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Tesla seeking to open Richmond facility
- Thread starter LetsGoFast
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Hodginator
Member
As I recall the service center is included in the dealership definition. At the hearings it was my impression that it was all inclusive. Either they could sell and provide service or they could not.
It is nice to see that the county gave the VADA a unanimous middle finger. It looks like they understand what is in the public's best interest.
DriveElectricRVA
Member
Glad to see that Henrico was willing to let the market decide what is the best way to buy a car.
Sorry for my delinquency, but here are more notes from the July 1 hearing:
After the testimony of consultant Maryann Keller, VADA presented two dealers who say they quered Tesla about selling their cars. First up was Heywood Hyman, owner of Hyman Bros.
Next came the testimony of Larry Page, owner of Page Auto Group:
More to come ...
Sorry for my delinquency, but here are more notes from the July 1 hearing:
After the testimony of consultant Maryann Keller, VADA presented two dealers who say they quered Tesla about selling their cars. First up was Heywood Hyman, owner of Hyman Bros.
- Hyman sent a letter to Tesla expressing an interest in selling their cars. He would want more information about their business model before making a final decision, but he was serious about pursuing it.
- He used to sell Saturns, so he is familiar with the car's innovative transparent single pricing. He had to fill out a 20-page application, which is atypical. Several other Saturn dealers fell by the wayside due to their strict requirements on the appearance of the store and the conduct of its staff. It was hard at first when people walked out because they couldn't haggle on price, but eventually Saturn's approach worked.
- The LEAF is the only EV that Hyman sells, and he only sells one a month.
- VADA emailed him about sending a letter to Tesla. He sent a single letter and didn't follow up. He didn't devise a proposal, but that is because the typical approach is to send a letter of interest and receive a formal application with additional information about the business model.
- It's hard to say if he could be a successful Tesla seller. He does sell cars at the wholesale price, but he makes up for that with the profits he makes in other services and products.
- He was quoted in an article saying that the fixed pricing system used by Saturn was hard for the dealer and the customer. Of course, things have changed in 20 years and he does sell cars at fixed prices.
- His Saturn dealership lost money for a few years.
Next came the testimony of Larry Page, owner of Page Auto Group:
- None of the dealerships he owns sell all-electric vehicles. They do sell hybrid models.
- When you apply for a dealership, you send a letter with information about your dealership. If the auto maker isn't interested, they send a response. If they are interested, they will send an application.
- He sent a letter to Tesla after VADA contacted him that the company was interested in operating in Richmond. He didn't receive a response.
- He had a Mazda dealership that didn't make money for seven years while another dealership took five years to turn a profit.
- Page doesn't think the cars he sells now competes with Tesla because they aren't electric, even though Tesla believes that it competes against luxury cars that run on gas.
- He terminated his Mitsubishi dealership after eight years.
- He has no experience selling cars at the wholesale price. He has to get an ROI on his dealership.
More to come ...
DriveElectricRVA
Member
Here are my notes from the July 1 hearing that cover the testimony of Fiona Scott Morton, an economics professor at Yale and rebuttal witness about Tesla's objections to VADA's interrogatories
Daniel Small, the hearing officer, didn't think so, reiterating his opinion that the proceedings have gotten "way off topic." He thinks the whole discussion thus far has been irrelevant, so he sustained the VADA's motion to strike Tesla's response to VADA's interrogatories and Morton's testimony. (Later, Small backtracked from this decision and allowed all of the expert testimony into the record, saying he would take it "at face value.")
Small said this is a simple case -- is it the public interest to allow Tesla to sell directly to consumers ? He feels that a lot of the paperwork and testimony offered from both sides hasn't addressed that question. For example, he didn't think that testimony or information presented at the hearing in North Carolina for Tesla's dealer application was relevant. Tesla's lawyers disagreed. (See With Model 3 On The Way, Tesla Faces Roadblock From Charlotte-Area Dealerships.)
After the testimony of Herbert Walter, a rebuttal witness for Tesla who submitted a proforma analysis of the financial viability of a Tesla dealership, Small asked a "bombshell question" (in his words) -- does Virginia law prohibit firms from being a dealer even if it is unprofitable? Nothing in the jaw says that the dealer has to be successful.
Tesla's argument is that no dealer will be able to sell their vehicles in Virginia and serve the public interest because it's not economically viable. VADA counters that the law prohibits direct sales with four exceptions, and if Tesla says that it can't find a dealer, they haven't even tried! They have never solicited offers from local dealers and they didn't respond to the letters they received from prospective dealers. Tesla should go to the General Assembly and seek a change in the law.
The final quote of the day: "Tesla shouldn't get a pass because it's car is cool."
- Has Tesla created a monopoly with its closed loop model and fixed price? The answer is no. There are a lot of choices available to car buyers.
- Does competition between auto dealers lead to a better price for consumers? It does result in a reduction of the mark-up added by dealers, bringing the retail price closer to the wholesale cost. However, Tesla buyers pay the wholesale price, so no competition is required to drive that price down. Consumers already get the lowest price possible because there is no dealer mark-up required to cover costs and provide a profit margin.
- Vertical integration of auto manufacturing and selling eliminates double marginalization. Also, dealers don't internalize the financial and reputation costs of recalls and other problems with the vehicles they sell, so they don't have an incentive to manage recalls well. Finally, dealers don't have an incentive to educate consumers about electric vehicles.
- Current law makes it difficult for auto makers to enforce standards, such as limitations on the ability to terminate a franchise. Also, dealers cannot be forced to sell at a single price -- they can find ways to wiggle out of such requirements plus they can make money from service and financing. Tesla has said that it wants to smooth the experience for customers by making money only from the sale of the car, not by marking up service costs or selling related services.
- In general, it's easier to manage the behavior and performance of a salaried employee within your company than it is to dictate what employees do at another company with a franchise relationship. Arms-length relationships are harder to manage.
- Tesla is being expected to ditch its successful business model in order to be economically attractive to dealers. The way in which Tesla chooses to do business is not compatible with how dealers make money. Dealers do not offer the same no-haggle, no-pressure experience.
- Auto dealers have to be able to sell at a higher retail price to pay for the services they offer. But their approach to selling doesn't support the Tesla brand.
- Negotiating franchisees' objections to certain standards takes time and money, so why should Tesla have to pay for that when it can sell directly to the consumer?
- It isn't clear that Tesla's model will scale up. However, it's up to the company to succeed or fail, and they certainly have the right not to try the franchise model at this time.
- Morton did not ask Tesla for detailed information on about how it manages its employees. She based her analysis on information provided by Tesla, interviews, and her visit to a store. The company did not supply a manual detailing how it manages every aspect of their employees behavior. Rather, she talked to Jonathan Chang about Tesla's policies. She took what he said at face value rather than independently verifying it, but she felt she had the information she needed.
- Her job was to analyze a vertically integrated model of making and selling cars to see if consumers are better off economically. Whether the company makes a safer car wasn't part of her analysis.
- VADA dragged out a bunch of articles unrelated to the facts of the hearing, putting them in front of her and asking her to read excerpts:
- NTSA's admonishment of Tesla regarding its nondisclosure agreement with owners who receive repair services beyond the warranty's requirements -- the VADA's lawyer argued that such an agreement isn't in the public interest.
- Requirement for Tesla club members to advocate for the company
- Tesla hasn't been profitable in 13 years
- Recent drop in Tesla's stock due to its bid to buy Solar City
- Accusation of Tesla receiving billions of dollars in government subsidies
- What would be impact to Virginians if Tesla went out of business? It would be bad for the economy, but the impact wouldn't be better or worse depending on whether they sold directly to consumers or through dealers.
Daniel Small, the hearing officer, didn't think so, reiterating his opinion that the proceedings have gotten "way off topic." He thinks the whole discussion thus far has been irrelevant, so he sustained the VADA's motion to strike Tesla's response to VADA's interrogatories and Morton's testimony. (Later, Small backtracked from this decision and allowed all of the expert testimony into the record, saying he would take it "at face value.")
Small said this is a simple case -- is it the public interest to allow Tesla to sell directly to consumers ? He feels that a lot of the paperwork and testimony offered from both sides hasn't addressed that question. For example, he didn't think that testimony or information presented at the hearing in North Carolina for Tesla's dealer application was relevant. Tesla's lawyers disagreed. (See With Model 3 On The Way, Tesla Faces Roadblock From Charlotte-Area Dealerships.)
After the testimony of Herbert Walter, a rebuttal witness for Tesla who submitted a proforma analysis of the financial viability of a Tesla dealership, Small asked a "bombshell question" (in his words) -- does Virginia law prohibit firms from being a dealer even if it is unprofitable? Nothing in the jaw says that the dealer has to be successful.
Tesla's argument is that no dealer will be able to sell their vehicles in Virginia and serve the public interest because it's not economically viable. VADA counters that the law prohibits direct sales with four exceptions, and if Tesla says that it can't find a dealer, they haven't even tried! They have never solicited offers from local dealers and they didn't respond to the letters they received from prospective dealers. Tesla should go to the General Assembly and seek a change in the law.
The final quote of the day: "Tesla shouldn't get a pass because it's car is cool."
Thanks for that report.
It's all about what's in the public interest. As much information to the commissioner and the hearing officer about how the public hates dealers and prefers to buy direct from Tesla will be very helpful.
It's too bad the hearing officer didn't allow more public testimony and instead wasted time with VADA participation.
Send your comments in asap.
send emails and faxes to:
[email protected]
TELEPHONE - EXT (804) 367-6606
FAX (804) 367-2296
It's all about what's in the public interest. As much information to the commissioner and the hearing officer about how the public hates dealers and prefers to buy direct from Tesla will be very helpful.
It's too bad the hearing officer didn't allow more public testimony and instead wasted time with VADA participation.
Send your comments in asap.
send emails and faxes to:
[email protected]
TELEPHONE - EXT (804) 367-6606
FAX (804) 367-2296
From VADA:
A hearing officer considering the evidence in a case brought by Tesla before the Virginia Department of Motor Vehicles has recommended that Tesla should not be permitted to own its own dealership in Richmond, Virginia.
In 2012, Tesla filed a similar request to own a dealership in northern Virginia in a case in which the Virginia Automobile Dealers Association participated. Virginia law does not allow a manufacturer to own its own dealerships, except in limited circumstances. The Commissioner of Motor Vehicles ruled that Tesla could not qualify for an exception if there was a dealer independent of Tesla willing to own and operate a dealership in the public interest. He ruled that Tesla had to show no such dealer was available, and it did not.
Tesla appealed the Commissioner's decision but the Virginia Automobile Dealers Association agreed to work with Tesla and the state through a settlement. Under the agreement, Tesla would be given thirty months to own and operate one store in Virginia in Tysons Corner as an experiment.
Before that experiment was complete, and contrary to its agreement, Tesla applied to own and operate a second dealership in Richmond even though eleven successfully operating Virginia dealers had contacted Tesla with an interest to becoming Tesla franchisees. VADA intervened in the new action and called as witnesses five of those interested dealers, an expert in compliance to testify about Tesla's rampant violations at its dealership in northern Virginia, and two experts about the importance of independent dealers.
The September 6, 2016 Hearing Officer recommendation that Tesla should not be granted a license followed the reasoning of the Commissioner of Motor Vehicles' decision in 2013: "Simply put, the evidence does not support Tesla's request. There are dealers independent of Tesla - at least eleven of them - prepared to be Tesla's dealers...Those eleven dealers who have expressed interest are already licensed dealers operating in the public interest, especially the five that took the time to testify, and they will operate in the public interest as Tesla dealers."
Don Hall, President of the Virginia Automobile Dealers Association, expressed appreciation for the recommended decision. "Decades ago the General Assembly decided that consumers and the public interest are best served by dealerships owned and operated by franchisees independent of vehicle manufacturers. We welcome Tesla in Virginia, but the company must operate according to the Commonwealth's laws and the public interest."
The Commissioner of Motor Vehicles now has sixty days to consider the recommendation and to issue a final decision on behalf of his agency. His decision is subject to appeal to a Virginia circuit court.
Sincerely,
VADA
A hearing officer considering the evidence in a case brought by Tesla before the Virginia Department of Motor Vehicles has recommended that Tesla should not be permitted to own its own dealership in Richmond, Virginia.
In 2012, Tesla filed a similar request to own a dealership in northern Virginia in a case in which the Virginia Automobile Dealers Association participated. Virginia law does not allow a manufacturer to own its own dealerships, except in limited circumstances. The Commissioner of Motor Vehicles ruled that Tesla could not qualify for an exception if there was a dealer independent of Tesla willing to own and operate a dealership in the public interest. He ruled that Tesla had to show no such dealer was available, and it did not.
Tesla appealed the Commissioner's decision but the Virginia Automobile Dealers Association agreed to work with Tesla and the state through a settlement. Under the agreement, Tesla would be given thirty months to own and operate one store in Virginia in Tysons Corner as an experiment.
Before that experiment was complete, and contrary to its agreement, Tesla applied to own and operate a second dealership in Richmond even though eleven successfully operating Virginia dealers had contacted Tesla with an interest to becoming Tesla franchisees. VADA intervened in the new action and called as witnesses five of those interested dealers, an expert in compliance to testify about Tesla's rampant violations at its dealership in northern Virginia, and two experts about the importance of independent dealers.
The September 6, 2016 Hearing Officer recommendation that Tesla should not be granted a license followed the reasoning of the Commissioner of Motor Vehicles' decision in 2013: "Simply put, the evidence does not support Tesla's request. There are dealers independent of Tesla - at least eleven of them - prepared to be Tesla's dealers...Those eleven dealers who have expressed interest are already licensed dealers operating in the public interest, especially the five that took the time to testify, and they will operate in the public interest as Tesla dealers."
Don Hall, President of the Virginia Automobile Dealers Association, expressed appreciation for the recommended decision. "Decades ago the General Assembly decided that consumers and the public interest are best served by dealerships owned and operated by franchisees independent of vehicle manufacturers. We welcome Tesla in Virginia, but the company must operate according to the Commonwealth's laws and the public interest."
The Commissioner of Motor Vehicles now has sixty days to consider the recommendation and to issue a final decision on behalf of his agency. His decision is subject to appeal to a Virginia circuit court.
Sincerely,
VADA
What the Foxtrot?!? Where does VADA get off telling Tesla who "will operate in the public interest as Tesla dealers"?
diamond.g
Active Member
Worse than that-- it wasn't the VADA saying this, it was the hearing officer being quoted as saying the dealers are "operating in the public interest". A perfect example of regulatory capture.
Argh.
I figured this was the outcome after Mr. Small's mini-rant and question at the end of the last hearing. He clearly has not actually read through or considered the mounds of evidence that Tesla presented. I was not happy with the performance of Tesla's lawyer's either.
There are no independent dealerships that can operate Tesla dealerships in the public interest because there is no profit in it, and therefore no trust by consumers.
I figured this was the outcome after Mr. Small's mini-rant and question at the end of the last hearing. He clearly has not actually read through or considered the mounds of evidence that Tesla presented. I was not happy with the performance of Tesla's lawyer's either.
There are no independent dealerships that can operate Tesla dealerships in the public interest because there is no profit in it, and therefore no trust by consumers.
I hate the VADA....hopefully Tesla will file a suit against DMV and get remedies in the legal system. Frankly, I think Tesla needs to make a case the Virginia law (and indeed laws in many other states) are ensuring the monopoly called franchsied dealerships, and these laws should be dclared unconstitutional. (But then again I stayed at a Holiday Inn Express so what do I know!)
I take it that the VADA announcement is their embellishment of the Hearing Officer's ruling. Is there a public statement from the Hearing Officer? Does it provide justification for his decision? It's a long shot, but the Commissioner can logically rule in Tesla's favor if he reads the transcript of the hearing and the letters we have written.
"Daniel P. Small is an idiot and harming Virginia consumers."
Is what the headline should have read. Instead it read:
DMV hearing officer rules against Tesla Motors request for Richmond-area dealership
Posted: Thursday, September 8, 2016 9:00 pm
By JOHN REID BLACKWELL Richmond Times-Dispatch
A hearing officer with the Virginia Department of Motor Vehicles has recommended that the agency reject Tesla Motors Inc.’s request to open a company-owned dealership in the Richmond area.
Tesla, a California-based maker of electric vehicles, filed a request with the DMV earlier this year seeking an exemption from a state law that prohibits car manufacturers from owning dealerships in most circumstances.
Tesla argued that there are no independent automobile dealers in the Richmond area capable of profitably selling its specialized, battery-powered cars.
The company’s request for an exemption was opposed by the Virginia Automobile Dealers Association, a powerful trade group that represents independent automobile dealers in the state.
The association argued that there are dealers willing and capable of selling Tesla cars and that the company was simply trying to circumvent state law.
Three full days of hearings were held — one each in March, April and June — before an appointed hearing officer at the DMV’s headquarters office in Richmond. Thousands of pages of documents were submitted and more than 20 hours of testimony were presented by both sides.
“Simply put, the evidence does not support Tesla’s request,” the hearing officer, Daniel P. Small, wrote in a 17-page recommendation submitted this week. “There are dealers independent of Tesla — at least 11 of them — prepared to be Tesla dealers.”
Small’s recommendation is not the final word on the subject. It now goes to DMV Commissioner Richard Holcomb, who will decide whether to grant Tesla’s request. A final decision could take up to 60 days.
Tesla was still reviewing the hearing officer’s recommendation and was not ready to make a statement Thursday, according to a representative for the company.
VADA released a statement praising the recommendation.
“Decades ago, the General Assembly decided that consumers and the public interest are best served by dealerships owned and operated by franchisees independent of vehicle manufacturers,” said Don Hall, president of the association.
“We welcome Tesla in Virginia, but the company must operate according to the commonwealth’s laws and the public interest.”
Founded by tech industry tycoon Elon Musk, Tesla sells its electric cars directly to customers at fixed prices.
The company has been opening its own showrooms and retail stores around the country, a move that has faced resistance from independent dealers in many states where long-standing laws prohibit vehicle manufacturers from controlling the retail end of the business.
In Virginia, state law prohibits a manufacturer from owning a dealership unless there are no independent dealers available in a community to sell the manufacturer’s vehicles “in a manner consistent with the public interest.”
Tesla previously won an exemption to operate one store in Virginia near Tysons Corner. That store opened in 2015, but only after Tesla went to court and reached a legal agreement with the Virginia DMV and the automobile dealers association.
The hearing officer’s recommendation is “logical, coherent and consistent with Virginia statutes,” said George E. Hoffer, an economics professor at the University of Richmond who has followed the auto industry for decades.
However, the issue isn’t going away because of one decision, Hoffer said Thursday.
“In my opinion, this and similar issues will not go away and will continue to keep VADA (the automobile dealers association) on the defensive,” he said.
“Virginia, as well as most other states, have a body of motor vehicle franchise laws and statutes that have not kept up with rapidly changing retail technologies and changing consumer preferences.”
At the DMV hearings this spring and summer, Tesla and the dealers association had expert witnesses testify to support their positions.
Owners of several automobile dealerships in the Richmond area testified that they were interested in selling Tesla cars, while lawyers and executives for the company argued that the dealers could not do so profitably. Local owners of Tesla automobiles also attended the hearings to support the company.
[email protected]
(804) 775-8123
DMV hearing officer rules against Tesla Motors request for Richmond-area dealership
Is what the headline should have read. Instead it read:
DMV hearing officer rules against Tesla Motors request for Richmond-area dealership
Posted: Thursday, September 8, 2016 9:00 pm
By JOHN REID BLACKWELL Richmond Times-Dispatch
A hearing officer with the Virginia Department of Motor Vehicles has recommended that the agency reject Tesla Motors Inc.’s request to open a company-owned dealership in the Richmond area.
Tesla, a California-based maker of electric vehicles, filed a request with the DMV earlier this year seeking an exemption from a state law that prohibits car manufacturers from owning dealerships in most circumstances.
Tesla argued that there are no independent automobile dealers in the Richmond area capable of profitably selling its specialized, battery-powered cars.
The company’s request for an exemption was opposed by the Virginia Automobile Dealers Association, a powerful trade group that represents independent automobile dealers in the state.
The association argued that there are dealers willing and capable of selling Tesla cars and that the company was simply trying to circumvent state law.
Three full days of hearings were held — one each in March, April and June — before an appointed hearing officer at the DMV’s headquarters office in Richmond. Thousands of pages of documents were submitted and more than 20 hours of testimony were presented by both sides.
“Simply put, the evidence does not support Tesla’s request,” the hearing officer, Daniel P. Small, wrote in a 17-page recommendation submitted this week. “There are dealers independent of Tesla — at least 11 of them — prepared to be Tesla dealers.”
Small’s recommendation is not the final word on the subject. It now goes to DMV Commissioner Richard Holcomb, who will decide whether to grant Tesla’s request. A final decision could take up to 60 days.
Tesla was still reviewing the hearing officer’s recommendation and was not ready to make a statement Thursday, according to a representative for the company.
VADA released a statement praising the recommendation.
“Decades ago, the General Assembly decided that consumers and the public interest are best served by dealerships owned and operated by franchisees independent of vehicle manufacturers,” said Don Hall, president of the association.
“We welcome Tesla in Virginia, but the company must operate according to the commonwealth’s laws and the public interest.”
Founded by tech industry tycoon Elon Musk, Tesla sells its electric cars directly to customers at fixed prices.
The company has been opening its own showrooms and retail stores around the country, a move that has faced resistance from independent dealers in many states where long-standing laws prohibit vehicle manufacturers from controlling the retail end of the business.
In Virginia, state law prohibits a manufacturer from owning a dealership unless there are no independent dealers available in a community to sell the manufacturer’s vehicles “in a manner consistent with the public interest.”
Tesla previously won an exemption to operate one store in Virginia near Tysons Corner. That store opened in 2015, but only after Tesla went to court and reached a legal agreement with the Virginia DMV and the automobile dealers association.
The hearing officer’s recommendation is “logical, coherent and consistent with Virginia statutes,” said George E. Hoffer, an economics professor at the University of Richmond who has followed the auto industry for decades.
However, the issue isn’t going away because of one decision, Hoffer said Thursday.
“In my opinion, this and similar issues will not go away and will continue to keep VADA (the automobile dealers association) on the defensive,” he said.
“Virginia, as well as most other states, have a body of motor vehicle franchise laws and statutes that have not kept up with rapidly changing retail technologies and changing consumer preferences.”
At the DMV hearings this spring and summer, Tesla and the dealers association had expert witnesses testify to support their positions.
Owners of several automobile dealerships in the Richmond area testified that they were interested in selling Tesla cars, while lawyers and executives for the company argued that the dealers could not do so profitably. Local owners of Tesla automobiles also attended the hearings to support the company.
[email protected]
(804) 775-8123
DMV hearing officer rules against Tesla Motors request for Richmond-area dealership
It is too bad that the emphasis seemed to be on dealer profitability --- as if that has ANYTHING to do with the public interest.
The emphasis should have been, very simply, on the mountain of evidence which shows that independent dealers are scumbag parasites that add no positive value and add only deadweight losses to auto sales transactions and ripoff consumers every possible way that they can. The only good thing they do is offer sales jobs to fraudulent mortgage originators who were out of work after the mortgage crisis.
VA dealers won this small battle but they will eventually go the way of the horse and buggy, milk and newspaper delivery man, coal industry and all the other industries that were replaced with something better, faster and more efficient. Consumer preferences and other market forces will eventually overcome their legislated anti-competitive practices.
The emphasis should have been, very simply, on the mountain of evidence which shows that independent dealers are scumbag parasites that add no positive value and add only deadweight losses to auto sales transactions and ripoff consumers every possible way that they can. The only good thing they do is offer sales jobs to fraudulent mortgage originators who were out of work after the mortgage crisis.
VA dealers won this small battle but they will eventually go the way of the horse and buggy, milk and newspaper delivery man, coal industry and all the other industries that were replaced with something better, faster and more efficient. Consumer preferences and other market forces will eventually overcome their legislated anti-competitive practices.
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