Tesla Pushes Even More States To Upend Auto Dealer-Friendly Laws (arstechnica.com) 116
An anonymous reader quotes a report from Ars Technica: Tesla is now pressing ahead with lobbying efforts that would allow it to expand its direct dealerships in two more states: Nebraska and Wisconsin. For now, more than 20 states already allow the California automaker to sell its own vehicles, while others have set up a system that at least partially bans manufacturers from direct sales and effectively protects auto dealers. Those states include Texas, Michigan, West Virginia, and Utah, among others. Last year, court rulings and changes in the law in Arizona, Missouri, Indiana, and other states have paved the way for Tesla to sell directly to the public. In Nebraska, the new bill under consideration is known as LB 830. It has been met with opposition from existing dealers who are concerned that other manufacturers like GM or Ford will want a similar arrangement. Similarly, in Wisconsin, SB 605 would carve out an exception in state law for a "manufacturer [whose] motor vehicles... are propelled solely by electric power."
So what about states that oppose this? (Score:5, Funny)
Will they be charged in court?
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I'm sure they will be batteried into submission.
Yeah, not my best work.
Someone remind me again... (Score:3)
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Re:Someone remind me again... (Score:4, Informative)
Because it actually made sense 70 years ago. The manufacturers would sell the vehicles, but not provide the service/support/parts infrastructure that was required to actually service them (given the poor reliability). Putting the dealerships brought about the parts/service stuff that the dealerships weren't providing.
In the modern era, when vehicles are much more reliable, and there are parts/service infrastructure separate from the delaerships, it no longer matters. However, in small town america, the dealerships are often the larger businesses in town, and thus have a significant amount of clout when it comes to state lawmakers.
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How does that make sense though - if the car company isn't providing replacement parts, they're leaving money on the table. Couldn't find it with a quick Google but I think Henry Ford had a quote to the effect that he would give cars aw
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Modern car companies only directly make a small fraction of the parts that go into their vehicles. There's a whole industry of second and third-tier suppliers for parts. It's simply no longer feasible for any one company to produce every car that goes into a modern vehicle. Back in Henry Ford's day, there were far fewer third party suppliers.
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Sure, modern cars, but the parent's context was 70 years ago. You couldn't go to Amazon and order parts made in China or Vietnam 70 years ago.
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That's exactly my point.
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Let's just leave the essential "Adam Ruins Everything" on cars which explains it all very nicely.
https://www.youtube.com/watch?... [youtube.com]
It's a monopoly system. And yes, it also makes it impossible for Tesla to open dealerships that won't be owned by the same dealerships that will screw you over right now, which is another reason why Tesla won't franchise - the laws make it so you can't just arbitrarily open a new dealership.
Break up the big bad corporations (Score:2)
To make long story short, in the 1930s some people wanted to break up the car companies, saying the same company couldn't both manufacture cars and own the dealerships.
You can imagine if Microsoft in 1998 made not just the OS, but also the PCs and owned the stores that sold them. Some people would want a new law saying Microsoft couldn't own the stores too. The thing is, laws ALWAYS have unintended consequences.
Why exceptions? (Score:5, Insightful)
Re:Why exceptions? (Score:5, Interesting)
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Is Tesla going to set up locations all over the state or will they concentrate their sales and service operations in major cities?
It's very common that the less common the vehicle make, the more focused their presence is in large cities.
GM and Ford seem to be in almost every pissass village, but you need to go to a town, not a village to find a Toyota dealer. You then have to go to a city to get a BMW or Porche. You then have to go to a large city to get Tesla or Ferrari.
Re:Why exceptions? (Score:5, Insightful)
There is a fig leaf of an argument that a car is such a significant purchase that there should have some minimal in state presence for service/support for the customer.
They can keep the showroom and service bays, I just want standardized prices with no need to haggle over stupid stuff. I'd like to just be able to place the order online, even fill out the paper work electronically and place the deposit, only having to show ID and put down the final signatures when I arrive to take delivery.
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Except that this here is to protect dealerships and has nothing to do with presence in the state. The opposite of dealerships in the states is not no presence, but rather company shops.
You can try the no presence thing. Expect your marketshare to reflect that accordingly. That fig leaf of an argument self-regulates.
Re:Why exceptions? (Score:4, Interesting)
Semi-related, my local camera store has had this exact problem since the advent of the internet. I'm amazed they're still around.
Re:Why exceptions? (Score:5)
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In other words they don't want multiple dealers in competition with each other selling their products. They want all the money to themselves.
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If you could just order a car directly from Ford, what's to stop you from visiting a dealership, taking a test-drive, wasting the sales clerk's time, then leaving and buying your car on ford.com?
Nothing, but I think that's the way it SHOULD be. I think the entire car sales model should change to that exact experience. Car manufacturers should be required to have test drive facilities in every city from which a car can be ordered online, where the employees of that facility are paid by the car manufacturer, and exist SOLELY to facilitate test drives and to make repairs. Then the buyer goes online and orders the car directly from the manufacturer.
Car dealerships suck, and we would all be better of
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Why even REQUIRE it? Just allow it.
Any car mfg who doesn't do that will lose out in advertising, publicity, and sales.
I'd actually see it more like, mfgs provide 'test drive' cars to various sales/repair service companies. Those companies contract warranty repair and service for the cars and also have a 'new car lot' where you can see and test drive vehicles which the mfg pays to have put there and shown. It doesn't diverge greatly from the existing method of sales except you skip the sleezy salesman and
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It's only a problem when the manufacturer competes with its own dealerships. So why is it better to allow dealerships and prohibit direct sales than the opposite?
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Problem solved. Prohibit car dealers from selling cars, period. You order the car online, and you can have it delivered to your house (for fee), or to a dealership (for a slightly higher fee).
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You mean like the destination charge fee you already pay? :)
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Yes, like the destination charge you already pay -- and you currently even pay it if you pick it up at the factory.
Re:Why exceptions? (Score:5, Insightful)
Semi-related, my local camera store has had this exact problem since the advent of the internet. I'm amazed they're still around.
Which makes you wonder why are they still around. You see it becomes a question of value. Do I go waste someone's time and then take my business online with a re-seller I've never seen who is in god knows where subject to god knows what laws, or do I spend a couple of hundred dollars extra to protect a major investment by buying locally, a product that I get instantly, where if I have a problem I can not only return it with ease but also deal with a living person rather than some RMA email service.
Unfortunately dealerships do nothing of the sort. Fuck them. You know what the opposite to a dealership model is? Tesla. Where you can go into the Tesla store, take a test drive, waste the sales clerk's time, and then leave buying your car on tesla.com all the while the people running the stores still happily take home a paycheck and don't try to heap on after market worthless "extras".
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In the UK it's the opposite. You generally have more rights if you buy online, because distance selling regulations mean you can return the item for any reason within 2 weeks or receipt. If it isn't faulty you have to pay return postage, that's it. Doesn't have to be in the original packaging either.
I generally prefer this to buying in physical shops, because all the physical shops are crap. Shops with salesmen are the worst. It doesn't have to be that way, in Japan I like physical shops and really enjoy sh
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Nothing. If the dealer model is inefficient, it will die. However, other products are produced where you have the option of buying direct. I can buy an iphone at an Apple store or at Best Buy, and it seems to work for the respective companies.
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Nothing. If the dealer model is inefficient, it will die.
Not necessarily. Look at he RIAA and MPAA. Their models are horrible inefficient and actively anti-consumer / anti-artist. However they've gotten enough laws passed protecting their business model and essentially outlawing any competition with extreme fines to enforce those laws...that they get to continue.
Car sales are of a similar ken...and Tesla is coming in and turning them all upside down. They're just ... ignoring most of the 'rules' in the industry they're entering and carving out their niche qui
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The original intent was to prevent shady car manufacturers that went sell cars then go out of business and the consumer would be left with a vehicle that would not run and be unable to be serviced. Remember, these laws came about 100 years ago. Now there is no need but at one time they were there to prevent consumer fraud.
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Interestingly as a (long former) sales person for saturns, the employment side of that is an identical experience... :)
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Devil's (or Alan Greenspan's) advocate is that by creating middlemen you increase the market and trickle down the economy -
Local little leagues need T-shirts with logos on them.
Gil the sales guy needs to meet his quota to feed his cat.
The illegal immigrant mechanics that change your oil for $200.
Those big swathes of over priced ex-farm land near the edge of town don't sell themselves.
Bright night lights to keep cars safe keeps the electric company happy.
The country club can't just be full of lawyers, doctor
Buisness model (Score:2)
In fact it's a case of business model.
The business model of dealers becomes obsolete once cars need much less service, once they become electric.
Dealership is good at selling cars with options, and performing warranty maintenance.
That is not needed for electric cars, Tesla or others.
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Furthermore, protecting obsolete business models is not the role of laws, so yes, at that point it becomes corruption.
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Why wouldn't you want to order a Ford or GM (or Toyota or whatever) directly, instead of having to go through a middleman? Are these laws pure corruption or is there some way to look at them in the best light, where they serve the peoples' interests?
In theory, a car dealership could be like any other retailer. You go there, look at different models from different manufacturers, and decide which one is best for you. The fact that most dealerships only have cars from one manufacturer breaks that theory, though. Unless you want to spend a large amount of time, you have to narrow your choices down to two or three manufacturers before you even start to look at cars in person.
Big bad corporations (Score:2)
In the 1930s some people wanted to break up the car companies, saying the same company couldn't both manufacture cars and own the dealerships.
You can imagine if Microsoft in 1998 made not just the OS, but also the PCs and owned the stores that sold them. Some people would want a new law saying Microsoft couldn't own the stores too. The thing is, laws ALWAYS have unintended consequences.
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If Ford / GM started selling directly then either a) they have an unfair advantage to undercut the dealers and drive them out of business, or b) they charge prices way in excess of dealers, c) they operate as a cartel with the dealers, neither undercutting them or charging more than them - price fixing.
None of these choices are good for the consumer. The only way I could see Ford / GM selling "direct" is if they spun off a completely independent subsiduary that was ab
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Cars are big ticket items but the idea of dealerships is to perform a similar role - to be competition to each other so that when you buy a Ford, you have a choice of dealers and if you shop around you will get the best deal.
The Tesla sales model so far is buy from their store or tak
This is uniquely a US problem. (Score:5, Informative)
No where else in the world do these types of protectionist laws for car dealerships exist. They were originally intended to protect car dealers from having to compete with a manufacturer if they wanted to start up their own dealership. Manufacturers were pushing less successful models to their dealers. This was all in the 1920 or 1930's.
Now, the dealerships are using this law as a guise to "protect the consumer", but really it should be transparent that they're doing it because it's easier to lobby and legislate your competition away than to actually compete with them by trying to sell cars.
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It seems to me like the main dealers should be able to cut out the middleman, sell a product that's ultimately lower in price, but actually increase the price they receive per unit. They can pass some of that middleman savings onto the customer while retaining some for themselves, and the customer saves more while they make money. The "dealer network" can still exist for purposes of service and repair - which the main dealers would probably rather not bother with - and they can still compete with the main d
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SEAT have a direct sales outlet in the UK, but I can't imagine why anyone in their right mind would buy from them. Prices are strictly list price, whereas all dealers will cut at least 10%, usually more, and throw in a few extras.
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Yeah, America is a country that believes in 'small government', the 'free market' and self-regulation. Weird, huh!?
movie theaters can't be owned by studios (Score:5, Interesting)
https://constitutioncenter.org... [constitutioncenter.org]
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Not quite relevant. The purpose of this was to prevent studios which own a lot of cinemas to drown out the competition with their market power on account of only playing their own movies and no one else's content.
On the flip side that is exactly what exists here despite these laws. A Ford dealership sells Ford cars.
Where Is The Need? (Score:5, Interesting)
It can't be simply transaction value: huge numbers of new homes are built every year, many sold by agents and not by the builders.
It can't be because it's a mechanical device or has an engine in it: motor boats and motor yachts are sold every year - many for prices far higher than cars - without enforcing dealership based purchase.
Maybe it's because the dealers can continue to gouge their clients for years and years - on servicing and a raft of other things. Maybe it's because it allows for artificial control of used vehicle pricing.
Bottom line is: there doesn't seem to be any established or practical precedent that explains *why* motor vehicle dealers think they have such a unique use case as to grant them this special dispensation.
Or are they just being precious?
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Greed and power.
Typical working adults must drive. On average they are directly or indirectly spending a few thousand per year on a new vehicle. In a rural area that cost will probably exceed 10% of gross wages. So imagine 6-10 men chatting over brunch in a local restaurant, to discuss business and politics. These men represent families whose businesses touch over 10% of the gross wages of the entire county. Guess what kind of effect they have on state politics? Rural politicians are outright terrifie
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The reasons these laws came about was that cars were being sold with no link to the state so that when it broke or you had problems the purchasers only recourse was to travel to another state. These laws make sure that there is a local resource to provide the purchaser protection.
Houses don't matter since they since are other laws that prevent that type of action.
Since most people don't purchase boats they were probably not a
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Tons of variables here. Hard to explain it all and it's different in every state. Where I live I can go and pick out a new truck in 10 minutes then spend 6 hours at the dealership filling out forms and other crap. It's a complex process. The dealership assumes a lot of the responsibility for me, runs a lot of the paperwork with the state and financial institution.
There also is a presumption (false in most cases) that the dealership may be non partisan in the sales process and work for the customer. If you g
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Cars were new, and were replacing horses which had been used on roads for thousands of years.
They were trying to prevent certain problems that they were worried about at the time, that ended up not being problems. The argument after that was if the problems don't exist because they were not valid concerns, or if it is because of the laws.
50 years ago that was probably less clear than it is now, since there are so many other places in the world that didn't use our system. It is just the normal progression of
I agree! (Score:2)
Barrier to entry (Score:5, Insightful)
Obviously setting up a dealership network is a huge barrier to entry to new innovation and disruptive technologies. This is just a feature of crony capitalism.
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You must be thinking of the EV1. They only made a few thousand of those, and sold none of them - they were only leased. At the end of the lease, GM famously took all the cars back and crushed virtually all of them. Being from the 90's they initially used lead-acid batteries, and later NiMH, so the range wasn't that great.
GM also made an electric version of the S10 back in the 1990's. They made less than a 1000 total, and almost all went to fleets. Unlike the EV1, they could actually be purchased so the
An answer that would help keep the dealers happy (Score:2)
Why not pass a law that says something along the lines of "manufacturers can only open their own manufacturer shops if that manufacturer has no franchised dealers anywhere in the state". That way Tesla (who has no franchised dealers and no plans to open any) gets to open manufacturer shops but Ford and GM and Toyota and VAG and the others dont get to run factory dealerships since they already have franchised dealerships everywhere.
Ends the objection of the franchised dealers where they say "if you allow Tes
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Franchise laws already contain strong protections so manufacturers can't do things like that to force the dealers out of business (GM got hit with this when they axed a bunch of dealers as part of their bankruptcy and were forced to partially reverse the decision after some lawsuits by axed dealers)
A nice thought (Score:2)
Lobbying - if it's good for the goose, it's good for the gander. Doesn't mean that the big three won't do $ome lobbying of their own, though.
Fuck dealerships (Score:5, Interesting)
Last time I was in the market for a car the first place must have caught a wiff of "fell off the turnip truck." I test drove one vehicle, didn't really like it. The salesman hands me a document acknowledging I'd seen the carfax report. Right after that with a casual "and can I get you to sign this?" he pushes the bill of sale in front of me with an absurd 20% interest rate. I tore it up, stood up and started to walk out. Apparently the salesman and manager had planned this in advance because the manager approches me as I'm leaving and shakes my hand and saying "congratulations" as I was leaving. Congratulations on walking out of a dealership? I wonder how many people that trick works on. I'll bet it's more than 0.
The place I did get my car from wanted to charge me *more* for not using financing. They wanted to tack on around $2,500 to the asking price for paying cash. I was like "no" but I've never had to try so hard to get someone to take thousands of dollars from me on the spot. It was totally insane. I didn't have to pay that added price but I had to make a scene to get it.
In conclusion, fuck the dealerships. Their sole job is to fuck over consumers in new and creative ways just on the bleeding cusp of legal.
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Actually not as many as you'd think (Score:4, Interesting)
I live in a moderately sized city where "small town" attitude runs rampant, and the prevailing attitude here is that it's one's civic duty to shop locally - even if that means getting screwed over. There's a dealership in a neighboring city that advertises along my commute with billboards to the effect of "drive 50 miles, save thousands" but many locals are reluctant to travel even to the next county.
So, although it's widely known that most of our local dealerships are extremely shady, the locals don't care. I even once had a salesman, when I said that I had found a better price across the state, reply that why would I drive three hours away instead of supporting a local business... you know what, taking my business elsewhere is exactly what I'm going to do.
If you're willing to travel, you can actually find some reputable, honest dealerships out there. We use USAA's car buying service to shop for the best price, and some dealerships are surprisingly much more willing to work with you if they know that you're not geographically limited. If I don't like what I'm hearing over the phone, I can hang up and you've lost any chance of a sale. Last time we bought a car, we drove all the way to South Carolina, and saved several thousand dollars. Before that, we drove to Ohio. Each time did cost us a weekend, but we got two decent road trips out of it... and one manager actually walked in after we had closed the sale and handed us an envelope with $300 cash, for travel expenses, to thank us for driving out of state to give them business.
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It's because they get commission on the financing. In the UK that can be more than they make from the actual sale, so they'll discount to sell at a loss if you take financing, knowing they'll make it up in commission from the finance company.
Re:Wont save consumers money (Score:4, Interesting)
Dealerships make their money with service and financing and parts, not by selling cars. They know many people think they have to go to the dealership for service and milk that for all they can. They also make money selling extras like extended warranties and add-on features.
In terms of service, Elon Musk stated his goal is for service not to make a profit. This is the exact opposite of dealerships where one of their main revenue sources is service.
I can give an example of this. I damaged one of the roof panels on my Tesla model S. The roof panel is painted with a clear-coat. The cost for the part was $175. I spoke to a friend of mine who used to work at a Lexus dealership. He told me the same part would have cost many times that amount. The labor to replace it was also fairly reasonable. By comparison, my experience with Toyota with my previous car, a Prius, was far higher.
For example, shortly after the 3 year/36 month warranty ended (but within the 7 year 100K mile warranty), the HID headlights went out. This was a well-known problem with the Prius. The headlights were not designed to be easily replaceable since HIDs are supposed to last a very long time. Anyway, Toyota wanted $200 per bulb and $140 in labor to replace it. I went online and found the same exact Sylvania bulb for under $50. I ended up going to another dealership to have the work done (having bought my own bulbs) and they replaced it under a "good-will" warranty (which my local dealership did not want to do).
In another case, after I sold my Prius to my parents, the touchscreen stopped working. This is caused by a known design defect where a solder connection breaks over time. Toyota wanted $5000 for a new touchscreen and $2000 in labor to fix it. I removed the touch screen in under 5 minutes. I found a place online that repairs them with a lifetime guarantee for $400 and had that done then spent under 5 minutes re-installing the touchscreen. $2000 in labor is utterly insane. I basically undid one screw, popped a few panels and undid a couple of bolts and that was it. $5000 for the touchscreen is also insane. It probably cost Toyota no more than $300 to make and probably well under that.
Another thing the dealership wanted $1800 for the extended warranty. I went online and bought the same factory extended warranty for $1000. Anytime I needed a part, Toyota would charge outrageous amounts of money for it.
Oh, and Toyota would always try and push a bunch of unnecessary maintenance but give me trouble for known issues that would come up (like a water pump that went bad twice).
I later got a notice over the headlights that there was a class-action because dealerships were charging people to replace the ballasts when there was nothing wrong with them when the HIDs died (Toyota had a bad batch of bulbs). Many people were charged a lot of money to replace the ballasts which were never the problem.
My experience with Tesla has been very different. They never pushed me to buy add-on options or extra service. The service costs were also generally reasonable, though some things like tires are cheaper elsewhere (I like Tirerack). This is what the dealerships fear. My car needs service once a year or every 12.5K miles. A Tesla tech told me that the electric motor is lubricated for 12 years. There's no transmission or regular oil changes needed and even the brakes get a lot less use. There is far less to go wrong mechanically. Even the battery will last a very long time. I'm coming up on 5 years 60K miles and haven't noticed any reduction in range. This is not what dealerships want to sell. Hell, Tesla will even honor the warranty if you don't service the vehicle every year.