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New Jersey Votes to Block Tesla’s Direct Sales
- DrStalker 13y agoWhy aren't auto manufacturers jumping on the idea of selling directly to the public? Do they get some benefit from middlemen that Tesla doesn't, or is it just because they are so established doing things one way they won't consider other ways?
- voidlogic 13y agoThey already have the dealership networks...
- jvm 13y agoThat's exactly what the auto manufacturers want. They're blocked by the dealership lobby. Relevant Planet Money: http://www.npr.org/blogs/money/2013/02/12/171814201/episode-435-why-buying-a-car-is-so-awful http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...
- deleted 13y ago[deleted]
- matt_heimer 13y agoI'm trying to imagine what would happen if a grocery store lobby started trying to ban farmers markets.
- baddox 13y agoThere's no shortage of stories about government "health" departments cracking down on farmers' markets. I don't have any evidence of actual "grocery story lobbyists," but it's reasonable to assume that grocery store management approves.
- icambron 13y agoIt's for the same reason that movie distributors don't bypass theaters by selling directly to the public. Originally, it was hard to distribute cars, and car manufacturers didn't want to make the investment to open little retailers everywhere. So they offloaded the risk and capital requirements to third parties, who could customize themselves to the markets they were in (what inventory to carry, where to locate, how to advertise, etc). Then those dealerships became their main (only?) source of revenue. Now they're beholden to their main sales channel. If they started selling cars directly, the dealerships revolt (like a labor strike - what do they have lose here?) and cut them off from revenue for a month. Similarly, theaters very explicitly refuse to show movies that are directly release to the public, which means, for the moment, that those movies won't make any money, and thus movies aren't released that way. That's a scenario no upstart car company would ever enter into willingly, so Tesla of course didn't. And eventually, companies like Tesla will increase the pressure on all car companies to sell directly, and the dealership cabal will collapse. But in the meantime, that's a lot of tied hands. Adding legal barriers through lobbying makes all of that worse, of course.
- erichocean 13y agoIt's for the same reason that movie distributors don't bypass theaters by selling directly to the public. Your understanding of the history of movie distribution as it relates to theater ownership isn't quite right. You can read up more here: http://en.wikipedia.org/wiki/Block_booking http://en.wikipedia.org/wiki/Block_booking In a nutshell, distributors (i.e. movie studios) owned the major theater chains until 1948, when the Supreme Court demanded that theater production and distribution be separated from exhibition (i.e. theaters).
- icambron 13y agoThanks. I guess I didn't mean to suggest the history was the same (I know almost nothing about the history of theaters), just the current situation. So sorry for the poor paragraph organization. I will stand by my assessment of the status quo, though. I remember a few years ago, theaters refused to show a Soderbergh movie because it was being released simultaneously on DVD and the theaters. Not a great article, but here's a reference: http://www.techdirt.com/articles/20060118/195200.shtml http://www.techdirt.com/articles/20060118/195200.shtml
- EGreg 13y agoI would love to hear what kind of rationale can be given for banning a car company from directly marketing and selling its own products to consumers.
- lkbm 13y agoThese bans were first put in place to ensure there'd be local service shops available from dealerships, I believe.
- toomuchtodo 13y agoThe bans were initially put in place to protect the investments made by dealerships from being nullified by a manufacturer setting up shop and competing with them. It has no purpose when the manufacturer has no dealership agreements to begin with.
- bodyfour 13y agoThe short answer: very few state legislators have auto manufacturers in their districts, but every one of them has car dealers.
- mcv 13y agoNice. Protectionism and trade wars between US states.
- deleted 13y ago[deleted]
- bane 13y agoThis is also the state that doesn't allow self-service when you pump gas in your car.
- denverpeterson 13y agoThank you bane for saying what the rest did not (84+ comments). Middlemen gotta get theirs. Big Oil, Big Auto. Why would they have a problem with electric cars?
- dfxm12 13y ago*one of the states that doesn't allow self-service Also, what does this have to do with this issue?
- akulbe 13y agoI think someone is paying someone else off. The automotive lobby is big and powerful.
- nickff 13y agoPublic choice theory explains the situation quite well.[1] [1] http://en.wikipedia.org/wiki/Public_choice http://en.wikipedia.org/wiki/Public_choice
- deleted 13y ago[deleted]
- cm127 13y agoI didn't realize this was so common: > Tesla has won recent legislative battles in states like Washington, Ohio, New York and Minnesota, but states such as Texas, Arizona and Virginia have retained or added laws limiting the company’s ability to operate stores.
- 0x0 13y agoWhat's stopping Tesla (or Elon Musk) from starting a new dealership corporation that happens to sell Teslas?
- m_darkTemplar 13y agoApparently it's fine in New York though. Can you somehow just buy one in New York and drive it back? It's not too far away.
- DannyBee 13y agoThere are all sorts of weird franchising laws and such on the books for dealerships as well.
- rhizome 13y agoNext up: New Jersey prohibits registration of cars bought direct.
- cyanbane 13y agoWhats to stop a NJ resident from going to NY to purchase a Tesla direct? Is their a a big financial penalty for doing so when registering? What is to stop a grey market of NY residents reselling them to NJ consumers if so? This makes no sense.
- toomuchtodo 13y agoI was actually planning on setting up a landing page tomorrow to offer Tesla buyers an address (no charge) in an adjacent state to register the vehicle at when they can't purchase directly in their state (TX, NJ, etc). You would take delivery at that address, and then re-register the vehicle in your home state after the title was in your name.
- btian 13y agoNJ residents are still able to take delivery at their home address.
- toomuchtodo 13y agoSo Tesla simply can't have a presence in the state? If that's the case, Tesla should be fine with having showrooms in New York, as well as Philadelphia/Levittown/Allentown, PA. That would put the vast majority of NJ residences within a 30-45 minutes drive of a Tesla showroom.
- lbotos 13y agoAs someone who purchased a car out of state and took it back to NJ the only thing is you have to pay NJ tax on the sale. So no "extra" penalty that I'm aware of unless they are doing that for electric vehicles which would be just downright horrible.
- btian 13y agoNothing. Just as there's nothing stopping an NJ resident from buying a Tesla on the Internet from her home. It's just to annoy people who don't know what they want. They can still do test drives in NJ, but can't talk about pricing, options, financing options etc.
- xophe 13y agoIsn't this "Bridgegate" Christie?
- free652 13y agoI hate dealers, every time I buy a car it is always a stressful experience. Dealers are trying to cheat me on every my step. Last time I was via PenFed Car Buying Service, got a "guaranteed" web quote: Got the dealer: Sure, we will honor the price. But all of our cars have door guards installed - that's $500 extra. We just don't sell the cars without door guards. Got the contract for the car: Some extra maintenance plans included for an another $900, forced to remove them. Oh and the dealer made an another mistake for $1000, couldn't add up two numbers together (damn liar). An hour later got a fixed contract. Got to the financing guy who is trying to sell me extended warranty and gap insurance for about an hour. And that's over 6-7 hours at the dealership... /vented
- B-Con 13y agoLast time I was at a dealership it was to buy a used car. As soon as we started talking numbers I found there was an additional $800 of work that had been done to the car (window tinting and some door guard thing) that I had to pay for. I started by telling him that the sticker price was disingenuous since this was was already done and they knew they had to charge for it. I ended up negotiating something half-way decent, but that was a very annoying starting point.
- beachstartup 13y agoyou are comparing the purchasing experience of a high end car (tesla) against a low end one.
- tim333 13y agoEven with fancy cars they tend to give you a crap deal on your trade in.
- s0rce 13y agoI've purchased a $60,000 BMW and they still tried to sell stupid crap.
- beachstartup 13y ago
- oskarth 13y agoThis is what pg tweeted earlier today: Banning Tesla is an index of the corruptness of state governments as banning Uber is of city governments. (https://twitter.com/paulg/status/443469758369767425 https://twitter.com/paulg/status/443469758369767425) A very astute observation, as usual.
- joesmo 13y agoCouldn't agree more. It's amazing anything that isn't corrupt ever happens in New Jersey's government. Or, at least, I assume things that aren't corrupt do happen at least once in a blue moon. I suppose they got tired of selling kidneys and found a new victim.
- npizzolato 13y agoOr, alternately, Uber ignores local taxi regulations and then is surprised when cities fight back. I haven't been following the Tesla issue closely, but their attitude does not seem similar to Uber's, which, personally, makes all the difference.
- AJ007 13y agoThe cynic says the more things you regulate, the more industries that can donate money to your political campaign and hire you when you retire. Some regulation serves a purpose. All regulation can be justified with some sort of logic. That doesn't mean it is either necessary or a net benefit to society. Proponents claim that cities need to regulate Uber to ensure passenger safety. Meanwhile an NYPost investigation found of the 16 fatalities caused by cab drivers since 2009, all but 2 kept driving cabs. ( http://nypost.com/2014/02/09/cabbies-who-kill-or-maim-in-nyc-keep-licenses-return-to-work/ http://nypost.com/2014/02/09/cabbies-who-kill-or-maim-in-nyc... ) May be its different in other cities. I haven't been kidnapped by a cab driver in NYC, yet at least. The Tesla dealership issue is more erroneous and transparent to me than Uber. Car dealerships are a public nuisance. No one would argue we need more middle men for electronics, clothes, or food. Why for cars? The current structure makes it easy for dealers to get away with dishonest business practices. Mechanics are paid to do repairs as fast as possible, increasing the chance of future failures. Car companies are vulnerable to large class action lawsuits while a single dealership is hardly worth an expert lawyer's time. Heavily regulated environments repel innovation. Regulations, both in Uber's case and Tesla's are written by the incumbents for the incumbents. Follow the letter of the law and instead of a sleek new structure you produce a disfigured chimera, which probably will piss money. Perhaps one of the best things the internet provided us was a regulation minimal environment. You could put up a website and try new things with out having to worry about getting shaken down. I hope the future web won't be full of rampant EU-mandated privacy notices and DMCA federal government web site registries. Uber and Tesla don't have a choice. If they want to provide high quality services, laws have to be broken. It is unfortunate that you need to be a large and well funded company to force much needed changes on state and local regulators. I predict that cities and states which are friendly toward innovation will do better by leaps and bounds in the long run. Betting against change and efficiency tends to be hazardous.
- tdiggity 13y agoAnyone know if they've considered the most logical route: If you sell direct, no dealers. If you have dealers, you can't sell direct In all of Tesla's battles, I haven't seen this brought up.
- hnriot 13y agothey could sell them in the Apple store. Solved.
- blazespin 13y agoIt could also be because people are waking up to the irrational exuberance in the tesla stock. Imagine selling all these cars but not actually delivering them.
- andrewfong 13y agoI wonder what requirements are placed upon dealers. In theory, Elon Musk could just open up his own "Elon's Teslas" shop and voluntarily sell the cars for no additional markup. There'd be some additional overhead, but it'd still be a much nicer arrangement overall than the current one I bet.
- Lost_BiomedE 13y agoIn Texas they have Tesla stores that only offer test drives. Then, you buy it online in the shop from Cali.
- rsobers 13y agoTesla has a showroom at Short Hills mall in NJ. You can go in, check it out, test drive the car, and then order online. While it's really telling about NJ's government, I don't think it'll impact Tesla or its customers. Also, I love how the article title reads "New Jersey Votes", as if the citizens got a vote in the matter.
- freshyill 13y agoUgh, the Short Hills mall. The ultimate rich mall. Of course they have a Tesla showroom.
- deleted 13y ago[deleted]
- johnvschmitt 13y agoHere's how we got here: 1) Money buys political influence (duh!) 2) Most cities have small tax bases, where car dealerships are a very large part of the tax base. City managers want a larger tax base to help fund their plans. 3) Thus, car dealerships & local politicians have aligned incentives. 4) So, local laws (zoning, advertising, etc) favor car dealerships. 5) Higher offices are filled from the pool of local politicians, as they move up the food chain. 6) Those politicians remember their contacts @ the dealers, who helped fund/launch their careers, & they remain aligned with them in passing laws empathetic to dealer's interests. Of course, legitimately, car dealerships have HUGE capital investments (fast aging inventory, large chunks of prime real-estate, staffing costs). Would YC ever want to get into the traditional dealer space? No friggen way. Too risky & doesn't scale. And, nobody really buys a car without a test drive/showroom. So, nearly any "online" sale is cannibalizing the dealer's investments. So, we need to have some kind of online buying system where you MUST enter in a dealer showroom code before buying, & they get some commission, as they DO offer real value here folks. IMO, the whole consumer retail system is going to evolve into "showroom + online buying" in a fair system soon.
- greggman 13y agoI'm not sure I understood your point. But..., HUGE capital investments does not seem like a valid reason to protect a company. Should we protect Walmart from Costco or Costco from Target?
- johnvschmitt 13y agoTo clarify: No. A businesses costs shouldn't become our costs. I'm just saying that it's a fallacy to think that an online sale is wholly responsible for the sale. They do rely on those huge investments by showrooms/dealers. So, in a "right evolution", I envision smaller showrooms, wide variety + low inventory per unit. (Yes, like an Apple store). Similarly, if stores like Best Buy died, Amazon sales of consumer electronics would fall. So, Amazon would likely buy up 1/2 the brick & mortars, to create showrooms. But, until Best Buy dies, Amazon is happy that they provide free showrooms that everyone hates, but still uses & abuses.
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- jrockway 13y agoWhat's next, the governor blocking lanes on the George Washington Bridge to get back at a political opponent?
- InclinedPlane 13y agoThis isn't relevant to this discussion, you're not helping.
- DigitalSea 13y agoHoly crap. Is this for real? Dealers are one half of the rotten pie that is the car industry, just let the dealer industry die already. Much like the music business tried fighting digital music only for it to completely take over, the car industry eventually will change to a different model that isn't reliant on an industry lubed up in snake oil and shady business practices. Extended warranties, sneaky extras and premiums added to your contract, the amount of crap you have to endure when buying a new car these days is horrendously deep. If only more car companies sold directly and allowed you to buy online like Tesla does, I know the lobbyist motor dealerships group would never let that happen though. No wonder the car industry is in the toilet, it's killing itself and Elon Musk is one of few people trying to change things and he's met with resistance: typical.
- shardulm 13y agoIts surprising to see why Auto Manufacturers uniting against this , reaching directly to Customer without middle man must be really good for them too , isnt it ?
- snambi 13y agoAh god
- tnuc 13y agoLooks like Tesla is going to convert it's sales centers to "showrooms" I have to admire Tesla for standing up to this corruption.
- nickff 13y agoThey're not really "standing up to this corruption", Tesla is just trying to side-step it.
- DrStalker 13y agoDoes that mean you can go in, look at and test drive a car but not purchase one, then you go home and order one online?
- wmf 13y agoYes, that's how they operate in several states.
- brc 13y agoThey should open up internet cafes next door. Who just happen to have computers that only go to the Tesla website, and are full of Tesla marketing materials and helpful staff who can assist you navigating the only website available. I would do this just to create press and get people to come and see the free-internet-cafe-next-to-showroom that caused such a fuss.
- PythonicAlpha 13y agoI thought, that the US are the land of free market? Sometimes, it just seems to me the land of free market for those that can afford it?
- nickff 13y ago"... free market for those that can afford it?" The Model S is not a cheap car.
- PythonicAlpha 13y agoThe cost of a car? You just think to small. I doubt, that you understand what I meant by "afford".
- nickff 13y agoMy point was that the Model S is not a car for the poor huddled masses, and that if anyone could "afford" to purchase political power, it would be the people driving luxury auto-mobiles.
- smsm42 13y agoTesla car costs under six figures, you need much more to buy even a local political power, and state-wide you probably need 3-4 orders of magnitude more.
- smsm42 13y agoAre you a time traveller from the 18th century or something? The good people in Congress have worked for centuries to not let free markets remain too free - otherwise where the good people in Congress would get the votes and the campaign funds, if they couldn't tweak free markets to benefit this or that interest group? Of course, the good citizens are universally (within tiny margin of error commonly called "those crazy libertarians") cheering this since they belong to one or other interest groups. The fact that while they are screwing others with one special interest law other screw them ten times with another ten special interest laws so at the end everybody ends up being screwed ten or eleven times eludes their attention and will probably continue to do so for many many years.
- shmerl 13y agoCorrupted law bought by car dealers. How can public accept such obvious corruption?
- nrbafna 13y agoWhat are the regulations around setting up a dealership? - Can Tesla set up a proxy dealership whose only job is to take the order and send out a receipt of purchase? - Can dealership be purely online?
- vpeters25 13y agoIANAL, just wondering whether these state laws conflict with the constitution's commerce clause. Has such legal theory ever been tested in court?
- npizzolato 13y agoWhat is the conflict? Unless there's a federal law that says that auto manufacturers can sell direct to consumers in states, I don't see what conflict there could be.
- DannyBee 13y agoYes, it seems to be a fairly clear violation of the dormant commerce clause (IMHO). I've done a completely trivial amount of research, and haven't found anything in court on it.
- tzs 13y agoThe article is a bit misleading. It makes it sound like direct sales were legal in NJ (and so presumably the only reason Ford and Chevy and Toyota and the rest did not do them is that they did not want to), and the politicians are now stepping in to make a new law to stop Tesla. In fact, it looks like direct sales have been illegal for a long time, but the law is poorly worded, and can be read in a way that bans direct sales for Ford, Chevy, Toyota, and most other major car manufacturers, but does not apply to manufacturers like Tesla, who only sell direct. What the new law is doing is saying that the old law is meant to apply to all car manufacturers, not just Ford, Chevy, and so on.
- drawkbox 13y agoHere we have a new industry everyone wants, a US product people want that gets high awards, innovative, inspirational and lawmakers go and block easier ways to sell it. Is this how we are going to compete on new industries and alternatives? This is the same middle man battle going on in other industries, years of legacy middle men. Dealerships will still exist and Tesla won't kill them, let them play.
- zallarak 13y agoThis is madness. Tesla's model of selling is simply better; it is cheaper to the customer and cuts out unnecessary middlemen.
- smsm42 13y agoThat's the state where it is considered too dangerous for you to fill up your own car with gas, right? So one's expectations of that place's lawmaking sanity should be already pretty low, and these expectations are now confirmed.