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"It's illegal for a car company to sell cars directly to the public in 48 states."???

Discussion in 'North America -' started by Benz, Apr 10, 2013.

  1. Benz

    Benz Active Member

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    #1 Benz, Apr 10, 2013
    Last edited: Apr 10, 2013
  2. markwj

    markwj Moderator, Asia Pacific

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    My understanding is that there are 3 levels:

    1) no restrictions
    2) illegal to sell direct if you have dealers
    3) illegal to sell direct, period

    But, then again I'm from Hong Kong - where despite communist motherland ownership we have a free market :)
     
  3. deonb

    deonb Active Member

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    I'm not that familiar with US franchise law, but there seems to be an easy way around insane laws like this. If you've ever worked in the Middle East for an "American" employer - you'll know what it is.

    You get some local figurehead to start a franchise e.g. called "Tesla Texas" and give him the rights to sell cars & display the real Tesla logo (so the only mentioned of the actual franchise name "Tesla Taxes" would be on the business license). And you allow him to retain some nominal amount ($50?) for each car sold through his store + expenses (and make sure he doesn't actually do any work).

    Then you hire "consultants" from the corporate office to do the actual floor work. (And if it is illegal for Tesla to be a direct employer in that state, you hire people from a sane state and send them to those locations and have them switch every few weeks/months, so that they never would become a resident of the other state. I'm sure there are lots of young people who would love to work and travel around the country at the same time, especially if you give them one of the test-drive cars for traveling.).

    Tesla will anyway have to do this one day when they want to open sales offices in Dubai, Abu Dhabi, Jeddah, Riyadh, Kuwait City etc. so may as well do the same with local protectionist states.
     
  4. brianman

    brianman Burrito Founder

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    @deonb - This would get tagged as "dealership" and then all hell would break loose.
     
  5. widodh

    widodh Model S R231 EU

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    So, wasn't the US meant to be the "land of the free" ?

    This seems like a very conservative law, almost like protectionism. The French tried something similar about two years ago, give tax credits to people who bought a French car. The EU stopped it since it was protectionism and there should be a free market.

    Dealerships are nothing more then somebody in the pipeline who is just adding costs to the whole chain. I just love the Tesla idea.
     
  6. Benz

    Benz Active Member

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    But will Elon Musk be repeating what he is doing now in Texas 47 more times? I think the man has better things to do.

    This would be crazy.

    Maybe something can be done on a higer level of legislation (FEDERAL LEGISLATION)? Does anyone have an idea about how this works?
     
  7. Zythryn

    Zythryn MS 70D, MX 90D

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    My understanding is only in Texas is Tesla not allowed to sell direct.
    Most states have a law stating it is illegal for an auto manufacturer to compete against their own dealerships by selling direct. As Tesla has no franchises, this doesn't seem to be a problem in states where this has been brought to court.
     
  8. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    Well, it's still a problem in that Tesla has to ensure they are not acting as a car dealer according to state law in each state. It's just that Texas has much stricter rules about what makes you a car dealer.

    - - - Updated - - -

    Of course it's protectionism. The term for it is rent-seeking, where middle-men interpose themselves in a process, profiting without adding value. Because they don't add value, especially in the Internet age they have to lobby and use their wealth to buy legal protection. Cars and alcohol are two major areas affected.

    The effect of telecommunications, especially the Internet, has been both to reduce the value of middle-men. Its effect on car sales is growing, with people better informed and more able to buy out of state. The great thing about Musk's willingness to be disruptive is that he pushes against the rent-seekers. Right now they're a low-volume business so the Tesla effect isn't that large. But if Tesla makes it to Gen 3, higher demand will put that the protectionism under more pressure and it's quite likely that they'll break. If they do, you could see other manufacturers start making more moves against franchising, just as Nissan did with the Leaf launch and GM is doing with the Volt incentives.
     
  9. caddieo

    caddieo Member

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    It seems to me that Tesla can minimize the controversy by eliminating the word "store". That word always implies selling - i.e., a dealership. Why not call it a "Tesla Information Center" instead. And let those who want to buy do the ordering online from their homes instead of using the "store"s" internet facilities (as I did when I ordered).
     
  10. youlikeadajuice

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    I believe in Texas they call them "Tesla Galleries"?
     
  11. Benz

    Benz Active Member

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    Elon Musk: "If we're seeing nonstop battles at the state level, rather than fight 20 different state battles, I'd rather fight one federal battle."
     
  12. lolachampcar

    lolachampcar Active Member

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    For those who think the US is the land of the free, it is. We have been free to completely corrupt our political system with money. We now incentives the best and brightest people to do all the wrong things (think PI or drug marketing). Nothing will get fixed until the corruptive supply of money is removed. In Texas, the money just happens to come mostly from oil.
     
  13. JohnQ

    JohnQ Active Member

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    These types of things are to be expected when disrupting an entrenched market. It doesn't matter that Tesla makes EVs. It's the fact that they're establishing a precedent whereby vehicle manufacturers can sell directly to the public. Of course the dealership associations are going to go crazy, it's why the dealerships pay to belong to those associations. They're thinking "crack the door for the mouse and the elephant will surely end up in the house."
     
  14. dsm363

    dsm363 Roadster + Sig Model S

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    Wouldn't the interstate commerce clause cover this somehow (car being sold from California to any other state)?
     
  15. Jason S

    Jason S Model S Sig Perf (P85)

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    Article is from oct 2012. These issues have been resolved. Are there any new ones?
     

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