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Other car manufacturers can't sell directly. Why should Tesla get special rules?
by bob13579 13y ago
Other car manufacturers can't sell directly. Why should Tesla get special rules?
- jamesaguilar 13y agoTesla shouldn't get special rules. Instead, no car maker should be compelled to use dealerships.
- bob13579 13y agoI'm responding directly to his "large corporate interests" talking point, when those large corporate interests are barred from selling directly.
- jbooth 13y agoThe large corporate interests have the infrastructure in place and don't particularly want to sell directly. This regulation serves as a moat to keep out competition.
- bob13579 13y ago1) The large corporate interests don't own that infrastructure. The actual owners can choose whoever they want to represent. 2) What's stopping Tesla from partnering with Toyota dealers? 3) With its $10B valuation, Tesla could build 10 very nice dealerships for 1% of its valuation.
- jbooth 13y agoTo be clear, this is more about inertia than it is some nefarious cabal erecting barriers to Tesla. But, if the regulation was a big problem for the corporate interests? The regulations would definitely not still be here. When it comes to money and regulations, I like to picture water acting on rock over time -- they get carved away a little bit at a time.
- runako 13y agoIIRC auto manufacturers are prohibited by law from owning dealerships. So Tesla would be introducing a dependency of variable quality between itself and its customers.
- mhurron 13y ago> What's stopping Tesla from partnering with Toyota dealers? My guess is Tesla not wanting to slap a bunch of dealer costs on top of the cost of the cars. > Tesla could build 10 very nice dealerships for 1% of its valuation. As I understand it, Tesla owning those dealerships would be just as illegal. If Tesla doesn't own the dealerships, they're either going to share the profits of the sold cars with the dealership or deal with the dealers markup and dealers fees increasing the costs of the cars.
- mikeash 13y agoThe "large corporate interests" being protected in this case are car dealerships, not manufacturers.
- bob13579 13y agoAt a $10B valuation, Tesla is worth about 1000 times the average car dealership in Texas.
- mikeash 13y agoIf true, then given the fact that there are about 20,000 car dealerships is Texas (http://txdmv.gov/dealers-portal/motor-vehicle-dealers http://txdmv.gov/dealers-portal/motor-vehicle-dealers), that means the dealerships outweigh Tesla by a factor of 20. And that's not even counting the fact that these are all dealers in Texas, whereas Tesla's presence applies to the entire country. If we assume Texas is about 1/10th of the US, that means the local dealers outmatch them by a factor of about 200.
- deleted 13y ago[deleted]
- kailuowang 13y agoIt's mentioned in the article that joining the dealership network is relatively more difficult for a startup like Tesla than the other big manufacturers. Also I don't see why being able to sell directly to consumers should be count as a "special rule". On the contrary, being forced to find a dealer in the "network" to work between you and your consumer is.
- bob13579 13y agoIt should be considered a "special rule" because an exception would be made for Tesla, and no one else (including other small car manufacturers). Either let every car manufacturer sell directly or don't.
- jeffasinger 13y agoThe answer then, is to remove the "special rule" for everyone. Anyone (even companies that make cars) can sell them.
- qdog 13y agoI think they made it 'special' to try and get it passed. The car dealers would probably commit every single cent they had to stop such a law if it allowed all dealers to sell direct. Tesla would probably be fine with allowing everyone direct dealerships, but the dealerships are not.
- toomuchtodo 13y agoThe law was put in place to protect dealers who invested their own money in their infrastructure from predatory manufacturer practices. Tesla has no existing dealer network, and therefore has no need to have said non-existed dealer network protected from them.
- bob13579 13y agoYes, I agree that the law is a shoddy law but that shouldn't allow Tesla to sell directly. Would small car manufacturers get special rules too? Laws are laws. Either change the law or enforce it. That's fair. Not cronyism.
- jack-r-abbit 13y agoI think that is the point. Change the law. Ford, Chevy, etc may not want to go the "dealer not required" route and continue to use dealers. But at least there would be options.
- andyl 13y agoThe original intent of the law was not to prohibit manufacturers from selling direct. The intent was to prevent manufacturers from competing against their own dealerships. Tesla has no dealerships.
- coldpie 13y agoI'm baffled. Who is arguing for Tesla to get special rules? They're simply not going to sell in markets that don't allow them to sell how they want to.
- nawitus 13y ago"Other car manufacturers can't sell directly. Why should Tesla get special rules?" Tesla shouldn't get special rules. Tesla probably advocates a non-special-rule model.
- koenigdavidmj 13y ago"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread." -Anatole France
- bob13579 13y agoTesla currently has a market cap over $10B. That is larger than Fiat's.
- Shivetya 13y agodoesn't answer the question, why should Tesla be granted an exception not available to other automakers? Chrysler has had all sorts of problems with franchise law in California in regards to operating their own.
- gknoy 13y agoFrom a different perspective, what's wrong with car manufacturers operating their own dealerships? (I'm curious: there very well may be a down side, but I haven't thought of it yet.)
- bodyfour 13y agoIt's mostly a historic artifact. Early on, cars were sold by local dealers. Later, when manufacturers wanted to sell direct they learned that local politicians cared more about the business down the street than some giant company in Detroit. Therefore, all manner of state and local laws got passed to protect dealerships' turf. In a lot of ways, car dealerships are perfectly suited to exercise power in state legislatures. No matter what poduck district a state lawmaker comes from there are probably several car dealers there. They're often some of the most locally famous people thanks to the amount of advertising their businesses do. I couldn't name my gradeschool teacher from 30 years ago but I sure could tell you who owned the largest car dealership in the area... and sing his radio jingle. By contrast, few state lawmakers have a Ford or GM plant in their district.
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- _pmf_ 13y ago> Other car manufacturers can't sell directly. Why is this (I'm not familiar with the way it works in the US)?
- uvdiv 13y agoState-sanctioned corruption. If you're looking for the justifications, here's an explanation from a Cato article (pp. 3-6): Why Restrictions on Online Auto Sales? The franchise laws that inhibit the new business models for car sales from spreading online are defended as being important for protecting dealers and consumers from automobile manufacturers. Defenses of those laws, which became widespread in the 1950s, revolve around two arguments: first, that restrictive franchise laws are needed to protect consumers and, second, that such laws are needed to protect distributors from rapacious manufacturers[...] http://www.cato.org/sites/cato.org/files/pubs/pdf/bp58.pdf http://www.cato.org/sites/cato.org/files/pubs/pdf/bp58.pdf
- LanceH 13y agoIt's car dealers who have special rules to restrict competition.
- mindcrime 13y agoThey shouldn't. ALL manufacturers should be able to sell direct to their customers. We have this same problem here in NC, and I'd be somewhat opposed to a bill which carved out an exemption just for Tesla. But I'd wholeheartedly back a bill that approved "direct to customer" sales across the board.
- bob13579 13y agoExactly. I agree with you that car manufacturers should be able to sell directly. I'd love to buy a BMW directly instead of dealing with a dealership. The laws prevent BMW and other car manufacturers from doing so. The laws need to be changed, but until that happens, IMO everyone should be following the same rules.
- pchristensen 13y agoCar manufacturers can't sell directly to compete against independent dealers of their cars. Tesla has no independent dealers.
- digikata 13y agoOther manufacturers had dealership agreements dating back pretty far into history. This is a really good listen: http://www.npr.org/blogs/money/2013/02/19/172402376/why-buying-a-car-never-changes http://www.npr.org/blogs/money/2013/02/19/172402376/why-buyi... I suspect it would be better for everyone if special dealership regulations were broken down. But, given that Tesla is a new car company, without any historical dealership agreements, why should they be bound the inefficient legal infrastructure that essentially cropped up around private contractual agreements between other car companies and dealers.
- bob13579 13y agoAny of those dealers would love to sell Tesla cars, especially the higher-end ones that sell BMWs, Mercedes, Porsches, and Lexuses. Nothing is stopping Tesla from partnering with dealers to do so. Small Chinese car manufacturers don't get special treatment. Why should Tesla get them? I know the dealership laws are awful, but IMO we should be focusing on changing those laws instead of giving special treatment to particular companies.
- revelation 13y agoAll your arguments divolve into this one statement: I know its awful, but we need to do the right thing. The world does not work that way. You can not put off inventing transport just because you have not invented teleportation yet. Things work in small steps.
- bobwaycott 13y agoI don't think anyone is suggesting Tesla get special rules (except maybe Tesla). More likely is an interest in seeing existing automobile franchise and anit-trust laws reviewed and possibly changed to remain in line with consumer needs, interests, and the operation of a healthy market.
- bobwaycott 13y agoYou do realize that manufacturers cannot sell directly as a result of dealerships lobbying & litigating to restrict and, ultimately, abolish the practice, right?
- JPKab 13y agoIn response to the "why should Tesla get this when other automakers don't" angle: Nobody is saying the law is at all fair to Ford, GM, Toyota, etc. It's not. They should be able to sell directly to consumers also. The law was lobbied for by dealers in Texas, and signed by America's greatest president, George W. Bush, when he was still governor of Texas. Bush was a true conservative who believed in free market principles, except for when he wasn't. Let's not pretend this is Tesla vs. Ford/GM/Toyota. This is Tesla vs. the good old boy, rent-seeker network that is the auto dealer lobby. Car dealerships are some of the last dynasty busineses. Ever wonder why most family run businesses eventually fail when an incompetent son/daughter takes over, but dealerships just stay around for 3 or 4 generations? Its because its a rigged market that requires no skill. The profits don't come from adding value. They come from gouging consumers. Tesla is just a new reminder that we are being screwed, and they don't have the inventory to support the network of the dealership mafiosos and their fratboy progeny. "Dude, my dad owns this dealership, so I totally know business bro......" (overheard at every frat party ever)
- gnoway 13y agoFor everyone else reading, you should look here: ftp://ftp.legis.state.tx.us/bills/83R/billtext/html/senate_bills/SB01600_SB01699/SB01659I.htm ftp://ftp.legis.state.tx.us/bills/83R/billtext/html/house_bills/HB03300_HB03399/HB03351I.htm The above are linked from here: http://www.teslamotors.com/advocacy_texas http://www.teslamotors.com/advocacy_texas I believe the issue bob13579 is bringing up (in the least helpful and most aggravating way possible) is that these bills effectively single out Tesla. Read the amendment in section 1. I think it means that the exclusion would only apply to electric- or battery-only car manufacturers doing business in Texas on or before 3/1/2013. This is surely only Tesla. My opinion is that the existing law should not exist. But it does, and (again, my opinion) if this bill had 'done the right thing' and tried to remove the protection for all dealers, it would have received even less consideration. Is this protectionism something that can be tested for constitutionality in the courts? Has it been already? It seems like the sort of thing that ought to get litigated.