Has it dawned on anyone?

[Clint Eastwood]

Definitions:

A free market is a market structure in which the distribution and costs of goods and services, along with the structure and hierarchy between capital and consumer goods, are coordinated by supply and demand unhindered by external regulation or control by government or monopolies.

Capitalism is an economic system characterized by private or corporate ownership of capital assets and goods. In a capitalist economy, investors are free to buy, sell, produce, and distribute goods and services with at most limited government control, at prices determined primarily by a competition for profit in a free market.

If Americans truly believe in free market capitalism, then it doesn't matter whether dealers would lose their jobs, or tax revenue would be lost, etc. As mynameisjim said, adapt or die.

iTunes brought about changes to the entire system of music distribution in the U.S. The record companies--after initial resistance--finally adapted.

The internet/iPad/Nook/Kindle brought about the demise of newspapers and bookstores. Many newspapers did not adapt or adapted too late, and died. Some bookstores did not adapt, and died.

This is how the US economy works--or how it should work. The threat of becoming obsolete is the very thing that spurs innovation.

No law stopped the internet from killing many newspapers. No law should stop Tesla from being able to sell directly to the consumer.

Look at it this way: Imagine being told that instead of buying groceries from your local grocery store, you were now required to buy your groceries from a designated "food provider" in your neighborhood. That "food provider" would buy the food from the grocery store, and then re-sell the food to you (after increasing the price to pay himself). Does that seem right to you? What value is the "food provider" adding to the process?

Thank you for eloquently expressing my exact position. I'm sorry if people lose jobs because tesla found a better business model. When the other automakers adapt, there will be new jobs. Besides, the purpose of labor/commerce laws were to protect the consumer/prevent monopolies and other unfair business practices. There is nothing more irritating to me than when the government tries to protect me from myself. Protect me from others only, that is what you were created to do. It doesn't "take a village".

 

[Zythryn]

The state laws I have seen are not written to protect the consumer, they are written to protect the Dealers from the manufacturers they represent.
This is very valid IMO and basically enforcing contract law.
What those laws should not be, is a protection of one specific industry from any competition from any other legal business model.
It is the antithesis of free market and borders on state owned business.

To see how well dealer laws are protecting the consumer, ask how many people feel they were taken advantage of when buying a car.
Or ask Karma owners how well they feel 'protected' now that many can't get warrantee coverage if they can get service or parts at all.

 

[brianman]

I'm sorry if people lose jobs because tesla found a better business model.

America is different today in some fundamental ways from its first century. For example, it's new to be propping up businesses and business models rather than letting the good, effective ones thrive and the poor ones die off. It's the nanny state for businesses.

"Pursuit of happiness" does not mean "guaranteed happiness."
"Opportunity" does not mean everyone gets to retire at 35 with all expenses paid.

Many have lost their way, and it's affecting the mental model of future generations.

 

[Todd Burch]

America is different today in some fundamental ways from its first century. For example, it's new to be propping up businesses and business models rather than letting the good, effective ones thrive and the poor ones die off. It's the nanny state for businesses.

"Pursuit of happiness" does not mean "guaranteed happiness."
"Opportunity" does not mean everyone gets to retire at 35 with all expenses paid.

Many have lost their way, and it's affecting the mental model of future generations.

Agree. But I'm particularly upset about this no retirement at 35 thing. I was all excited about it there for a moment, and now all hope is lost...

 

[v12 to 12v]

Businesses adapt or die. Creating legislation that forces their existence is temporary. They need to provide a valuable service and convince people they're worth using. They provide no value to me and I won't miss them at all.

That is what the Travel Agents had to do. If the client values the extra service they stay with the Travel Agent.
Some commissions are lost here and there by clients that decide to book direct, and the number of brick and mortar stores have dwindled, but the profession has survived.

 

[Vger]

We are in the midst of a 2,000 mile road trip with our Model S, and have introduced the car and Tesla the company to dozens of people at overnights and charge stops cross BC and WA. NOT ONE person we talked to supports the dealers. Everyone thinks Tesla is doing the right thing to go direct.

Customer service is not great on this continent in general, but nowhere is it worse than in the auto industry. It is not just about economics, as Elon points out, the incentives for customer care are all wrong in the dealer model.

 

[carogan]

I'm not a lawyer, but I've heard that the Commerce Clause of theConstitution could be argued here--that attempts by states to restrict Tesla'sability to do business is an unlawful attempt by a state to regulate interstatecommerce. I'll leave the rest up to the lawyers in the crowd.

But can it be argued that anyone is restricting Tesla’s ability to do business? No one is saying that Tesla cannot sell cars in their jurisdiction. What they are saying is that there are rules in place to protect the consumer and industry stakeholders, and that Tesla must adhere to those rules.

It will, inthat it will allow Tesla to sell directly in the states in question.

Not necessarily at all. The onus will very likely be on Tesla to prove that

1) The state does not have jurisdiction to institute laws to protect the consumer and industry stakeholders, and

2) That the laws in place do not provide the protection sought

Of coursenot--it would look silly to file a complaint arguing that Tesla shouldn't havethe right to compete with them.

You misunderstood what I attempted to say. I am saying that Tesla supporters claim that auto dealers are pushing these laws for “anti-competitive” reasons (“anti-Tesla), when if you look at their complaints at face value, they are pushing their legislators to uphold existing laws in place that everyone must adhere to, including Tesla.

Certainly notfor the safety and health of the consumer. And by the way, those laws apply tofranchises--and protect the franchisee from the possibility of the manufacturerskipping them and selling directly to the consumer. Which, in itself seems likea silly rule on its own.

Well, I won’t speak about every jurisdiction. However, I would highly suspect that most laws surrounding dealership regulations and requirements, if they are at all similar to where I come from, very much have to do with consumer and stakeholder protection.

Tesla, nothaving franchises, does not apply in this case. They have no franchises theycould be circumventing by selling cars to consumers.

I think Tesla supporters are focusing in on one single issue, and have spun their interpretation of this one law and made it a rallying cry to support our arguments with respect to all issues. There will be far more legislation that we are dealing with than just this issue.

So carogan,are you a dealer?

I managed auto dealerships for over 10 years and my family owned a dealership as well. My father wanted to hand over the dealership to me but I declined as I despise the entire auto dealership culture that this industry is built upon. I turned down a license to print money based on sheer principle.

I have worked as a project manager in the construction industry for the last 10 years. However, I would return to the auto industry in a heartbeat if I could work for acompany like Tesla – and I would only return to a company like this if I came back. I've actually submitted a resume to Tesla.

I love this product immensely. I think it is a game-changer. I think it is a world-changer. Since I’ve learned about this product I don’t think there is a company on this planet that I am rooting for more than this.

You are mistaking me as a supporter of the ICE industry when there is absolutely nothing further to the truth. I would love to see the complete disappearance of the dealership structure in this industry – but I am not naïve. And I think I have a far stronger understanding of this industry than most of you commenting on it.

In order to defeat your enemies you need to understand who it is you are fighting and you need to understand the game. I fear for Tesla because it is absolutely clear that they know how to build an incredible car, but I question their understanding of the industry from a marketing and distribution standpoint, and their ability to compete against opponents who are as determined, cutthroat, andwealthy as any industry on the planet.

Until Tesla can start churning cars out and earning substantial revenue it cannot afford to waste money on legal battles that won't help advance its cause. It needs to be careful when it picks a fight, and it needs to know that when they do that it is a fight it can win.

 

[PopSmith]

In general, I agree with the OP. However, one statement did cause me to pause:

If Tesla is allowed to sell directly as Elon is pushing, then their existence will cease to exist almost overnight as other manufacturers will have to be allowed to compete with Tesla in the same manner.

If the NADA is really worried about this (and not scared of Tesla, in general) then they simply need to push for a law that makes it illegal for manufacturers to own a dealer if they currently have franchised dealerships. Make it a bit more specific and limit it to U.S.-based EV-only companies (I believe that is what Tesla was trying to pass in Texas). That would prevent incumbent automakers from establishing company-owned dealerships while letting Tesla continue on their way.

However, I realize it almost never is that simple. The NADA won't go for that and instead they'll probably fight this clear up to a U.S. Supreme Court ruling.

 

[carogan]

In general, I agree with the OP. However, one statement did cause me to pause:


If the NADA is really worried about this (and not scared of Tesla, in general) then they simply need to push for a law that makes it illegal for manufacturers to own a dealer if they currently have franchised dealerships. Make it a bit more specific and limit it to U.S.-based EV-only companies (I believe that is what Tesla was trying to pass in Texas). That would prevent incumbent automakers from establishing company-owned dealerships while letting Tesla continue on their way.

However, I realize it almost never is that simple. The NADA won't go for that and instead they'll probably fight this clear up to a U.S. Supreme Court ruling.

And make no mistake - NADA is definitely afraid of the loss of the ICE industry as well because they obviously have everything invested in their current product and it would be difficult for them to have a new competitor change the game for them.

But some dealers can adapt to change if they must...but they can't adapt period if they are deemed redundant.

 

[Krugerrand]

But can it be argued that anyone is restricting Tesla’s ability to do business? No one is saying that Tesla cannot sell cars in their jurisdiction. What they are saying is that there are rules in place to protect the consumer and industry stakeholders, and that Tesla must adhere to those rules.

Yes, it can be argued. Just ask those Tesla owners who've had to bend over backwards in Texas just to get a test drive, to buy a Model S, to get it delivered and serviced. Just ask Tesla employees in various Tesla Studios who can't tell customers how much the car costs, or help them order one online, or accept deposits. Can we say 'jump through hoops'? And what about N.C. trying to ban people of that great state from buying a Model S via the Internet?

Funny, but I don't recall seeing one Tesla owner or Tesla stakeholder argue that they need or needed NADA legislation and rules to protect them. Have you? In fact, I believe that unanimously Tesla owners and stakeholders are very pleased with the direct sales model.

I've always been a firm believe that stupid, irrelevant, or redundant rules were made to be broken.

What you seem to fail to realize is that nobody likes dealerships, except those directly involved in them. You also seem to fail to realize that the sky is not going to fall and crush the Dealerships overnight. There will be a need for sales, parts and service of ICEs for many, many years to come even if EV's become the new major mode of transportation in the coming decades.

I'd also like to know what happened to all the chatter that Model S is vaporware, that Tesla will never sell beyond the 1% rich and famous, that once the early adopters have bought their cars, demand will peter out? We aren't believing that anymore, are we Dealerships?

 

[carogan]

I’m not sure why you’re directing a hostile tone towards me. I’m going to guess that you’re misinterpreting my position on some level (ie. you think I am disagreeing with your opinions regarding the dealership culture? Maybe you missed some of my comments because I've said I can't stand that culture one iota. Furthermore, I am 100% a Tesla supporter)

Yes, it can be argued. Just ask those Tesla owners who've had to bendover backwards in Texas just to get a test drive, to buy a Model S, to get itdelivered and serviced. Just ask Tesla employees in various Tesla Studios whocan't tell customers how much the car costs, or help them order one online, oraccept deposits. Can we say 'jump through hoops'? And what about N.C. trying toban people of that great state from buying a Model S via the Internet?

The NADA of Texas outright told Tesla that they can do anything they want, so long as they sold their vehicles out of a dealership. That is not restricting their ability to do business in Texas. What it is doing is forcing Tesla to follow state laws in carrying out their business. Do you understand the difference?

Funny, but Idon't recall seeing one Tesla owner or Tesla stakeholder argue that they needor needed NADA legislation and rules to protect them. Have you? In fact, Ibelieve that unanimously Tesla owners and stakeholders are very pleased withthe direct sales model.

No customer of GM, or Ford, or Audi or anyone else likely had come out asking for NADA legislation specifically either. I would assume NADA legislation came out over time as issues arose and the states determined that certain protections were required to be put in place. I would strongly suggest that there is a lot more to the protection of the consumer and industry than you are likely giving consideration.

I've always been a firm believe that stupid, irrelevant, or redundant rules were made to bebroken.

Don’t disagree with you there.

What you seemto fail to realize is that nobody likes dealerships, except those directlyinvolved in them.

How did I fail to realize that? You clearly didn’t read through my posts then because if you did you would have read how I absolutely despise the auto dealership culture, which was the reason I left the industry and didn’t takeover our family dealership. If you think my arguments are making a case in support of dealerships than you're missing the point completely.

You also seem to fail to realize that the sky is not going to fall andcrush the Dealerships overnight. There will be a need for sales, parts andservice of ICEs for many, many years to come even if EV's become the new majormode of transportation in the coming decades.

I strongly disagree with you here. There are far too many Tesla followers who incorrectly believe that the service department is the major profit center for car dealerships.

A good car dealership should be able to cover its operating costs due to service revenue. However a large proportion of the time the service department is a money loser (although that's generally a sign of poor management). A good dealership earns most of its revenues due to used car sales, and good used car inventory is traded in if there is a healthy new vehicle sales department. If dealers start losing market share to a new competitor their bottom lines will be severely affected mainly because of lost used car sales (due to lack of quality trade ins) and some new vehicle revenue.

However, if auto manufacturers could start cutting out some of their dealer network (in order to stay competitive with the Tesla's of the world who sell direct) those dealers would absolutely close overnight unless the manufacturers took them over. Service department revenue is not enough to keep a dealership running on service alone except for the biggest of dealerships.

I'd also liketo know what happened to all the chatter that Model S is vaporware, that Teslawill never sell beyond the 1% rich and famous, that once the early adoptershave bought their cars, demand will peter out? We aren't believing thatanymore, are we Dealerships?

I’m not quite sure who this last comment was directed to.

 

[Jason S]

Its all fine and dandy for everybody here to argue that the rule of "free market" must win out.

But you are all making one incredibly massive assumption, which is that you have limitless resources with which to take on this fight.

Its been said that much of this technology has been out there for a century. Why is it that we aren't all already driving in electric cars?

All I am saying is that if you want to pick a fight, its always good to know for sure that you can win it. If you go in blind, you just might find out the hard way that there is always someone out there that is bigger and badder than you are.

The opponent we are discussing here is a formidable one and the fight will not be cheap.

Internet, cheap and instant communications, supply chain management.

These are the things that turned the dealership model from a benefit to a curse. Bypassing them can now happen because that's where the efficiencies are. They can still provide the same services -- best dang mechanics I've dealt with work at my local Mazda dealership. But now they compete against everybody.

Here's a question for dealership cheerleaders: what if dealerships could sell any brand of car? Rather than an automall with a bunch of dealerships, what about a dealership that could help ya figure out the best car of all the choices out there? Wouldn't that be a model worth exploring? (And isn't that Carmax? They get to do it because the used car market is outside the dealership model.)

 

[deonb]

But can it be argued that anyone is restricting Tesla’s ability to do business? No one is saying that Tesla cannot sell cars in their jurisdiction.

Hey, Netflix - SURE you can do business in our jurisdiction. Nobody is saying you can't. As long as you ship all your DVD's to BlockBuster and people can just pick it up from there.

Video stores pay good wages, and are a big part of the social fabric in our community! After all video stores have massive investments in real estate, capital, infrastructure, and people.

Definitions:

A free market is a market structure in which the distribution and costs of goods and services, along with the structure and hierarchy between capital and consumer goods, are coordinated by supply and demand unhindered by external regulation or control by government or monopolies.

Capitalism is an economic system characterized by private or corporate ownership of capital assets and goods. In a capitalist economy, investors are free to buy, sell, produce, and distribute goods and services with at most limited government control, at prices determined primarily by a competition for profit in a free market.

Add this one:

Democracy is a form of government in which all eligible citizens have an equal say in the decisions that affect their lives.


This is not giving an equal say to people. It's giving a loud say to NADA, while disregarding what > 90% of people want.

 

[Zythryn]

The NADA of Texas outright told Tesla that they can do anything they want, so long as they sold their vehicles out of a dealership. That is not restricting their ability to do business in Texas. What it is doing is forcing Tesla to follow state laws in carrying out their business. Do you understand the difference?

...

I suspect he does, but you don't.
Have you ever tried to buy a Volt in Texas from a GM dealership?
Most will dissuade you and sell you something else instead, if they even offer them.
Quickest way for Tesla to get fewer sales in Texas would be to start to work through dealers.
And the quickest way for the buying experience to go downhill in Texas would again be for Tesla to start selling through dealerships.
Oh, and the quickest way to get no information, or worse yet, misinformation about Tesla out their would be to have dealership car salesmen providing said information.

Doubt that last one? Go into 3 Texas dealers and ask about the Volt.

 

[jerry33]

Yes, it can be argued. Just ask those Tesla owners who've had to bend over backwards in Texas just to get a test drive, to buy a Model S, to get it delivered and serviced.

As a Texas owner, there are just not many hoops to jump through anymore. Service is no problem. Although the Tesla employees can't talk prices or give test drives, that really doesn't stop anyone from buying. The biggest inconvenience is that you have to go down to the county tax office to pay your sales tax.

The dealership laws were written when dealers were mainly family owned businesses. The Ford dealer just sold Fords and the Chevy dealer just sold Chevys. Now dealerships are giant businesses selling almost every brand of car. In many cases they are just as big as the manufacturers. It's the consumer that needs protection, not the dealers.

 

[DavidM]

I'm convinced that Tesla will ultimately prevail on this issue. Today you don't see grassroots consumer uproar and support because most folks can't afford the car anyway. Why fight for something you can't have? BUT, as soon as Tesla shows a Gen III prototype for $35K and starts taking tens of thousands of reservations from middleclass households, the dealers will lose this fight, once and for all. It would be ridiculous for a state to inhibit registration of a safe, compliant, American made car designed for the masses, because independent dealers can't take a cut.

Actually this fight is more about maintenance revenue than selling EVs. Dealers make most of their money on the maintenance of ICE cars. If the industry even goes 33% EV, dealership profits would be hurting from lower maintenance revenue on the EVs. Just like movie theaters make most of their money from the candy stand (not ticket prices). Most of the ticket price goes to Hollywood. Take away the candy stand profits and theaters would be in an uproar. Yup, dealers really want ALL EVs to just go away. Dealers will eventually lose this battle. They just don't know it yet. It will take 2 - 3 years for Tesla's final victory on this issue.

 

[tdelta1000]

Capitalism allows Tesla Motors to grow or fail at manufacturing EVs.

Sent from my SPH-L710 using Tapatalk 4 Beta

 

[lolachampcar]

Everyone.... Please take a breath.

Carogan is 100% on point here. We can all sit in a circle and pat ourselves on the back that we are going after the big bad dealerships but it will not do the effort any good. In fact, it will make it easier for the dealerships to paint Tesla and it's ravenous fans as carpetbaggers bent on their destruction.

Elon is not stupid. He will evaluate the method of pushback, initially be hurt by the senseless need to devote so much attention to a negative then recover and go to work understanding the issues at hand. That understanding will be a bulk of what Carogan has written. I welcome a view from the dealer's side; I especially welcome it from someone that knows the inside and finds it does not agree with his moral compass.

Instead of telling ourselves how right we are, why not use the collective intellect of the members on this forum to dissect Carogan's points and try to model a successful strategy that is cost effective. CO, I've seen enough of your thought process to know you would be of great help here (along with Birch,Dog,,,,,,).

 

[Electroman]

I think OP has a point. We may not be able to slay the demon at one shot with a supreme court battle. However confident we may be, what happens if the ruling is not in Tesla's favor? That will be the end of the fight.

Rather we should plan for a thousand cuts and then when Gen 3 hits the market, with enough grass roots support it will be easier to talk to the politicians.

 

[Al Sherman]

I think OP has a point. We may not be able to slay the demon at one shot with a supreme court battle. However confident we may be, what happens if the ruling is not in Tesla's favor? That will be the end of the fight.

Rather we should plan for a thousand cuts and then when Gen 3 hits the market, with enough grass roots support it will be easier to talk to the politicians.

^^^This. Like it or not, most of these politicians are bought and paid for. NADA has VERY deep pockets. For the most part, the only coercion the politicians will react to is the threat of being voted out. The money is ineffective if you're gonna lose your seat. When lots of folks want Gen 3, they'll be very annoyed if dealerships (which they hate in spite of the "social fabric" argument which is to me at least: hysterical) make it difficult to get one.