Currently, automakers are barred from owning their own dealerships, forced instead to go through middlemen dealers. Those dealers then protect their turf by buying their home district politicians.
Tesla, the pioneering electric car manufacturer, found a loophole. It sells its own cars direct. But since it can't own dealerships, it has created Tesla "galleries" where people can browse literature, talk to a salesperson, maybe sit in a Tesla. But you can't buy the car there. You have to go online and use this wonderful new invention called the "inter-nets."
Dealers are upset. Not because they can't sell the Tesla. They don't give two shits about electric cars. They are worried that Ford and GM and Toyota and Hyundai may realize that it makes more sense to follow suit. Why have a bunch of high-pressure sleazy assholes represent your brand, when you can sell your own vehicles better? Apple found this out in 2001, when it abandoned its network of authorized dealers and began opening up its own stores. No one was a better brand and product ambassador than Apple itself, and those stores are a big part of the company's success story.
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In a sane world in which a true "free market" existed, there might not be a need for independent dealerships. So manufacturers might prefer letting indies sell their wares. Others would opt to sell direct. Because why is it the government's business to tell manufacturers who can and can't sell their product?
So we can all snicker with a knowing nod that the three states that have now officially closed the internet-sales loophole and banned Tesla from selling their cars at all are—drum roll—Texas, Arizona, and as of this week, New Jersey.
When Republicans talk about their fealty to the free market, just look at Texas and Arizona and laugh in their face. And New Jersey? Why, that's Chris Christie's turf, and it was his administration that unilaterally shut down Tesla in the state. This was the same Chris Christie that a week prior, at CPAC, said this:
We need to talk about the fact that [Republicans] are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.Ironic, then, for him to shut down "ingenuity" using the "cold, hard hand of the government." The incumbent auto dealerships have no interest dealing with competition, and Christie is right there to help them maintain their outdated business model. Listen to the dealers' argument:
“There are substantial economic and public safety implications in the purchase of an automobile,” said Jim Appleton, president of New Jersey Coalition of Automotive Retailers. “The Tesla factory-owned store model destroys price competition and restricts consumer access to warranty and safety recall service.”Destroys price competition?
Manufacturers can set their own prices. People decide which car they can afford. Not sure where "price competition" is harmed. In fact, Tesla's no-haggle pricing is a breath of fresh air. There are few experiences more frustrating than trying to negotiate an auto price at a dealership.
And that doesn't even take into consideration the fact that dealers have monopolistic "territories," whether they are the only outfit carrying a specific brand. The competition can be an hour's drive away. (Though in fairness, I negotiated my last car purchase by emailing the five closest Mazda dealers with my requirement, and going with the one that got me the best price, even though I had to drive an hour to go pick it up.)
Restricts consumer access to warranty and safety recall service?
Not only is Tesla opening up their own service centers, but they have roving service teams for people who live too far from a service center. And in any case, if that was a problem, the free market would take care of it, right? Either independent service centers would arise to fill the need, or Tesla would suffer from poor word-of-mouth as owners would find it difficult to service.
And it's really rich for dealers to hype up their role in safety issues when ...
[T]he Consumer Federation of America reported in 2013 that “[m]isrepresentation in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes” was the top source of consumer complaints to state officials, as it had been in previous years.The dealership model is a failure.
Ironically, dealers don't make that much money in car sales. Even in the best of years, the numbers are about $150 per vehicle, and in bad years, they could lose money per sale. And the dealership model costs about $2,225 per car, costs that are obviously passed on to auto buyers. Dealerships actually make their revenue in their service and parts department, and that wouldn't necessarily be affected by direct internet sales of vehicles.
New Jersey is just the latest front in this wide-ranging battle between Tesla and incumbent dealers, and it certainly won't be the last. There is legislation pending in New York, Ohio, and other states to similarly ban Tesla from bypassing the dealers, and those dealers are pumping thousands of lobbying dollars to protect their turf.
It's a losing cause, of course. There will be far more public pressure to allow Tesla sales in Texas and New Jersey and Arizona than there will be to keep them out. And not just from middle class families that will clamor for Tesla's mid-priced sedan scheduled to arrive in 3-4 years, but more importantly, from the well-heeled upper-income people who now see Tesla as a status symbol. (And as far as status symbols go, Tesla is probably the most wholesome save-the-earth one possible.)
And yes, once Tesla breaks the dam, then other automakers will follow suit. And that's a good thing. If people think that a middle-man is worth their while and want to pay the premium, all the power to them! But in the end, the dealers DO have everything to fear. They suck, people hate them, and given an alternative, they'll take it.