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Transportation The Courts

Dealership Commentator: Tesla's Going To Win In Every State 156

cartechboy writes Unless you've been in a coma for a while you're aware that many dealer associations have been causing headaches for Tesla in multiple states. The reason? They are scared. Tesla's new, different, and shaking up the ridiculously old way of doing things. But the thing is, Tesla keeps winning. Now Ward's commenter Jim Ziegler, president of Ziegler Supersystems in Atlanta, wrote an opinion piece that basically says Tesla's going to prevail in every state against dealer lawsuits. He says Tesla's basically busy defending what are nuisance suits. This leads to the question of whether there will be some sort of sweeping federal action in Tesla's favor.
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Dealership Commentator: Tesla's Going To Win In Every State

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  • by Anonymous Coward
    Not unless Tesla can outspend the dealers lobby.
    • Not unless Tesla can outspend the dealers lobby.

      They do have a considerable budget to work with. Here's to hoping!

    • by pr0t0 ( 216378 ) on Thursday September 18, 2014 @11:38PM (#47942781)

      I highly recommend to everyone reading this discussion to listen to this 16-minute NPR Money Matters story:
      http://www.npr.org/blogs/money... [npr.org]

      Them if you have some time, This American Life tells the dealer's side of the story:
      http://m.thisamericanlife.org/... [thisamericanlife.org]

      I'll warm you now that your blood may boil, and you may turn into a rage monster thinking about the sheer absurdity and stupidity of the car-buying process.

    • Actually yes. In area, is there a competing phone company? Do they have dealers? And so....

      What is good for Verizon, AT&T, etc -- no dealerships, must also be true and allowed for Tesla

  • Federal Overreach (Score:4, Informative)

    by Anonymous Coward on Thursday September 18, 2014 @07:30PM (#47941503)

    As this is an interstate sale, federal action is actually constitutional. However, I don't see any reason we need Washington to command us how to sell cars; Tesla's approach (common sense and a bajillion dollars) seems to be working.

    • by l0ungeb0y ( 442022 ) on Thursday September 18, 2014 @07:38PM (#47941545) Homepage Journal
      Yeah, except that a single company shouldn't have to spend a bajillion dollars in order to be able to sell cars without having to kowtow down to dealer cartels. That's why the Federal Government needs to get involved -- no one should have to sell their product through a middleman.
      • Re: (Score:2, Flamebait)

        by trout007 ( 975317 )

        Right. If there is one thing the federal government is good at is breaking up cartels.

      • Re:Federal Overreach (Score:4, Informative)

        by LordNimon ( 85072 ) on Friday September 19, 2014 @09:06AM (#47945009)

        no one should have to sell their product through a middleman.

        Tell that to Section 2 of the 21st Amendment.

    • by iroll ( 717924 )

      What are you smoking? Regulating interstate commerce is a power directly allocated to Congress by the constitution.

      • Maybe try reading the words?

        • by iroll ( 717924 )

          Ha! Whoops! Read that as unconsititutional. It took me about a dozen rereads to spot it... guess I'm just not used to anybody actually arguing that something is constitutional :)

  • Not sure why these dealers are so scared. Tesla is a super high end product that only gets 200 or so miles to a charge. The appeal to even fairly well of people is limited. The existing car companies are still going to be prevented from selling directly.
    • by agm ( 467017 )

      No company should be prevented from selling their products directly to the public. Land of the free indeed.

      • Re: (Score:2, Informative)

        by Anonymous Coward

        yes they should, but perhaps they SHOULD be required to maintain physical presence where their products are sold so that the customer does not need to be grossly inconvenienced when trying to obtain warranty service. doesn't need to be as extensive as, say, ford motor company's dealer network, but certainly more than one per state in most cases - especially given the proprietary nature of the product and its parts, and single source availability of them, as well as the lack of availability of necessary serv

        • Re:Why so much fuss? (Score:5, Interesting)

          by bmo ( 77928 ) on Thursday September 18, 2014 @09:42PM (#47942255)

          The dealer shill thus spake:

          the local dealer may have overpriced their product so you buy elsewhere, but that local dealer is still obligated to do the warranty service (for which they are paid quite well by the manufacturers).

          In no other industry is this true. In electronics, white goods, etc, there are "certified warranty service centers" where you can call up and get them to fix your stuff. For example, you don't have to go to an Apple dealer to get your high-priced computer fixed under warranty - you can bring it or ship it to one of many service centers.

          https://www.apple.com/lae/supp... [apple.com]

          Please note that the requirement to become a service center does not include having to be an Apple reseller.

          Ford, Volkswagen, Jaguar, Chevrolet, etc., should be able to certify garages for warranty work. But no, the automobile industry is the only industry where you have to go to a dealer to get warranty work done.

          Leeches, all of you. Die already.

          --
          BMO

          • Apple's requirements basically force you to be a dealer. Years ago, a computer store I worked at looked into becoming a AASP and the requirements were ridiculous compared to other brands. Running the numbers, it was actually cheaper to buy the parts through a 3rd party than going through the hassle of playing Apple's game. How many of those iDevice repair places are actually AASPs?
        • by msauve ( 701917 ) on Friday September 19, 2014 @06:36AM (#47944089)
          "they SHOULD be required to maintain physical presence where their products are sold so that the customer does not need to be grossly inconvenienced when trying to obtain warranty service"

          Why shouldn't the consumer be allowed to decide for themselves what constitutes "gross inconvenience?" Is your mommy government somehow uniquely qualified to do that?
      • Re:Why so much fuss? (Score:5, Interesting)

        by PPH ( 736903 ) on Thursday September 18, 2014 @08:55PM (#47941989)

        No company should be prevented from selling their products directly to the public. Land of the free indeed.

        So, you are starting out as a small manufacturer. You've got a product you think people would like, but you don't have the money to build a network of your own retail outlets. So you shop around for a general retailer willing to put your stuff up on a shelf.

        The minute your product gains any market share, part of that agreement will be that you don't compete with the retailer within a certain geographical area. And when you start moving large volumes of product through a retailer, your cost to get to the equivalent market goes up. So its a barrier to entry.

        That's why many manufacturers' outlet stores are way out in the sticks. No existing retailers cover that area, so outlet malls spring up.

        • sounds a bit like the way microsoft and apple do business, the 3 E's - so why should they get away with it and not car dealers after all the market should be open
        • Re:Why so much fuss? (Score:5, Informative)

          by voidptr ( 609 ) on Friday September 19, 2014 @07:26AM (#47944305) Homepage Journal

          That's a reason why you should protect dealer networks if a company decides to start with that business model.

          That's not a reason to protect those dealer networks from an upstart company that never had that business model. Just because GM and Ford made a deal with the devil 50 years ago shouldn't bind a new company to that same business model. Tesla has never had a dealer franchise agreement with anyone, them selling directly does not break any contractual agreement they've entered in to. They have no obligation to respect an agreement Ford or GM made with their dealer network to not compete.

          Also as a counter point, Apple sells plenty of things through the half dozen Best Buys in my town. There's also two Apple stores within a 20 minutes drive. Just because a company sells through channel partners doesn't immediately preclude them from selling direct, it depends on the agreement they made with the channel in the first place. Even car dealer arrangements started out with the dealers protected by the franchise agreements themselves, elevating them from simple contract law to specific legislative protections came later.

    • The existing car companies are still going to be prevented from selling directly.

      How do you know this? If Tesla can do it why can't other car companies? Those existing companies could easily sue and win if Tesla is allowed to bypass dealerships. Laws are not so overtly tailored to one company as to make Tesla special.

      • Because of this link which is right in the summary: http://yro.slashdot.org/story/... [slashdot.org]
        • I wonder if existing manufacturers can pull dealership agreements and then come under the same rules a Tesla. There are also existing car companies that do not have dealership agreements that might want to sell directly.

      • by PPH ( 736903 )

        If Tesla can do it why can't other car companies?

        Because dealer franchise agreements give individual dealers a defined geographical area in which they are the only sales outlet for that particular model. And that contract language is difficult for manufacturers to break*. Tesla had no such agreements in place.

        *Not just manufacturers. We had a road realignment project here in Seattle that was stalled for years by the existence of a Buick (I think) dealership smack in the middle of where they needed to build the new road. Moving it even a few miles would h

        • by mysidia ( 191772 )

          Because dealer franchise agreements give individual dealers a defined geographical area in which they are the only sales outlet for that particular model. And that contract language is difficult for manufacturers to break*. Tesla had no such agreements in place.

          Well, if it doesn't suit them, they'll likely just revise the language, or allow the agreement to end at its expiration date, and terminate the contracts; if they don't suit the manufacturer.

      • by mark-t ( 151149 )
        Tesla isn't bypassing dealerships because no dealerships actually sell Tesla automobiles.
    • by khallow ( 566160 )
      Because once there is a leak in the dike, it will grow. The existing car companies will be prevented from selling directly, only if the existing franchise agreements remain in place.
      • The existing car companies stil are prevented from selling directly, because it's anti-competitive with with their franchises. That's why these laws came about in the first place.
        • by khallow ( 566160 )
          Only as long as those franchise agreements continue to exist. Ford or Toyota didn't agree to uphold car dealership franchises till the end of time. If Tesla is able to turn this into a competitive advantage, and I think they will, then most of the car companies will have to follow suit or lose market share.
      • by PRMan ( 959735 )
        Yep. It's impossible for GM to invent a new badge (like Holden as they are known in the rest of the world) and move all their cars over to it next year. Sorry, dealers, we don't make cars for GMC, Chevy, Cadillac, Pontiac and Buick anymore.
        • Agreed. There's no value in the name recognition and reputation of those brands and buyers would have no hesitation in jumping in and buying a car under a new label.

    • by iroll ( 717924 ) on Thursday September 18, 2014 @08:43PM (#47941909) Homepage

      They're afraid that a Fiat or a Mitsubishi coming back to the states without a dealer presence will just use a combination of the internet and maybe some Apple Store-style mall showrooms to eat their lunch, shipping the cars out of central depots, and avoiding all of the overhead of traditional dealerships.

    • Not sure why these dealers are so scared.

      Because if Tesla can sell direct, then so can Ford, GM, Toyota, etc. In a decade, there will be no car dealerships, except for used car lots.

      • by mark-t ( 151149 )

        Ford, GM, et al would be competing with dealerships that they sold franchises to in the first place, it would be unfair competition.

        Tesla hasn't sold any franchises, and doesn't compete with any dealerships.

    • Two reasons

      1: They probablly see this as the thin end of the wedge, the first step would be botique car manufacturers selling directly. Then perhaps the major car manufacturers would look into how they can set up an "independent" company that isn't bound by the parent company's dealer relationships or look into how they can end the current dealer relationships and hence become a "dealer-free" manufacturer.
      2: tesla may be a botique manufacturer now but what happens if and when battery costs drop or fuel cost

    • The dealers are scared because if this "directly selling to customers" thing takes off, they (the dealers) won't be needed anymore. It's the same reason that the RIAA ran scared from digital music. Middlemen don't like when efficiency makes them obsolete.

    • 1) "only" 200 miles is FAR FAR FAR more than the vast majority of people need.
      2) You are apparently unaware of Tesla's plans to keep building lower and lower priced cars to break into more affordable markets.

  • This leads to the question of whether there will be some sort of sweeping federal action in Tesla's favor.

    I'd say that's a poor choice of wording. If any such action was taken, it would be AGAINST dealers. It won't be in favour of any single company. It should be fair for all.

    • by jc42 ( 318812 )

      This leads to the question of whether there will be some sort of sweeping federal action in Tesla's favor.

      I'd say that's a poor choice of wording. If any such action was taken, it would be AGAINST dealers. It won't be in favour of any single company. It should be fair for all.

      It should be. But history (e.g. the "only sell through registered dealers" laws) says it won't be. It'll be in favor of whoever pays the most bribes to the right officials.

  • Thoughts (Score:5, Informative)

    by AaronW ( 33736 ) on Thursday September 18, 2014 @08:42PM (#47941905) Homepage

    One thing is that in most states the laws were written to protect franchises against the car manufacturers but in this case there are no franchises to protect to often these laws don't apply.

    This podcast gives a lot of insight as to why the dealerships are so anti-consumer blood sucking parasites.

    http://www.thisamericanlife.or... [thisamericanlife.org]

    One other thing to keep in mind is that the dealership model has changed significantly. It used to be a bunch of mom and pop dealerships throughout the country. These aren't the dealerships complaining about Tesla. Instead it's the huge dealership conglomerates that have gobbled up and consolidated many of the smaller independent dealerships. These are also huge political donors in many states, getting laws written to protect them, often to the detriment of the automobile manufacturers.

    Part of it is the way the car manufacturers have the dealerships competing against each other, giving them huge incentives to sell a certain number of cars by the end of the month, etc. The dealerships also make a lot of their money off of service, whether it be warranty service or just plain service.

    Tesla does things differently. The people who work at the showrooms do not earn commissions on cars sold. Their job is to show the car, not play all these silly games pushing cars that people don't want to get their numbers.

    Also, Tesla generally does not maintain an inventory of cars. Every car is built to order with only the features the buyer wants. They don't have huge lots of cars that they have to push since every car is already spoken for.

    Their service is also different. They have publically stated that their goal is not to make a profit off of service. I have had to have things repaired that were not covered by warranty (I broke some clips). The cost to repair was actually fairly reasonable and was much less than what the cost would have been had the same sort of thing happened to my Prius.

    My biggest complaint about service is that there is often a long wait to get an appointment because they're having trouble keeping up with the growing number of cars out there.

    Tesla took a cue from Apple with the Apple stores. They want to provide a consistent experience for their customers without all of the hassles and problems often encountered at dealerships. The company has also consistently bent over backwards in favor of their customers. When news of the fires hit they quickly extended the battery warranty to cover fires caused by hitting objects then actively worked on methods to mitigate it. They retroactively increased the drive train warranty to unlimited miles.

    • by fermion ( 181285 )
      My thoughts are there must have been a reason that dealers franchises had to be protected from manufacturers. I suspect there were issues, and that is the reason in the vast number of cases, except for fly by night 'seen on tv' junk we as retail consumers tend to buy retail, not direct from the manufacturer. I have bought or been involved in buying a fair number of cars in my life. I never felt the dealer was pushing me to buy a car I did not want. I have generally gone in knowing the car that I want, an
      • Pretty sure they hit the '25,000 electric cars to the people' mark. ;-)

        As for buying cars from dealers, I've been in quite a few purchases myself. The only dealer I had a reasonably good experience with was Saturn.

        With Lexus, Jaguar, and BMW, there was a lot of negotiation. I had to go to several dealers to get competing prices (which were *always* with a spread of $2-3K). In addition, the push was always to buy something either off-the-lot or something that they could have brought over from another deal

  • If a car maker would sell regular cars the way Tesla does, why couldn't they compete in a major way and dominate the younger generation demographic?

    I suppose the barrier here is all the big auto makers are so set in their ways with and entrenched in regulatory capture that there is no incentive for them to change to a new "model".

    • In addition... small or local car dealerships should not complain about Tesla for killing their business model. They should look to those car mega-dealers that completely shit on their customerbase in order to make a dollar. No wonder so many people despise all car dealerships.

    • by mark-t ( 151149 )

      The big barrier (for other auto manufacturers) here is that all of the big auto makers have already sold franchises to dealerships, giving dealerships a right to sell their cars, so if the manufacturers of said cars started selling direct to consumers, they would be competing with the franchises that they sold to dealerships in the first place. This is unfair competition, and why it is illegal.

      However, Tesla hasn't sold any franchises, and so wouldn't be competing with any of the dealerships in any kind

  • Few things cheese me off more than corporate cartels and their allies in congress who preach about the goodness of the free market and against government meddling, right up until the free market threatens their dominant position; then they want the government to put a stop to that nonsense immediately. If you really do support a free market, then you either change with the times or you get out of the way and stop holding back those who are actually innovating.
  • It always surprises me that states that argue the most for anti-government involvement in business affairs (the Red or Conservative states) are the first to decry a company that is espousing their ideals. There's too much money involved with Cars and Constituents and other things that our 'elected leaders' care about.

    Tesla's model is, as far as I understand, direct and open competition with their fellow automobile salespeople/dealerships. Tesla is doing everything right (that we know) and should be al

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