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Middle men don't like confronting their own mortality. If Tesla succeeds, they can't sink their fangs into the revenue stream. If Tesla really succeeds over a

Middle men don't like confronting their own mortality. If Tesla succeeds, they can't sink their fangs into the revenue stream. If Tesla really succeeds over a longer period of time, the other car makers might start getting ideas.

songzme 13y ago
so how did it ever come to be where car manufacturers are required to sell through dealerships?
- jared314 13y ago
  Running a local car dealer takes a lot of capital investment to pay for inventory and trained personal. With the franchise law, the government is encouraging, and protecting, the local business's upfront investment. This creates revenue, employment, and consumer supply to a local area. If the manufacturers dictated the price, as apposed to suggesting it (MSRP), it could starve the dealers, eliminate consumer choice, and lower local government revenue. (Local, in this case, can be considered city, county, or state government)
- 30thElement 13y ago
  There's 2 reasons on top of the generic problems with vertical integration, at least that I know of. First, once an independent dealership opens, they're gonna forever be afraid that the manufacturer is going to cut off their supply and then open an official dealership next door. It screws up the value equation for opening a dealership in that the small family owned business takes all the risk so the giant mega corp can swoop in and take all the profits once they finally show up (at least that's how you pitch it to the voters). Second, dealerships make their money off of the maintenance as well as the sale. Allowing the manufacturer to dip into that maintenance revenue stream will create perverse incentives that hurt consumers. The first one doesn't really apply, as Tesla has the capital to start all of the dealerships they need and that's basically what they want; they don't want 3rd party dealerships popping up at all. The second one applies to Tesla, but I don't think it really matters. They are The Experts in electric cars right now, so any significant maintenance will probably just get shipped back to their factory anyway.

songzme 13y ago

so how did it ever come to be where car manufacturers are required to sell through dealerships?

jared314 13y ago
Running a local car dealer takes a lot of capital investment to pay for inventory and trained personal. With the franchise law, the government is encouraging, and protecting, the local business's upfront investment. This creates revenue, employment, and consumer supply to a local area. If the manufacturers dictated the price, as apposed to suggesting it (MSRP), it could starve the dealers, eliminate consumer choice, and lower local government revenue. (Local, in this case, can be considered city, county, or state government)
30thElement 13y ago
There's 2 reasons on top of the generic problems with vertical integration, at least that I know of. First, once an independent dealership opens, they're gonna forever be afraid that the manufacturer is going to cut off their supply and then open an official dealership next door. It screws up the value equation for opening a dealership in that the small family owned business takes all the risk so the giant mega corp can swoop in and take all the profits once they finally show up (at least that's how you pitch it to the voters). Second, dealerships make their money off of the maintenance as well as the sale. Allowing the manufacturer to dip into that maintenance revenue stream will create perverse incentives that hurt consumers. The first one doesn't really apply, as Tesla has the capital to start all of the dealerships they need and that's basically what they want; they don't want 3rd party dealerships popping up at all. The second one applies to Tesla, but I don't think it really matters. They are The Experts in electric cars right now, so any significant maintenance will probably just get shipped back to their factory anyway.