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Tesla CEO Elon Musk
Assembly Consumer Affairs Committee votes 4-0 to allow Tesla to sell cars directly to customers

Tesla Motors has been the subject of a statewide ban on direct car sales in the state of New Jersey since April 1. The ban was the result of the state Motor Vehicle Commission’s (MVC) decision to enforce a 1970s law that required new vehicles to be sold through a dealership.
However, a new bill by the New Jersey Assembly Consumer Affairs Committee would allow Tesla to resume its direct cars sales in the state. The bipartisan committee voted 4-0 to give Tesla a reprieve as long as the company follows a few simple rules. Tesla would be limited to just four stores in the state (for now) and would be required to have at least one facility to service Tesla vehicles.
“New Jersey prides itself as being pro-business, pro-innovative and pro-jobs. And this is a company that is an American company, an American idea,” said bill sponsor Tim Eustace (D-Bergen). “I think we would be mistaken if we didn’t’ reverse the idea that the MVC made, making it illegal to sell Teslas in New Jersey.”

Tesla Model S
Tesla CEO Musk has long rallied against the dealership model and says that these “middlemen” don’t have customers’ best interests in mind. Musk points to the fact that dealerships make a large portion of their profits from vehicle services (repairs, routine maintenance, etc.), but electric vehicles like the Model S require far less maintenance than conventional automobiles, lessening the need for middlemen.
This latest move by New Jersey comes after Musk lashed out at Governor Chris Christie, stating, “Anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.” Musk even invoked “Bridgegate” by stating that if selling through dealerships ensures “consumer protection”, then “Gov. Christie has a bridge closure he wants to sell you.”

New Jersey Governor Chris Christie
More recently a number of directors for the Federal Trade Commission have come out in direct support for Tesla’s direct sales model in two separate blog postings. The FTC noted that the market should determine if a direct sales model is beneficial to customers. “Our point has not been that new methods of sale are necessarily superior to the traditional methods—just that the determination should be made through the competitive process,” said the FTC directors in an April blog posting.

“We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are—expressions of a lack of confidence in the competitive process that can only make consumers worse off.”


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Just a thought
By Grimer21 on 6/6/2014 10:56:48 AM , Rating: 2
Before this article I was thinking, "Why would anyone buy a Tesla, I guess because they're a fad at the moment..." But now I realize the REAL reason Tesla should get everyone's support; nobody likes car dealerships, it's such a huge hassle when the salesmen/women swarm like vultures the moment you step on the lot. After reading the article I wish I had the income right now to support Tesla's efforts by purchasing a Model S. Down with dealerships I say!

RE: Just a thought
By Brandon Hill on 6/6/2014 11:05:26 AM , Rating: 2
But now I realize the REAL reason Tesla should get everyone's support; nobody likes car dealerships, it's such a huge hassle when the salesmen/women swarm like vultures the moment you step on the lot.

Speaking to that:

Americans hate car shopping so much they'd rather give up sex and do taxes

RE: Just a thought
By atechfan on 6/6/2014 12:10:52 PM , Rating: 2
I do my taxes online, I just plug in the numbers, the website does the calculations, and submits the info to Revenue Canada for me. I always get back a pretty good chunk of change too. So I would do taxes every week if I kept getting such a big payout for such little work.

Giving up sex for a month? Must be people who don't get it anyway being polled. How is avoiding a bit of haggling worth that? Hell, why avoid haggling if it can save you a couple grand? And how in the hell does giving up a phone for a weekend compare to giving up sex for a month? That link baffled me.

RE: Just a thought
By kattanna on 6/6/2014 12:24:36 PM , Rating: 1

And how in the hell does giving up a phone for a weekend compare to giving up sex for a month?

maybe they were talking to married men, so its possible they werent missing anything from that month


RE: Just a thought
By Brandon Hill on 6/6/2014 1:09:32 PM , Rating: 1
This man unfortunately speaks the truth :)

RE: Just a thought
By Spuke on 6/6/2014 1:34:47 PM , Rating: 2 guys. No haggling. Prices are already discounted and they apply any factory rebates. I bought a car through them back in 2004 and it was as painless as it gets.

RE: Just a thought
By Brandon Hill on 6/6/2014 1:59:21 PM , Rating: 2
When I bought my last car, I was able to beat the Carsdirect price that I initially researched with some haggling and the fact that they were clearing out '13 models to make room for the '14s.

It sure was a pain in the ass though.

RE: Just a thought
By Mint on 6/6/2014 2:28:21 PM , Rating: 5
Haggling doesn't save you a couple of grand. It prevents you from being overcharged a couple grand.

RE: Just a thought
By Solandri on 6/6/2014 7:28:18 PM , Rating: 1
Haggling doesn't save you a couple of grand. It prevents you from being overcharged a couple grand.

Such a one-sided view of how markets work. The market price is the average of all haggled deals, not the minimum. If you are bad at haggling or don't haggle, you are overcharged a couple grand. If you are good at haggling, you save a couple grand.

It's just obnoxious to declare the best-haggled deal to be the market price, and label everything higher as "overcharging". A dealer could use your same logic and declare the worst-haggled deal to be the market price, and label everything lower as ripping them off.

Dealers only agree to such well-haggled deals because they're the exception, not the norm, and there is some advertising value in a buyer telling his friends "I got a great deal at..." If dealers were forced to set a fixed price, it would never be as low as a well-haggled deal. They wouldn't be able to make a living with such a small margin.

If you do your research and negotiate a great deal on a car, that deal was only possible because the dealer was able to rip off someone who didn't do their research. If everyone does their research, or the item is so cheap, or the volume of sales is large enough that the time spent haggling each individual sale wastes more money than it makes, then a fixed price becomes more optimal.

One can argue that cars have passed this point and a fixed price would be a more optimal way to sell them (especially given that you can purchase them on the Internet now). But declaring that haggling only results in all but the best hagglers being overcharged is simply naive.

RE: Just a thought
By spamreader1 on 6/9/2014 6:31:14 PM , Rating: 2
I read, blah blah blah, I'm happy pissing about with a sales guy that goes back and forth to a room in the back for 14 hours to walk away feeling like I won something when I drive away in my new car that I got for two thousand less that that shmuck who only spent 4 hours at the dealership.

RE: Just a thought
By Mint on 6/11/2014 2:53:21 PM , Rating: 2
If you are bad at haggling or don't haggle, you are overcharged a couple grand. If you are good at haggling, you save a couple grand.
You're making a lot of silly assumptions here.

There is a cap as to how much you can haggle downwards, as no salesman will sell you a car at a loss (outside of rare circumstances). But there's almost no limit to how much a car salesman can overcharge.

The MSRP is overcharging, and well above market price. Nothing more is needed to justify my statement.

RE: Just a thought
By therealnickdanger on 6/11/2014 3:26:19 PM , Rating: 2
There is a cap as to how much you can haggle downwards, as no salesman will sell you a car at a loss (outside of rare circumstances).

Actually, dealerships will often sell vehicles at a loss in order to get rid of inventory. Just like how banks will dump property at a loss rather than hold out for someone to market value, car dealerships are working with borrowed inventory. The longer they keep a car on their lot, the more it costs them. This is why having a solid core of buyers is critical for any dealership - to ensure that you just get enough inventory of the right vehicles that you know will sell.

Anyone else remember back when you would just order your muscle car from the factory, customized just how you want it? There's no reason that can't happen again.

RE: Just a thought
By Brockway on 6/6/2014 3:09:13 PM , Rating: 1
People don't like buying cars?! Car shopping is awesome, all the research and test drives. If I had more disposable income I'd do it more often.

I think its a big sign of whats wrong with the US right now, people (and politicians) don't want to haggle. They just want to buy their cars, houses, and insurance off a government web site for a set price without any thinking or consideration.

RE: Just a thought
By ritualm on 6/6/2014 8:55:55 PM , Rating: 2
It's not a test drive when the salesman says "you must follow my instructions. you cannot make any left turns whatsoever".

My worst personal experiences of all time - including police "interviews" - pale compared to that of buying a car at the dealership. Even when I know exactly what I want, I'm still forced to haggle and deal with these commission-fueled clowns.

So when the dealership association says their model is designed to "protect consumers", you can tell they're lying with their eyes wide open.

RE: Just a thought
By Manch on 6/9/2014 10:09:40 AM , Rating: 2
I was half reading your comment half reviewing spreadsheet numbers. For a minute I thought you said I do my taxes and sex online. Spit my coffee out laughing. Even though you didnt say that, Im still laughing. Now I need to clean my desk off and get more coffee....

RE: Just a thought
By alpha754293 on 6/9/2014 2:27:48 PM , Rating: 2
DISCLAIMER: The views and opinions expressed here are solely that of my own and are not representative of Ford Motor Company or its affiliates.

Canada Revenue Agency has a MUCH better handle on both Federal and Provincial taxes than IRS and the various Departments of Treasury in the States.

You can call them up and ask them a question and they've made it a point/mission to answer you within the first two minutes, and if it's a more detailed question, they refer you to the backline support people. And if there's a question that they can't answer right away, they'll go research it and call you back and tell you EXACTLY how to do within a couple of days. (I had to ask them how to report my US 401(k) contributions on my Canadian taxes, and they got back to me in like 3 days, and tell me all the forms that I needed and how to fill it out. It was awesome! And the guy gave me his name so if I have more questions, I can call him back for further clarification.)

They've already figured that it's MUCH better to educate the masses so that they'll do it right, rather than having them correct it for them.

RE: Just a thought
By Guspaz on 6/9/2014 8:11:29 PM , Rating: 2
CRA doesn't have much of a handle on provincial taxes, because if they did, I wouldn't have to fill out a complete duplicate set of taxes for the Quebec government... with slightly different numbers and slips for all of them, minimizing the amount of shared data.

Luckily, using online tax software makes it pretty easy, so it only takes half an hour to an hour to do my taxes each year. It was much more painful when I did it on paper.

RE: Just a thought
By Rage187 on 6/10/2014 8:58:16 AM , Rating: 2
I do my sex online as well!

RE: Just a thought
By Grimer21 on 6/6/2014 12:30:46 PM , Rating: 2
Haha, thanks for the humorous article.

Seriously though, while I can't speak for everyone else out there, in my particular case I pretty much already know what car I want to buy before I go to the lot. I just go there to see the car in person and maybe take it for a test drive. But, of course, the salesman comes sauntering out asking condescending questions and trying to be my friend at the same time... it's a very unpleasant experience and one that hopefully some day I never have to endure again.

RE: Just a thought
By crimson117 on 6/6/2014 5:14:17 PM , Rating: 2
I want Tesla to succeed now so they will eventually offer a car that I can afford!

RE: Just a thought
By cruisin3style on 6/7/2014 5:50:34 AM , Rating: 2
I get that buying a car is a hassle, I've done it many times over the years since I'm a car guy people drag me along to help them

But it isn't that big of a deal. No one can make you do or buy anything. I get if the salesman doesn't speak good english and/or pretends not to understand you, and so does things you specifically said "no" to or that you don't want.

But it should be an entertaining experience. Even if the salesman DOES do something similar to what I said above, just go ahead and let them do it. Assuming your sole mission that day is to get a car (and you should be taking your time and not rushing it imo) then they're just wasting their own time and you can enjoy the show.

I dunno, I try to take a zen look at things vs getting stressed by them because I don't want to die earlier than i have to, but personally i think it is just an interesting look into humanity when you see what the salesmen will do.

Then again I think almost every aspect of life is entertaining, so there's that...

RE: Just a thought
By drycrust3 on 6/7/2014 4:26:28 PM , Rating: 2
it's such a huge hassle when the salesmen/women swarm like vultures the moment you step on the lot

This is exactly why the arguments about direct sales vs dealership sales is more or less nit picking. Whether it is direct sales or dealership sales you still have some sort of retail premises that has to be paid for, staff who expect to be paid, the poor paying customers have to be chased, the advertising has to be bought, in warranty cars have to be fixed, city council taxes and government taxes have to be paid (you can tell I'm not an American), etc.
At the end of the day, Tesla need to make a profit from the cars they make, and the crux here isn't which sales model they use, but whether that model makes a profit for them. I don't think the sales model they want will be very much more successful than the sales model they rejected.

I don't get it
By bug77 on 6/6/2014 10:52:25 AM , Rating: 2
What's the dealer's argument? That the manufacturer will sell for less money so dealerships won't be able to what?
As long as manufacturers sell through both channels, I don't see a problem.

RE: I don't get it
By wookie1 on 6/6/2014 11:27:37 AM , Rating: 3
The dealers know that they don't add much value to the car-buying process. If there were a direct sales model, consumers would probably flock to that and avoid the high-pressure haggling and sneakiness that is part of the process of buying from a dealer. There's a very good chance that dealerships would cease to exist, which is why they are so opposed to this competition and pressure the government to block it.

In most states, dealerships collect large amounts of sales taxes for the state and especially the municipality that they locate in. You see tax break wars between cities as dealers locate themselves near city borders so that they can offer to pick which side of the border to locate themselves based on the best tax break. Municipalities favor this over direct sales as well.

RE: I don't get it
By bug77 on 6/6/2014 12:33:22 PM , Rating: 2
I know that, I was asking what's the argument the dealerships make to regulators.

RE: I don't get it
By wookie1 on 6/6/2014 4:15:41 PM , Rating: 2
The argument is this: "if you lock out my competition, I will donate $XXXXXXX to your campaign".

It seems to be a very convincing argument.

The other one is "car sales in your state/city bring you $XXXXXXXXX in sales tax revenue, make sure nobody forces me out of business!"

RE: I don't get it
By Dr of crap on 6/6/2014 12:41:55 PM , Rating: 3
Kind of sounds like a union - !

Here's an idea
By BRB29 on 6/6/2014 10:17:02 AM , Rating: 1
Why don't we make a federal law to allow direct sales throughout the country?

The state laws would become ineffective due to the Supremacy Clause in the constitution. Federal law will always Preempt state laws if there's conflict. When this happen, the Supreme Court have always upheld the federal law.

RE: Here's an idea
By tng on 6/6/2014 10:25:22 AM , Rating: 2
Why don't we make a federal law to allow direct sales throughout the country?
There will still be money and influence from auto dealers at the federal level, probably more than at the state level.

Also I do not doubt that if given enough money, eh, campaign contributions, that state legislators will find a way to make it hard on Tesla.

RE: Here's an idea
By Mint on 6/11/2014 3:08:02 PM , Rating: 2
It's not that simple, though. Dealers bought land, built showrooms, and bought inventory assuming they get sales for a particular area. For Tesla, this argument doesn't fly because there are no independent dealers, but for all other automakers this is a legit gripe.

Companies generally hate it when laws mess around with a business model they already invested in under the assumption that the laws wouldn't change. In this case, there needs to be serious negotiation between the manufacturers, dealers, and lawmakers.

OTOH, if dealers refuse to negotiate, then such a nuclear option should be on the table.

RE: Here's an idea
By tng on 6/12/2014 11:40:58 AM , Rating: 2
Actually it is that simple...
Dealers bought land, built showrooms, and bought inventory assuming they get sales for a particular area.

Yep, as I assume Tesla does when they open a showroom, they have to invest in the infrastructure. So to say that this is somehow just something that independent dealers do is not true. Also why would other automakers want to gripe about it?

RE: Here's an idea
By wookie1 on 6/6/2014 11:22:30 AM , Rating: 1
"Why don't we make a federal law to allow direct sales throughout the country?"

We don't make laws, our representatives do. Tesla doesn't have enough money to entice them to do anything.

"Federal law will always Preempt state laws if there's conflict."

This is incorrect. The federal government only has those powers enumerated in the constitution (the Obamacare ruling certainly has torn this apart, but the language is still very clear in the constitution). All others are reserved for the states. However, since this particular issue deals with interstate commerce (which is one of the enumerated powers for the federal govt), that would be possible in this case. Personally, I disfavor this idea though. Tesla will crack their way into some states, and then residents/voters in other states will start to pressure their own government.

If the federal government did intervene, you can rest assured that the car dealers would have enough lobbying power to make sure that the legislation put many restrictions on direct sales - just look at the New Jersey bill with limits on numbers of stores and requirements for certain numbers of service centers. Then there would be no way for any of the states to allow a true direct-sales approach.

RE: Here's an idea
By Reclaimer77 on 6/6/2014 11:58:46 AM , Rating: 1
When's the last time Congresses passed a bill "just" to do something?

If such a bill went through, it would be loaded with so much pork and sideways crap, we might be worst off than we are now.

I support Tesla's quest to direct-sell to the consumer. I cannot, however, support the Federal Government forcing that model on the States through laws and legislation.

The change is happening already, perhaps slower than Musk would like. But these things take time. Too many times we've seen the destructive unintended consequences that arise when the Federal Government takes unilateral action and forces the market, even if it's well intended.

RE: Here's an idea
By Solandri on 6/6/2014 7:37:31 PM , Rating: 2
Why don't we make a federal law to allow direct sales throughout the country?

I haven't researched it, but based on what others have said, that appears to be Tesla's approach to this. Their "stores" are just places where you can test-drive a Tesla. You can't actually purchase a Tesla from there. The sale is done online, and thus interstate commerce in most cases. Theoretically, interstate commerce cannot be regulated by the States.

The FTC gets it right!
By vortmax2 on 6/6/2014 11:56:10 AM , Rating: 2
The 2 FTC blog posts at the end of this article pretty much sum up how this should commence: let the market decide.

RE: The FTC gets it right!
By ritualm on 6/6/2014 9:02:44 PM , Rating: 2
While I like what the FTC's thinking, it's going to be impossible unless Tesla has the backing of other automakers - because they're fighting against an entire national network whose existence is dependent on its ability to fleece consumers of their money via unnecessary vehicle repairs.

The last time I had to get my mom's BMW's winter tires swapped for summer ones, the ^$%&#*( dealership had the gall of pushing a "fix" that we've never needed in the first place - so they can double or triple the service charges.

By Zak on 6/6/2014 1:08:15 PM , Rating: 2
I'd like to customize and order my next car on line the same way I can customize a computer. No unnecessary options such as you have to get leather seats to get a sunroof and upgraded stereo. Then click the Purchase button, apply for credit and have the car delivered couple of weeks later. Dealerships should be only providing demo cars and services.

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