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WSJ column: Tesla Breaks the Auto Dealer Cartel

Discussion in 'Tesla Motors' started by TexasEV, Sep 16, 2014.

  1. TexasEV

    TexasEV Active Member

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  2. Vger

    Vger Active Member

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    And being a Texan, you know all too well and unpleasantly how apt a term that is!
     
  3. taurusking

    taurusking Member

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    What a timing...I just received a mail from my previous car dealer stating that it has been 3 years that I bought the car and they offer great trade in value..........:mad:
     
  4. Clprenz

    Clprenz Member

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    Great article... Small world- Sister's Roomate's Dad is the author
     
  5. mchk

    mchk Member

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  6. ggr

    ggr Roadster R80 537, SigS P85 29

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    "Auto dealers remain true Tesla believers"! Neat. It made me realize that in fact they must have customers coming in (as I did two years ago now) saying "How much will you give me for my AMG? I'm getting a Tesla Model S."
     
  7. SebastianR

    SebastianR Member

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    This! If they wouldn't believe in Tesla, they could easily just let Tesla sell a few cars, then gloat in face of the failure and say: "See this electric car thing is just as flawed, as the whole direct selling idea!".

    The problem the dealers face right now is that the start-up that went with the dealer modes (Fisker) is dead now. And the start-up that went without (Tesla) is thriving. I don't think the dealership question plays the main role in the difference between the companies but of course right now the narrative does not look good for the dealership cartel...
     
  8. Robert.Boston

    Robert.Boston Model S VIN P01536

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    The "true believers" comment needs to be read in context: if the dealers thought Tesla would remain an aberration, a niche entrant, they wouldn't care about fighting Tesla's business model. But they see a different future, where Tesla rewrites the rules of the automotive industry and leaves them in the dust.
     
  9. brianman

    brianman Burrito Founder

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    I only get the preview (first few lines) for the article but...
    I agree the latter statement is true, but it's not due to the former necessarily.

    Let me give you an example. If I make hats with the Tesla logo on them, Tesla will fight me on it -- because, as I understand it, the laws around brand protection require them to do so.

    Whether or not Tesla succeeds, the "advertising of a different model" is something they must fight against inherently as a form of self-preservation. Tesla's success makes it more urgent, but the need is there regardless.
     
  10. RDoc

    RDoc S85D

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    I continue to think that the real issue the dealers are concerned about is Chinese auto manufacturers. Like Tesla, they have no dealerships so when they enter the US they will be able to build their own direct sales model to keep their already low costs low. Existing car manufacturers should also be concerned I'd think unless they plan to set up their own "independent" car companies to do the same.
     
  11. Krugerrand

    Krugerrand Active Member

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    I don't think that's an accurate analogy. Tesla isn't selling cars with a BMW hood ornament or a dealership logo. Tesla's just selling cars. And the law around selling cars is being purposely misrepresented (since we all know the real reason for those laws many decades ago).

    I agree, but not in your context above. Tesla needs to be fought because they have a better product and business model all around, not because they are breaking any laws or infringing on copyright.
     
  12. brianman

    brianman Burrito Founder

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    I agree but I don't think the dealers do... yet.
     
  13. Krugerrand

    Krugerrand Active Member

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    Initially I agreed with your comment, but in thinking on it I do think they think that Tesla has a better product and business model and that's why they are fighting so hard. (Dang! I was trying for four versions of think in that sentence.)

    They may have originally just been reacting off the cuff (as people are wont to do by nature) and out of a sense of petulance that the new kid was breaking the rules and getting away with something, but now I think they realize the new kid is well-within the rules and just has more to offer. The natural response is to try and get the new kid in trouble and if that doesn't work you wait until he has his back turned to take a cheap shot.
     
  14. JohnQ

    JohnQ Active Member

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    I agree with the overall sentiment of this statement, that the underlying issue is the threat to the dealership model. Having said that, though, there are states where the law specifically prevents manufacturers from operating a sales location regardless of whether they have existing franchisees in that state. Michigan is one good example. In other locations, the law is vague or in conflict with other statutes (NJ has been put forth as an example). In those locations, Tesla has to fight the battle in the legislature rather than the courthouse.
     
  15. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    They have to fight in both places because some laws violate constitutional principles or have bad interpretation (court) and anti-consumer laws need to be overturned (legislature).
     
  16. wycolo

    wycolo Active Member

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    Prohibit 'sales locations' then No Sales Tax for You!! Calling it then a 'use tax' should be challenged on constitutional grounds.
    --
     
  17. Red Sage

    Red Sage The Cybernetic Samurai

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    In both the New Jersey and Missouri cases this was brought up by dealerships as a reason that Tesla Motors' method of sales 'had to be stopped', but I think it was rather disingenuous. That's why the provision for Tesla to sell in New Jersey was limited to electric car companies that had already been granted dealer licenses prior to January of this year. That way, they can bar Chinese, Korean, or even Eastern European companies of traditional automobiles from bringing a new marque to these shores without using 'independent franchised dealerships'. It is a solution to a problem that does not exist and is unlikely to materialize.

    I think some Chinese brands already sell in the US. They avoid the specific regulations for 'independent franchised dealerships' by selling only business-to-business for fleets or leasing on contract to municipalities. Those are basically small trucks, buses, and light utility vehicles instead of passenger cars, for the most part. They are low volume and are largely ignored.

    There is a minor concern that the Chinese will be able to immediately replicate Tesla vehicles if they are ever built in China. That would allow them to perhaps release a Chinese branded marque that was perhaps at least as well built as a Hyundai or Kia, while costing less than them, and offering a whole lot of electric range. I believe that concern is also largely unfounded. It won't be as easy to copy the Tesla Model ≡ as it was the Toyota Corolla. People who thrive on luxury features and their perceived exclusivity are already rather peeved that Kia/Hyundai can match anything that BMW/Mercedes can offer in terms of a feature set within three years -- for less money. Dealers imagine (supposedly) they could be seriously undercut even further by Chinese competitors, who might also cut them out of the loop through direct sales.

    As much as I'd love to see Pontiac, Saturn, Eagle, Plymouth, or Mercury reappear as companies that offer Supercharger compatible fully electric vehicles sold direct over the internet, I'm pretty sure that General Motors, Chrysler, and Ford would all be sued beyond all recognition by NADA and their individual state affiliates if they were to try it. They would use similar misinformation tactics and claim that by starting a new company and not giving dealerships an opportunity to partake, or at least the first right of refusal, they were illegally competing. The contents of franchise contracts are not known in their entirety, but it is presumed that they would be individually binding, even if the franchise laws that back them up were to evaporate.



    I believe that Tesla Motors wants to avoid bringing a court case themselves for as long as possible. So far, every time a dealership association has actually taken them to court, the dealers have lost, because they have not a leg to stand on. Further, each time that dealership association have attempted to have harsher legislation passed that would specifically bar Tesla, they have been informed that the original laws were poorly written and tenuous at best, and that their proposed updates would be outright unconstitutional even if they were passed. That's why Tesla has so far been granted at least limited access to present their wares and exemptions from the franchise laws. Dealers have been forced to realize that if they really push the issue, they will end up invalidating their own position, and should probably just give in to Tesla, allowing them at least partial access to the market.

    For now, without a Gigafactory, while building up capacity for Model X, and before they are ready for Model ≡, Tesla has some time on their hands to tackle these issues as they come up. They are gaining ground, however slowly, against dealership organizations. By not going on the litigious offensive early, Tesla don't run the risk of having public sentiment turn against them. But when it comes down to the wire, Tesla will want to have everything resolved in their favor at least six months ahead of the full launch of Model ≡. So you might see a Federal lawsuit in the first quarter of 2016, with the backing of the FTC, moving for the abolishment of Franchise laws in those states that are untenable to Tesla's efforts. It is pretty obvious that prevailing interpretations of interstate commerce laws would sorely wound the current enforcement of state franchise laws governing automobile sales once challenged at the Federal level.
     

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