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A deep dive into the direct sales legalization debate

Discussion in 'Tesla, Inc.' started by Pluto, Aug 19, 2018.

  1. Pluto

    Pluto Member

    Nov 17, 2015
    Stockton, California
    Hi guys, I wanted to understand what reasoning could be used for all these direct sales bills that fail to even make it to the floor for a vote (Connecticut, New Mexico, Wisconsin, Oklahoma, New York, and Nebraska makes six of seven bills this year alone). So I was reading through a hearing (January 30, 2018) on a Nebraska direct sales bill where testimony was taken from each side. Here was the introduction from Tesla's representative on the bill:

    Eventually a question was asked of Daniel Witt about how the bill would create a duality in the auto industry, with different cost structures and a possible unfair advantage (since the Nebraska bill would've only allowed newcomers to have a direct sales approach). I was surprised to hear a compelling argument to answer this which I somehow never connected the dots in my mind, notably the first two paragraphs here:

    He later clarifies how Tesla would be regulated and elaborates why Tesla believes the dealership model is the wrong decision for them:

    Last, I've included a beautiful testimony in support of Tesla as an automaker pursuing this business model:

    Overall I found the fear of adopting this bill was that direct sales could provide an unfair advantage over the dealership model in terms of having different regulatory structures. There was fear from dealerships that this change would lead to a later change to allow all manufacturers to open competing factory stores. There also seemed to be a lot of sentiment for dealerships and the existing model given that there are almost 8000 dealerships in Nebraska and only around 30 Tesla stores in California. Because dealerships are spread throughout the state even in rural towns/places, the dealership model is viewed as a good thing for consumers because it means service is guaranteed and provided at a reasonably close distance, regardless of any manufacturer business decisions (ie. when GM attempted to shut down some locations during bankruptcy).

    In closing, Senator Vargas who sponsored the bill reiterated that they were willing to compromise the changes or clarify/strengthen protections. He also highlighted how most of the concerns don't apply to Tesla at least and referenced how these fears aren't playing out in other states with direct sales legalized.

    Supporting arguments came from 4 entrepreneurs and/or Tesla owners. Opposing arguments came from 4 people involved in the dealership industry, a representative from the Alliance of Automobile Manufacturers, and a representative from the Nebraska Chamber of Commerce. In case if anyone wanted to read the full transcript for this hearing (which seemed to touch on almost everything), you can find it on pages 8-60:
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  2. Sprandt23

    Sprandt23 Member

    Sep 13, 2017
    St. Louis
    Thanks for sharing all that great info. The debate has been ongoing in Missouri for several years as well. Currently Tesla IS allowed to sell in the state thanks to a ruling in early 2017 - however there is some renewed push back from the MADA....they are looking for the ability to sue the Mo Department of Revenue saying Tesla shouldn't allowed to be licensed.

    Here is the latest article from this spring....
    Auto dealers renew fight against Tesla in Jefferson City

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