Discussion about anticompetitive state dealership laws

[SByer]

One can understand that the existence of a manufacturer owned dealership lowballing a franchise (of the same vehicle) in the same territory undercuts the franchise-manufacturer/distributor relationship and should be protected by law.

Actually, (this) one cannot. If a manufacturer has both dealer franchised (presumably relying on them as a distribution channels) and owned outlets, undercutting it's own franchisee's is a darned good path to not having franchisees. Quickly. It's been shown time and time again in other industries - if a manufacturer has both channels, it has to tread very carefully. You can see it in restaurants and software - the pricing at manufacturer stores (or website, in the case of software) never undercuts other outlets, but does keep them honest.

The Texas law seems to just be good-ol'-boy BS, and should be wiped from the books.

 

[setherme]

I shouldn't have mentioned franchises because again you focus on an issue that Tesla Motors doesn't need to address, agreed? The good old boy law is that which flat out restricts manufacturer owned dealerships. Wipe those out wherever they exist. If the big three don't want to follow the franchise dealership distribution model then their lobby can certainly handle that battle.

 

[SByer]

I think the big three are locked into ossified middle management think. They have so many problems, fighting lame per-state dealer laws isn't even on the radar.

 

[stopcrazypp]

THE ISSUE IS the existence of such blunt legislation as seen below that hint at undue influence by an auto dealership franchise union; does one exist??

The auto dealership franchise union is essentially NADA (National Automobile Dealers Association). They are a fairly strong group and do plenty of their own lobbying.
http://www.nada.org/

There are also local dealer associations.

I shouldn't have mentioned franchises because again you focus on an issue that Tesla Motors doesn't need to address, agreed? The good old boy law is that which flat out restricts manufacturer owned dealerships. Wipe those out wherever they exist. If the big three don't want to follow the franchise dealership distribution model then their lobby can certainly handle that battle.

The big three have absolutely no interest in fighting the traditional franchise model because:
1) That's how things were always done for them
2) They are currently dependent on those dealers to sell their cars
3) NADA would be on top of them immediately

Plus there is no movement toward direct internet sales in the automobile world (see the DOJ article linked at the start of this thread).

Tesla is different in that they don't not have any franchise dealers at all. They don't depend on any dealers to sell cars. Tesla also won't feel any direct pressure at all if NADA opposes (as in actual Tesla dealers boycotting). Tesla also is heavily dependent on direct internet sales and also wants to have their own "stores" (akin to the Apple store and similar to a manufacturer owned dealer).

 

[Robert.Boston]

Tesla Motors has good lawyers, so I'm sure they've found a way to sell and distribute cars in Texas without violating the law there. I suspect that NADA won't fight it too hard because Tesla isn't a big company and its members don't want to sell EVs. So, by the time Tesla gets to be big and the way people buy cars has been redefined, there will be too much momentum behind Tesla to stop them.

 

[dsm363]

I shouldn't have mentioned franchises because again you focus on an issue that Tesla Motors doesn't need to address, agreed? The good old boy law is that which flat out restricts manufacturer owned dealerships. Wipe those out wherever they exist. If the big three don't want to follow the franchise dealership distribution model then their lobby can certainly handle that battle.

The way the law is written as you posted is being interpreted as Tesla not selling cars directly to customers or have a service center anywhere in the entire state of Texas ("act in the capacity of a dealer").

For the Roadster, Tesla got around this buy selling you the car with a title California then you taking delivery in Texas and transferring the title.

 

[VolkerP]

I agree with Arnold that there might be no constitutional lever to sue Texas over this law, or that it is unlikely for the supreme court to accept the filing, or to bring it to decision in a time frame useful for Tesla building its distribution network.

I vote to 'grass root' efforts to bring down the law by Texan legislation, i.e. make them revoke their own law. The "denying American citizens to buy American" sounds to be a good line for this. While the NADA will tout 'consumer protection' if that happens, they have a hard time to show why such law exists in Texas only. E.g. If they fight for consumers, why don't they lobby for similar legislation in all other federal states?

 

[Robert.Boston]

One revision to the law might be to require a car manufacturer either to use the dealer model or use company-owned stores exclusively. Crafted this way, the law would continue to prevent GM (etc.) from opening a company-owned dealership (unless they bought out every one of their dealerships in the state, which isn't going to happen), and so placate NADA.

I gather Texas isn't alone in this problem; Tesla didn't do test drives in Virginia because of a similar restriction there, I seem to recall.

 

[kgb]

One way to get the attention of Texas legislators is to point out the lost tax revenues.

When I bought my Roadster, it was "purchased" in California. I believe that some of the taxes I paid went to the State of California. I did have to register my vehicle in Texas, so they did get some money, but I imagine if the whole transaction occurred in Texas, there would be more opportunity for the State of Texas to tax me.

At this point, Tesla is a low volume dealer, so the amount of lost taxes to the State of Texas is not likely to make much impact on the budget... but something is better than nothing. The legislature could fend off the dealers by telling their constituents that they didn't have to raise property taxes because car sales tax revenues exceeded expectations.

 

[brianman]

One way to get the attention of Texas legislators is to point out the lost tax revenues.

Another is to pull at it polticially.

"NADA is just like the unions" might go a long way.

 

[richkae]

Another is to pull at it polticially.

"NADA is just like the unions" might go a long way.

NADA has a lot of money to buy the government that they want. The probably already have paid for the flavor of government that would be most likely to support an anti-union message.
They could just as easily buy the other flavor as well.

 

[jerry33]

One way to get the attention of Texas legislators is to point out the lost tax revenues.

When I bought my Roadster, it was "purchased" in California. I believe that some of the taxes I paid went to the State of California. I did have to register my vehicle in Texas, so they did get some money, but I imagine if the whole transaction occurred in Texas, there would be more opportunity for the State of Texas to tax me.

As far as I know, Texas gets all of the sales tax when you register the title. If you purchase the car in California, there are additional taxes that apply. If you purchased the car in Texas, you wouldn't have had to pay those, and they don't count against your Texas tax.

 

[ModelS1079]

BIG NEWS FOR MASSACHUSETTS - YABBA DABBA DO!

1:33 PM A judge in Massachusetts denies a request by auto dealers to grant a preliminary injunction against the ability of Tesla Motors (TSLA -0.3%) to operate a store in the Boston area. The bigger issue: If Tesla keeps winning the right to operate its own stores and delivers even a modicum of success is the symbiotic auto dealer-manufacturer relationship at risk? (Read the comments on this at SeekingAlpha.com):biggrin:

 

[neroden]

I'm thinking about this, and it seems that it is completely impossible to force Tesla to issue franchises -- that's beyond the power of state law. It's also impossible to prevent end-users from buying their cars in California and importing them. It is *further* impossible to prevent customers from ordering the cars online. It's also impossible to prevent Tesla from delivering the cars to any location in the US; apart from the restriction-on-interstate-commerce issue, in the worst case Tesla could always provide a list of "approved transport services" and let the customer pick their own and pay for it separately.

And that's worst case, with a law like the Texas law. Most state laws regulating manufacturer ownership of dealerships only apply if the manufacturer offers franchised dealerships. (New York's law is actually called the "Franchised Motor Vehicle Dealer Act". Under NY law Tesla is a "dealer", but is not, legally, a "new motor vehicle dealer" or a "qualified dealer"!) Tesla doesn't offer franchises at all, so most of these laws simply don't apply to Tesla. The Texas law is the unusual one.

So there isn't much the dealers can get out of the existing laws, when it comes to Tesla. Maximum case, they can prevent Tesla from offering test drives in some localities. I think that's a big "so what" from Tesla's point of view!

 

[jerry33]

Maximum case, they can prevent Tesla from offering test drives in some localities. I think that's a big "so what" from Tesla's point of view!

Given the number of people on the forum who have stated that they will absolutely not purchase the Model S without a test drive, I'd suggest it's fairly important. Then when you add the journey to the DMV (which some people won't do), and the lack of walk in traffic because of no Tesla store...

 

[Krugerrand]

Given the number of people on the forum who have stated that they will absolutely not purchase the Model S without a test drive, I'd suggest it's fairly important. Then when you add the journey to the DMV (which some people won't do), and the lack of walk in traffic because of no Tesla store...

There's always an option to test drive the car 'some place else'...like while on vacation or visiting family in another state. I haven't really found the number of people unwilling to reserve w/o a test drive to be particularly high at all. But as Tesla puts more cars on the road, there will always be that friend or neighbor who has one that'll give test drives.

I also think that most people will be angered by some of these laws and it'll only serve to strengthen their resolve. If I lived in Texas and I wanted to purchase a Model S and was getting the kind of flack some people are...ooooh, yeah, I'd be making a huge stink at several levels; they'd hear me coming.

 

[bonnie]

...ooooh, yeah, I'd be making a huge stink at several levels; they'd hear me coming.

I just find this so difficult to comprehend.

 

[bobw]

I just find this so difficult to comprehend.

Perhaps I don't understand what it is that you don't understand.

i too resent other people using the law to enforce a monopoly that may make my life more difficult. The grounds are specious, but even if they were not those people have no right to impose upon me and mine.

It's a basic issue of liberty.

 

[bonnie]

Perhaps I don't understand what it is that you don't understand.

i too resent other people using the law to enforce a monopoly that may make my life more difficult. The grounds are specious, but even if they were not those people have no right to impose upon me and mine.

I was teasing krugerrand. That's why I included her quote.

 

[SteveH]

Blocking test drives is a big deal, but to me the bigger issue is the lack of a delivery specialist. That is part of the experience that I was looking forward to and now won't have. Besides just the experience, it prevents me from having a personal relationship with someone who can be an advocate within the company if I discover problems with my car.

The inability for Tesla to collect sales taxes will also make a big impact as they try to move to the GenIII. Not only does it make the process of buying and registering the car more difficult, but it makes the loan to value ratio more difficult to obtain.