spot because they've been saying for years that the franchise system is actually good for customers," [Jeremy Anwyl] says. I think he hit the nail on the head. I would say the franchise system is only good for the franchise owners, not the customers.
- thirdtruck 14y agoExactly right, if the number of "straight from the factory floor" stores here offer any indication. They're turning into the record companies of car distribution.
- manaskarekar 14y agoIndeed. I hate having to deal with car dealers. I can safely say it is one of the worst shopping experiences ever given that the purchase being made is one of the costliest things in my life. And I'm not referring to any particular thing going wrong during the purchase, just the whole experience feels like walking through a field of landmines of gotchas.
- cloverich 14y agoHas anyone ever had a good experience at a car dealership? I remember getting my first car when I was 16. I was so excited, I drove the thing home and didn't realize the car mats weren't in it. I called the next day: "Sorry sir, Car mats don't come with used Vehicles. We do sell them though ($350!!!)" The thought of car dealerships going out of business and being replaced by a better business model feels nearly too good to be true. Here's hoping its not!
- schreiaj 14y agoActually when I purchased my MINI I had a great experience. I walked into the show room and the salesman asked me if I wanted to drive a car (they only sold 1 car with 3 options for engine and suspension tuning at the time). I said yes, he took my license and copied it then handed me the keys. Told me to go down the road and where to turn to get to some relatively empty roads. Then said see you later. I took the car out, drove it and knew that day I was going to get the car it was just a matter of figuring out manual or automatic and which of the engine options. Fast forward a few days I walked in and purchased the car. They have it ready the next day. Problem is they forgot the temporary plates and we didn't notice that. I drove it 40 miles home and then discovered the plates. The salesman drove the plates out to my home address on his way home from work.
- NathanKP 14y agoThat is ridiculous. A car is a product like any other product that can be sold. Apple sells phones and MacBooks directly to the public. Outlet malls have clothing manufacturers selling directly to the public. The car dealerships is an outdated model and this is a sign that they are desperate. They are just suing because once the Tesla stores prove to be more efficient other car manufacturers will follow suit.
- Osmium 14y agoI have to admit, as an outsider, I can't fathom how a law like this even exists especially in a place like America.
- shawn-butler 14y agoI can recommend reading this paper[0] It discusses the history of the relationship between the auto manufacturers and their dealers and the reason why franchise laws now exist in every state. Concludes that state regulation is necessary to the extent it neutralizes the disparity in bargaining power between the automakers and the dealers, but that current legislation no longer achieves this and only benefits the auto dealers. [0] http://EconPapers.repec.org/RePEc:reg:wpaper:628 http://EconPapers.repec.org/RePEc:reg:wpaper:628
- Shivetya 14y agoWait till you see the laws surrounding the sale of liquor and cigarettes. There are many protected industries, some protected for business reasons and some for tax purposes. Tesla is not only upsetting the apple cart when it comes to sales but service; I do not agree with their service side changes because it takes choice out of the hands of the consumer. (disclaimer : I work for a parts distributor who happens to own repair shops too). Dealers are rightly upset because the current system requires them to put up a lot of money in facilities that must be built to specific guidelines. Throw in having to meet manufacturer set requirements for sales and service they do have a large investment. Contrary to belief, the majority of new car dealerships are very good people who do go out of their way to help people.
- redwood 14y ago
- dade_ 14y agoThe NPR story doesn't seem correct, at least according to my understanding that Tesla show room locations do not sell cars, only provide information about them. A car dealership is a business/location that sells cars, and Elon's argument is that a Telsa store does not sell cars and is therefore not a dealership. Sounds like defensible logic against the franchise lobby-law to me, but according to the NPR story a Tesla store sold a car. The law is ridiculous, but it is still the law. According to the story: Mark Seegar claimed, "he walked past Tesla Motors' Bellevue, Wash., showroom. It's one of a handful of Tesla's company-owned stores. Within five minutes, he'd put down a deposit for an electric car that costs more than $50,000." Tesla's site: "As it is, our Product Specialists could not sell you a car today under any circumstances, as Model S is already sold out several months in advance and there is no inventory on site. All they can do is get you to consider placing a reservation." http://www.teslamotors.com/blog/tesla-approach-distributing-and-servicing-cars http://www.teslamotors.com/blog/tesla-approach-distributing-...
- mmariani 14y ago> ...Tesla show room locations do not sell cars, only provide information about them. Now how much would you bet that this argument will win this case for Tesla?
- njharman 14y agoDepends if jury believes putting down deposit is "buying" or not.
- thaumaturgy 14y agoTesla has an online reservation system (https://www.teslamotors.com/own https://www.teslamotors.com/own). From http://automotivedigest.com/2012/10/dealers-annoyed-with-tesla-motors-showrooms-and-service-centers/ http://automotivedigest.com/2012/10/dealers-annoyed-with-tes... : > Tesla’s stores are a bit different – essentially showrooms to gain consumer interest and education. For those impressed and wanting to buy, they’re directed to a computer to make their deposit and place their order. Tesla here is clearly navigating on purpose through a gray area in which the customer is technically not buying anything from the show room.
- deleted 14y ago[deleted]
- jzd131 14y agoThis law is sure to go away. The fact is that the future of car sales is the internet. Here is an excerpt from my blog: "According to a Polk and Autotrader.com study, 70% of new and used car buyers use the internet while shopping for their vehicle, with 58% of all buyers listing the internet as the most influential element in their car buying process. But the online car buying process doesn’t stop there. In fact, eBay Motors has sold 4.62 million passenger vehicles solely online since its inception." See the post here:http://salemove.com/buying-a-car-on-the-internet/ http://salemove.com/buying-a-car-on-the-internet/
- mrkmcknz 14y agoEvery now and then we see old laws being used by dying industries take a plunge at stopping innovation. Uber & Air B'n'B are two others that come to mind. The bigger problem for the dying industries is that they're taking on companies that at their core solve problems and disrupt. As opposed to being pathetic and continuing to prolonge the inevitable, they should focus their efforts on product development/sales channels. Or maybe even become a little innovative themselves.
- nickesh_23 14y agoGovernment and old business innovating???? Nah, lobbying is much cheaper. Just ask SF taxi companies.
- gpcz 14y agoIts easy to say that at the macro scale, but what are you suggesting car dealerships do on the micro scale? Learn how to build their own cars and sell them in defiance of the current laws on the contingency that the judge rules in Tesla's favor?
- reinhardt 14y agoNo, go out of business and look for a real job.
- gpcz 14y agoIf the only choice for dealerships in the classic phrase "innovate or die" is to die, why even say that the dealership industry needs to innovate?
- ihsw 14y agoThe alternative is to 'bail them out' -- either through strong and enforced-by-guns legislation in their favor, or the monetary kind to 'create jobs.' I'm fairly certain we're all sick of private-industry and government colluding together in the name of state-sponsored profit. No industry deserves a guaranteed profit margin.
- adrianonantua 14y ago"First they ignore you, then they laugh at you, then they fight you, then you win.". Looks like victory is pretty close.
- vladoh 14y agoI think such laws are about to go away after big players like BMW start selling their cars directly to customers online: http://www.bloomberg.com/news/2012-07-24/bmw-bets-mouse-click-to-win-48-500-electric-model-buyers.html http://www.bloomberg.com/news/2012-07-24/bmw-bets-mouse-clic...
- djokkataja 14y agoFrom the Massachusetts law: (c) It shall be deemed a violation of subsection (a) of section 3 for a manufacturer, distributor or franchisor representative: ... (10) to own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor. http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93B/Section4 http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/...
- dietrichepp 14y agohttp://www.teslamotors.com/natick http://www.teslamotors.com/natick > The Gallery does not sell cars, but serves as a place to educate visitors about our groundbreaking electric vehicles. The website does not say this about Tesla's other locations.
- protomyth 14y agoCan they order the car on premises (even if it is a computer with a web browser in the studio)?
- droithomme 14y agoI can go to McDonalds and order an Apple computer by calling 1-800-MY-APPLE. I can also do so by using McDonald's wireless. If I don't have a computer or phone I can go to the library and use theirs. Is McDonalds a Apple dealer because I can order an Apple from inside the restaurant? Is the city library an Apple dealer? If the argument is true that this location, which does not accept money or purchases, and which does not deliver cars, is a car dealership, only because some people are using the internet to place deposits on cars with a company in another state, then the library and McDonalds are Apple dealers. And furthermore, since I can also access http://carsdirect.com http://carsdirect.com from the library and McDonalds, then under this principle, the library and McDonalds are both car dealers as well.
- 14y ago
- nickesh_23 14y agoWhat a dumb law. I wish I had a dollar for everytime the government tried to stop progress to protect big, archaic businesses (über, sidecar, lyft, Airbnb, you're with me on this one). Anyone smell corruption brewing? Think about it. How can a government own a car company then legislate against other car companies? I know it's federal gov buying and local gov ruling in this example, but it's a slippery slope nonetheless. It would be like mark Cuban becoming the commissioner of the NBA while still the owner of the mavs. Anyone here think that would end well?
- jasonlotito 14y agoBy big, archaic businesses you are talking about local car dealerships, right?
- mrdodge 14y agoCar dealerships are big business, many of the big new car dealerships are owned by Fortune 500s like Sonic Automotive and Penske Automotive Group.
- delinka 14y agoThat's how I read it. Not that you've insinuated otherwise, but if you take a look at the requirements for starting a dealership, they're typically not 'small' businesses.
- protomyth 14y agoIt is basically the same type of law that kept studios from owning movie theaters. Separating producers from local sales was a big thing. We can say it is a crap law but there were some very real worries and reasons that lead to it in many industries. Expect if the law is overturned that all the manufactures will replace local dealers with their own showrooms. This isn't about stopping innovation, it's about accumulated history.
- mrkmcknz 14y agoMaybe I'm too naive to see why manufactures having their own showrooms would be such a problem?
- politician 14y agoWhy does having a Walmart raise such ire in small towns? These types of companies expatriate dollars from local economies. I think that's the reason for the original laws.
- jetti 14y agoThey have have advantages over non-manufacturer dealerships. For instance, parts would be internal and thus they may get them for just material cost which would allow for either lower service costs or higher margins both of which aren't available at non-manufacture dealerships. You could apply the same scenario to fully finished new cars as well.
- rubyrescue 14y agoImagine that Ford only allows maintenance at company owned stores, because they don't sell replacement parts to dealers, then they charge $500 for a fan belt, etc.
- grannyg00se 14y agoExcept that if I knew that was their way of business I would simply avoid buying their products. Isn't this a case where the free market actually would account for that scenario? It's not like they have a car monopoly.
- archildress 14y ago"Tesla is choosing to ignore the law and then is choosing to play outside that system." Is there a statement more indicative of the fear of innovation in archaic industries? Let's hope that laws like this begin to vanish and clear the way for innovation. If they don't, I'm sure Mr. Musk will find a workaround. They could essentially setup their retailing operation as a separate legal entity and work around this. And that's what big auto needs to understand - legal ploys to stop progress will only be met with more legal maneuvers. How about cessation of belly aching and movement toward a change in the product and retail model?
- beedogs 14y agoDid the horse-and-buggy dealers sue the automobile industry when it was starting to threaten them, too?
- njharman 14y agoDon't know but I'd bet dinner and beers for "Yes, as hard and often as they could"
- tomjen3 14y agoAbsolutely. Mackinac Island banned cars in 1898 (properly easier back then than now), with the official excuse that they would 'scare the horses' (http://www.hal.state.mi.us/mhc/autoshow/vehicles/mackauto.html http://www.hal.state.mi.us/mhc/autoshow/vehicles/mackauto.ht...) They are still banned their today, but properly mostly because the town use it as a turist attraction.
- rhplus 14y agoIn the UK, the Locomotive Acts[1] restricted speed and weight of autos and imposed signaling rules (cars had to be preceded by a walker with a red flag!) and required yielding to horses. Arguably, these laws hindered early automobile development and public acceptance and helped the development of railways and trams. I'm not sure about the US, but by the early 20th century the American auto industry was on the offensive, setting up shell companies[2] to buy up and dismantle inner-city trolley lines. [1] http://en.wikipedia.org/wiki/Locomotive_Act http://en.wikipedia.org/wiki/Locomotive_Act [2] http://en.wikipedia.org/wiki/Great_American_Streetcar_Scandal http://en.wikipedia.org/wiki/Great_American_Streetcar_Scanda...
- walru 14y ago--"Let's say consumers really liked buying from a factory store. That would put dealers in a tough spot because they've been saying for years that the franchise system is actually good for customers," he says. -- This is like saying the shit the horses leave behind is good for the road/environment and also smells nice. I think we all know the real answer. There's a sea change on the horizon.
- nhangen 14y agoI love it. Tackling both the electric car and dealership problem at the same time. This is what disruption looks like.
- bjornsing 14y agoAs a Swede I'm always amazed to hear about this type of US laws. I know Sweden represents socialism to Americans, but when it comes to this kind of intervention in the market it's much less accepted here than in the US.
- deepGem 14y agoI'm curious to know what other consumer products are sold through dealerships (In the continental US). Why would any law make it mandatory for a manufacturer to sell their items through a dealership. Just curious.
- larrywright 14y agoI think it's a sure sign you're on to something when the incumbent businesses try to use outdated laws to stop you.
- larrywright 14y agoCar sales has always struck me as an industry that was ripe for disruption. Why do we still need car salesmen?
- nlh 14y agoSame reason we need any type of human salespeople -- sometimes people don't want to do all the research & comparisons by themselves and its nice to have someone guide you in the right direction. Now - that being said - I don't disagree with the sentiment here. The traditional car sales model sucks and I think is ripe for disruption. But don't necessarily throw the baby out with bath water ;) For example - I bought an espresso machine for a friend the other day. I called one of the better retailers out there and spoke to a super-helpful saleswoman who talked me through the various options, gave me differences between models, what's worth paying for and what's not, and based on my personal preferences, helped me pick the right one. It was a totally pleasant experience. But what made it particularly excellent was that she wasn't (to my knowledge) pushing one particular brand/model. She had at her disposal about 20 different brands and guided me to the "best fit" based on my needs. Maybe that's an opportunity for car dealers in the future -- maybe manufacturers sell directly and we get independent "car sales consultants" who don't work for a particular brand....?
- larrywright 14y agoAfter reading this, I think what I really object to is the sales process. The whole act of wheeling and dealing and never really feeling like you got the best deal.
- johnrgrace 14y agoWe need car salesmen so every new car can be sold at a different price, thus capturing max revenue from consumers.
- huhtenberg 14y agoAny bets on how this is going to play out?
- scott_meade 14y ago"FREE Butterball Turkey Certificate with every test drive!" I got this ad in the mail today from a local Jeep dealer. Dealers clearly have no clue. Could you ever imagine Tesla thinking up such a dumb promotion?