Breezy
Member
And I don't think that's true. There's nothing in the Indiana Code that I can see which prevents a manufacturer from operating as a dealer, regardless of whether they have franchisees or not.
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GM continues to try to stifle competition
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And I don't think that's true. There's nothing in the Indiana Code that I can see which prevents a manufacturer from operating as a dealer, regardless of whether they have franchisees or not.
Nomad
Member
Not quite. There are territory provisions that make opening a manufacturer-dealer establishment an unfair practice under IC 9-32-13. However, it is GM and Ford that voluntarily collaborated with these dealerships in the first place. It was their choice to pursue that business model. Tesla chose a different business model, one that was available to GM and Ford from the beginning. They've made their bed, and they should have to lie in it.
Or. Here's a thought. If the committee is indeed seeking an equitable solution, they should consider eliminating the territory provision that makes it illegal for existing manufacturers with franchises to sell direct to consumers.
Now matter how you slice it, HB 1254 with Amd 3 is not an equitable solution, does not fight for the consumer, and will put undue burden on Tesla Motors. All of that said, I think all but a few of these legislators are just ignorant on the issue. Only a select few, like Mahan and Buck have ill intent at the behest of GM. The others just seem to have a hard time grasping the dealership model as a whole.
Here's my email to Sen. Broden.
Dear Senator Broden:
I purchased a Tesla Model S last August at the Tesla showroom in Indianapolis. I sincerely hope you will oppose HB1254 at tomorrow’s meeting of the Commerce and Technology committee.
Chairman Buck stated at last week’s meeting that the bill is not about Tesla; but since Tesla is the only car manufacturer selling direct to consumers in Indiana, the bill has a direct immediate effect only on Tesla.
Senators who questioned Tesla representative Chen at the last meeting seemed unable or unwilling to grasp the fact that in order to make a profit, franchise dealerships need to sell in greater volume than is possible for Tesla at this time. In the early days of the auto business, companies sold direct to consumers, until with the advent of assembly line production sales volume became too great to make sense for the manufacturers to have enough outlets, which led to the franchise dealer system. If Tesla achieves its goal of high-volume sales with its new less expensive Model 3 ($35,000), it may well move to a franchise dealer model. At present, volume is too low for an independent franchise dealer to profit.
Franchise dealers also need to mark up the price of a car. Unless Tesla were to reduce their own profit (which is unlikely since they are currently in startup/expansion mode, spending more than they take in in order to bring out new models and fund R&D), a prospective buyer would have to pay more at an Indiana franchise than in neighboring Illinois or Ohio, where Tesla sells direct. I’d expect this to put pressure on the bottom line of a franchise dealer! Please ask supporters of the bill if they really believe a Tesla franchise would be profitable with low sales volume and adjacent states selling direct for less.
A USA Today article posted just a couple of hours ago (GM-backed bill could block Tesla in Indiana)
quotes a GM spokesperson as saying existing law discriminates against GM, Ford etc. by prohibiting them from selling direct because they have franchise dealers. From what Sen. Buck said, I understood that this is to prevent them from competing against their own franchise dealers.
Does GM suggest that it would like to be able to sell direct? Please ask them at the meeting. The big companies created the franchises to avoid having to create a huge direct-dealer network. Do they regret this, or just claim that it is unfair because they don’t want to compete? Is it a coincidence that the Tesla Model 3 will be a challenge to the Chevy Bolt?
A 2009 paper by the US Dept. of Justice analyzed the effects of the franchise dealer model: Economic Effects Of State Bans On Direct Manufacturer Sales To Car Buyers | ATR | Department of Justice
The paper describes a GM experiment with direct sales of the Chevrolet Celta in Brazil; I don’t know if it is still current. The paper quotes a Goldman Sachs estimate that consumers pay about 8.6% more due to the franchise dealer model. Is this in the interests of Indiana consumers?
In view of Tesla’s current low volume, couldn’t the bill permit them a 10 or 5 year extension? After all, the state allowed them to set up business. How fair is it to change the rules on them? And how fair is it to allow the big established companies force Tesla out of the state in order to ensure their monopoly of the Indiana market?
Dear Senator Broden:
I purchased a Tesla Model S last August at the Tesla showroom in Indianapolis. I sincerely hope you will oppose HB1254 at tomorrow’s meeting of the Commerce and Technology committee.
Chairman Buck stated at last week’s meeting that the bill is not about Tesla; but since Tesla is the only car manufacturer selling direct to consumers in Indiana, the bill has a direct immediate effect only on Tesla.
Senators who questioned Tesla representative Chen at the last meeting seemed unable or unwilling to grasp the fact that in order to make a profit, franchise dealerships need to sell in greater volume than is possible for Tesla at this time. In the early days of the auto business, companies sold direct to consumers, until with the advent of assembly line production sales volume became too great to make sense for the manufacturers to have enough outlets, which led to the franchise dealer system. If Tesla achieves its goal of high-volume sales with its new less expensive Model 3 ($35,000), it may well move to a franchise dealer model. At present, volume is too low for an independent franchise dealer to profit.
Franchise dealers also need to mark up the price of a car. Unless Tesla were to reduce their own profit (which is unlikely since they are currently in startup/expansion mode, spending more than they take in in order to bring out new models and fund R&D), a prospective buyer would have to pay more at an Indiana franchise than in neighboring Illinois or Ohio, where Tesla sells direct. I’d expect this to put pressure on the bottom line of a franchise dealer! Please ask supporters of the bill if they really believe a Tesla franchise would be profitable with low sales volume and adjacent states selling direct for less.
A USA Today article posted just a couple of hours ago (GM-backed bill could block Tesla in Indiana)
quotes a GM spokesperson as saying existing law discriminates against GM, Ford etc. by prohibiting them from selling direct because they have franchise dealers. From what Sen. Buck said, I understood that this is to prevent them from competing against their own franchise dealers.
Does GM suggest that it would like to be able to sell direct? Please ask them at the meeting. The big companies created the franchises to avoid having to create a huge direct-dealer network. Do they regret this, or just claim that it is unfair because they don’t want to compete? Is it a coincidence that the Tesla Model 3 will be a challenge to the Chevy Bolt?
A 2009 paper by the US Dept. of Justice analyzed the effects of the franchise dealer model: Economic Effects Of State Bans On Direct Manufacturer Sales To Car Buyers | ATR | Department of Justice
The paper describes a GM experiment with direct sales of the Chevrolet Celta in Brazil; I don’t know if it is still current. The paper quotes a Goldman Sachs estimate that consumers pay about 8.6% more due to the franchise dealer model. Is this in the interests of Indiana consumers?
In view of Tesla’s current low volume, couldn’t the bill permit them a 10 or 5 year extension? After all, the state allowed them to set up business. How fair is it to change the rules on them? And how fair is it to allow the big established companies force Tesla out of the state in order to ensure their monopoly of the Indiana market?
Last edited by a moderator:
bonnie
I play a nice person on twitter.
Here's my email to Sen. Broden:
Dear Senator Broden:
I purchased a Tesla Model S last August at the Tesla showroom in Indianapolis. I sincerely hope you will oppose HB1254 at tomorrow’s meeting of the Commerce and Technology committee.
Chairman Buck stated at last week’s meeting that the bill is not about Tesla; but since Tesla is the only car manufacturer selling direct to consumers in Indiana, the bill has a direct immediate effect only on Tesla.
Senators who questioned Tesla representative Chen at the last meeting seemed unable or unwilling to grasp the fact that in order to make a profit, franchise dealerships need to sell in greater volume than is possible for Tesla at this time. In the early days of the auto business, companies sold direct to consumers, until with the advent of assembly line production sales volume became too great to make sense for the manufacturers to have enough outlets, which led to the franchise dealer system. If Tesla achieves its goal of high-volume sales with its new less expensive Model 3 ($35,000), it may well move to a franchise dealer model. At present, volume is too low for an independent franchise dealer to profit.
Franchise dealers also need to mark up the price of a car. Unless Tesla were to reduce their own profit (which is unlikely since they are currently in startup/expansion mode, spending more than they take in in order to bring out new models and fund R&D), a prospective buyer would have to pay more at an Indiana franchise than in neighboring Illinois or Ohio, where Tesla sells direct. I’d expect this to put pressure on the bottom line of a franchise dealer! Please ask supporters of the bill if they really believe a Tesla franchise would be profitable with low sales volume and adjacent states selling direct for less.
A USA Today article posted just a couple of hours ago (GM-backed bill could block Tesla in Indiana)
quotes a GM spokesperson as saying existing law discriminates against GM, Ford etc. by prohibiting them from selling direct because they have franchise dealers. From what Sen. Buck said, I understood that this is to prevent them from competing against their own franchise dealers.
Does GM suggest that it would like to be able to sell direct? Please ask them at the meeting. The big companies created the franchises to avoid having to create a huge direct-dealer network. Do they regret this, or just claim that it is unfair because they don’t want to compete? Is it a coincidence that the Tesla Model 3 will be a challenge to the Chevy Bolt?
A 2009 paper by the US Dept. of Justice analyzed the effects of the franchise dealer model: Economic Effects Of State Bans On Direct Manufacturer Sales To Car Buyers | ATR | Department of Justice
The paper describes a GM experiment with direct sales of the Chevrolet Celta in Brazil; I don’t know if it is still current. The paper quotes a Goldman Sachs estimate that consumers pay about 8.6% more due to the franchise dealer model. Is this in the interests of Indiana consumers?
In view of Tesla’s current low volume, couldn’t the bill permit them a 10 or 5 year extension? After all, the state allowed them to set up business. How fair is it to change the rules on them? And how fair is it to allow the big established companies force Tesla out of the state in order to ensure their monopoly of the Indiana market?
Dear Senator Broden:
I purchased a Tesla Model S last August at the Tesla showroom in Indianapolis. I sincerely hope you will oppose HB1254 at tomorrow’s meeting of the Commerce and Technology committee.
Chairman Buck stated at last week’s meeting that the bill is not about Tesla; but since Tesla is the only car manufacturer selling direct to consumers in Indiana, the bill has a direct immediate effect only on Tesla.
Senators who questioned Tesla representative Chen at the last meeting seemed unable or unwilling to grasp the fact that in order to make a profit, franchise dealerships need to sell in greater volume than is possible for Tesla at this time. In the early days of the auto business, companies sold direct to consumers, until with the advent of assembly line production sales volume became too great to make sense for the manufacturers to have enough outlets, which led to the franchise dealer system. If Tesla achieves its goal of high-volume sales with its new less expensive Model 3 ($35,000), it may well move to a franchise dealer model. At present, volume is too low for an independent franchise dealer to profit.
Franchise dealers also need to mark up the price of a car. Unless Tesla were to reduce their own profit (which is unlikely since they are currently in startup/expansion mode, spending more than they take in in order to bring out new models and fund R&D), a prospective buyer would have to pay more at an Indiana franchise than in neighboring Illinois or Ohio, where Tesla sells direct. I’d expect this to put pressure on the bottom line of a franchise dealer! Please ask supporters of the bill if they really believe a Tesla franchise would be profitable with low sales volume and adjacent states selling direct for less.
A USA Today article posted just a couple of hours ago (GM-backed bill could block Tesla in Indiana)
quotes a GM spokesperson as saying existing law discriminates against GM, Ford etc. by prohibiting them from selling direct because they have franchise dealers. From what Sen. Buck said, I understood that this is to prevent them from competing against their own franchise dealers.
Does GM suggest that it would like to be able to sell direct? Please ask them at the meeting. The big companies created the franchises to avoid having to create a huge direct-dealer network. Do they regret this, or just claim that it is unfair because they don’t want to compete? Is it a coincidence that the Tesla Model 3 will be a challenge to the Chevy Bolt?
A 2009 paper by the US Dept. of Justice analyzed the effects of the franchise dealer model: Economic Effects Of State Bans On Direct Manufacturer Sales To Car Buyers | ATR | Department of Justice
The paper describes a GM experiment with direct sales of the Chevrolet Celta in Brazil; I don’t know if it is still current. The paper quotes a Goldman Sachs estimate that consumers pay about 8.6% more due to the franchise dealer model. Is this in the interests of Indiana consumers?
In view of Tesla’s current low volume, couldn’t the bill permit them a 10 or 5 year extension? After all, the state allowed them to set up business. How fair is it to change the rules on them? And how fair is it to allow the big established companies force Tesla out of the state in order to ensure their monopoly of the Indiana market?
Last edited by a moderator:
Breezy
Member
Thanks Lanny!
Diarmuid O'Connell, Tesla VP Biz Dev, just finished an interview on this local radio show.
Nomad
Member
Quick summary? Any interesting talking points that can be repeated?
Hoping to find a recording of the show later tonight.
He basically reiterated that Indiana state law as it exists today does offer a level playing field for all manufacturers, and that the new bill will give an unfair advantage to GM and others, and be detrimental to the consumer.
I tried twice to post the following email I sent to Sen. Broden. Don't understand why it has not been posted.
As a Tesla Model S owner and longtime WVPE supporter, I beg you to include something tonight or tomorrow morning about the Indiana Senate committee meeting TOMORROW MORNING Feb. 25th concerning HB1254, which seeks to change Indiana law to prevent Tesla Motors from continuing its dealer license beyond the end of 2017. I am forwarding Tesla’s email to Indiana Tesla owners separately. My email to Indiana senator John Broden follows. I know it is very late for you to digest the information, but I hope you can still say something on-air. The USA Today article published this afternoon and referenced in my letter below is informative.
Thanks, and my appreciation to WVPE.
Dear Senator Broden:
I purchased a Tesla Model S last August at the Tesla showroom in Indianapolis. I sincerely hope you will oppose HB1254 at tomorrow’s meeting of the Commerce and Technology committee.
Chairman Buck stated at last week’s meeting that the bill is not about Tesla; but since Tesla is the only car manufacturer selling direct to consumers in Indiana, the bill has a direct immediate effect only on Tesla.
Senators who questioned Tesla representative Chen at the last meeting seemed unable or unwilling to grasp the fact that in order to make a profit, franchise dealerships need to sell in greater volume than is possible for Tesla at this time. In the early days of the auto business, companies sold direct to consumers, until with the advent of assembly line production sales volume became too great to make sense for the manufacturers to have enough outlets, which led to the franchise dealer system. If Tesla achieves its goal of high-volume sales with its new less expensive Model 3 ($35,000), it may well move to a franchise dealer model. At present, volume is too low for an independent franchise dealer to profit.
Franchise dealers also need to mark up the price of a car. Unless Tesla were to reduce their own profit (which is unlikely since they are currently in startup/expansion mode, spending more than they take in in order to bring out new models and fund R&D), a prospective buyer would have to pay more at an Indiana franchise than in neighboring Illinois or Ohio, where Tesla sells direct. I’d expect this to put pressure on the bottom line of a franchise dealer! Please ask supporters of the bill if they really believe a Tesla franchise would be profitable with low sales volume and adjacent states selling direct for less.
A USA Today article posted just a couple of hours ago (http://www.usatoday.com/story/money...cked-bill-could-block-tesla-indiana/80860620/)
quotes a GM spokesperson as saying existing law discriminates against GM, Ford etc. by prohibiting them from selling direct because they have franchise dealers. From what Sen. Buck said, I understood that this is to prevent them from competing against their own franchise dealers.
Does GM suggest that it would like to be able to sell direct? Please ask them at the meeting. The big companies created the franchises to avoid having to create a huge direct-dealer network. Do they regret this, or just claim that it is unfair because they don’t want to compete? Is it a coincidence that the Tesla Model 3 will be a challenge to the Chevy Bolt?
A 2009 paper by the US Dept. of Justice analyzed the effects of the franchise dealer model: http://www.justice.gov/atr/economic-effects-state-bans-direct-manufacturer-sales-car-buyers
The paper describes a GM experiment with direct sales of the Chevrolet Celta in Brazil; I don’t know if it is still current. The paper quotes a Goldman Sachs estimate that consumers pay about 8.6% more due to the franchise dealer model. Is this in the interests of Indiana consumers?
In view of Tesla’s current low volume, couldn’t the bill permit them a 10 or 5 year extension? After all, the state allowed them to set up business. How fair is it to change the rules on them? And how fair is it to allow the big established companies force Tesla out of the state in order to ensure their monopoly of the Indiana market?
bonnie
I play a nice person on twitter.
Interesting study supporting that dealerships don't know how to sell EVs.
http://phev.ucdavis.edu/files/Dealer-Study-Brief_Short_2015-4-8.pdf
http://phev.ucdavis.edu/files/Dealer-Study-Brief_Short_2015-4-8.pdf
I used to be on the pro Tesla camp on this but given the crap I've seen about Tesla not selling parts or providing repair documentation, I'm completely on the other side of this now. The model that Tesla has chosen is anti competitive and makes them the sole supplier of everything else related to owning and operating a Tesla after the sale. I know a bunch of you are going to ream me for my opinion but if Tesla was sold through franchised dealerships, you'd never see the kind of walled garden crap we have now.
May solve the problem your referring to, but I'm not for regulation to dictate customer choice. Especially considering the number of companies in the business and number of cars available as options.
"They make the only car I want" still isn't justification. They may not have this car for sale if not for thief current biz model.
My opinion only.
bmanke
Member
And how does the franchised business model change any of this? The manufacturer still holds all the information and decides what is released. Furthermore they like any other manufacturer, they set the price on spare parts. I fail to see how Tesla is really all that different. If anything it is better as there is not a middleman.
I also fail to understand people's comments about Tesla being the sole supplier for parts. Yes, and just like any other car or any other manufactured component. If I need a part for my John Deere I go to John Deere, not CaseIH. If I need a part for my BMW I must get it from BMW. Yes "generic" parts can be sourced from other vendors and how is a Tesla any different here?
While I understand and am also a bit frustrated by the lack of information we can obtain, I also understand that they must go this route to protect themselves both in the marketplace and legally. We don't need to see the headline "Man working on Tesla electrocutes himself".
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Furthermore the person who wrote the bill Kevin Mahan is a State Farm Insurance rep. https://www.statefarm.com/agent/US/IN/Hartford-City/Kevin-Mahan-3XDP04RDXAK
I for one am seriously considering my decision to be insured with State Farm.
stopcrazypp
Well-Known Member
I don't think having dealers solves any of that. Tesla can require franchised dealers to limit part sales as part of the franchise agreement, just as they do with the Tesla certified repair shops right now. Right now Teslas (and EVs in general) are new enough that there is not an aftermarket/third-party parts market, but eventually it'll grow and it's not much of a concern. Also, what covers that is laws like the Massachusetts "right to repair" laws.
Also, for customer blacklists, manufacturers definitely can maintain them even with dealers. It is currently used to block people that buy cars for grey market purposes, but definitely Tesla can use a similar list for their own purposes.
Years ago Ford bought several dealers in Indiana. I think it was 20 or 30 dealerships. After trying direct sales for a few years, they decided to get out of that business.
Nothing prevented Ford back then, as long as the dealers they bought were not too close to independent dealers. GM or Ford or Honda could open factory stores in Indiana now under current law. In the video of James Chen's testimony in opposition to HB1254 last week, he made this point several times.
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