Print 43 comment(s) - last by natehow.. on Apr 1 at 1:21 PM

Tesla can continue selling its EVs directly

In a big win for Tesla Motors' auto dealership battle, the state of Ohio will allow the automaker to sell its electric vehicles directly to customers. According to AP, Tesla Motors and the Ohio Automobile Dealers Association negotiated the deal Tuesday, and it was approved by a Senate panel. 

This means that Tesla can continue selling its $69,900+ Model S sedan EV directly to customers in both of its existing Ohio stores -- which are in Columbus and Cincinnati.

Even better news for Tesla is that it can open a third store Cleveland as well, but it won't be allowed to open any more than that. 

The bill also made sure to prohibit other automakers from opening manufacturer-owned stores in the state of Ohio. This ensures that others can't follow Tesla's path and try to get rid of auto dealers altogether. 

Tesla CEO Elon Musk said that auto dealerships don't do a very good job at selling specialty cars like Tesla's high-end electric vehicles (Roadster, Model S). Hence, he's looking to run his own Tesla stores around the U.S. where he believes his cars will get a fair shot at being sold.  
The problem is that auto dealers don't want to sell Tesla vehicles, and they're also barring Tesla from selling its own vehicles (with the exception of online, where customers can physically touch or test drive the EVs).  

Elon Musk [SOURCE: Green Optimistic]

But auto dealers say that they are necessary middlemen between auto manufacturers and consumers. They've insisted that their role provides fair play for consumers when it comes to warranties and service issues. 

Tesla was granted authorization by Republican Gov. John Kasich through the Bureau of Motor Vehicles to sell its EVs directly to customers via an issued license. 

Earlier this month, it was reported that Ohio auto dealers were supporting a bill that would stop Tesla from opening stores outside of its only two locations in Ohio. 
It recently came to light that Ohio Sen. Tom Patton (R-Strongsville) backed the anti-Tesla bill -- called Senate Bill 260 -- which aims to prevent Tesla and any other automaker from "applying for a license to sell or lease new or used motor vehicles at retail." What's interesting is that Patton received at least $42,825 between 2002 and 2013 from state and national auto dealership owners, employees, and political action committees. 

But this recent agreement with Ohio auto dealers is a win for Tesla, especially when other states -- like New Jersey -- are giving Tesla the boot. 

Earlier this month, New Jersey Gov. Chris Christie’s administration proposed a new rule, which requires a person to have a franchise agreement with an auto manufacturer in order to be granted a license to sell. 
A week later, the New Jersey Motor Vehicle Commission voted in favor of the ban of direct auto sales. Tesla already operates two stores in New Jersey, and had plans to open more before this new rule. These now need to become showrooms as of April 1.

On the other side of the country, states like Texas and Arizona are rethinking Tesla's direct sales model (which they currently ban as well) in order to secure Tesla's giant new Gigafactory for EV batteries. The factory aims to supply batteries for up to 500,000 EVs by the year 2020. The gigafactory would cost $5 billion USD, span as much as 1,000 acres, and employ about 6,500 people. It would also largely be powered by renewable energy, hence its need to be in a Southwestern state. 

Source: AP

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What's the big idea?
By Mumrik on 3/27/2014 5:09:14 PM , Rating: 5
Why do so many American states hate anything close to free market competition in this area?

RE: What's the big idea?
By boeush on 3/27/2014 6:41:37 PM , Rating: 5
Because apparently Capitalists love the free market only up until the point when it threatens their livelihoods or hurts their profits.

RE: What's the big idea?
By robertgu on 3/27/14, Rating: 0
RE: What's the big idea?
By boeush on 3/27/2014 8:01:02 PM , Rating: 5
this is socialism.

... curious. I've never perceived states like Texas and Arizona (or Ohio, for that matter) as bastions of "socialism". Certainly not, when compared to California, surely? (CA does allow Tesla's direct sales; isn't that also ... curious?)

I think you might be confusing socialism with political free markets... (a.k.a. politicians for sale to the highest bidder; a.k.a. "money = speech, therefore STFU unless you've got some discretionary $Billions to throw about"... oh, and "politics is local", that's to say bribery and/or blackmail are most effective at short range...)
picking winners and losers is terrible policy

What you mean is, it's a very profitable policy for the winners... As for losers, well, it's all about taking personal responsibility for sucking so badly ;P

RE: What's the big idea?
By arrandale on 3/28/2014 7:41:28 AM , Rating: 4
this is socialism.

You keep using that word. I do not think it means what you think it means.

RE: What's the big idea?
By Mint on 3/28/2014 8:17:27 AM , Rating: 2
Private sector unions protect jobs, raise wages, etc SOLELY through collective bargaining agreements with companies. Unions are a free market construct, and compete with non-union workforces. If they make a company too uncompetitive, they effectively self destruct.

NADA is NOT a labor union. Its goal is to enacting and maintaining laws that explicitly outlaw certain competition from entering the market.

RE: What's the big idea?
By Dr of crap on 3/28/2014 12:40:25 PM , Rating: 2
Oh, like all politicians!

RE: What's the big idea?
By Reclaimer77 on 3/28/2014 12:52:04 PM , Rating: 1
Of course the NADA isn't a labor union.

They are a union however. Haven't we been through this already?

RE: What's the big idea?
By Schrag4 on 3/28/2014 2:18:15 PM , Rating: 2
If they make a company too uncompetitive, they effectively self destruct.

I've seen it happen where I live. Company and union couldn't agree on new terms, even after the company said they couldn't stay in town under the union's proposed terms. Company folded up its tent and moved to another state as promised. At least the union members stuck together, and that's all that matters, right?

RE: What's the big idea?
By seamonkey79 on 3/28/2014 8:54:33 PM , Rating: 2
That's what I was told when I lost my job and couldn't find a replacement for 8 years until I moved from Illinois to Florida. Now I make 12k more and work 8 fewer hours a week and everything's air conditioned.

RE: What's the big idea?
By natehow on 4/1/2014 1:21:56 PM , Rating: 2
this is socialism.

I believe the word you are looking for is crony capitalism

By milktea on 3/27/2014 4:24:22 PM , Rating: 5
A first win for Tesla to run its own dealership!

I wonder what kind of deal Tesla made with NADA?

But why should any Auto Manufactures run their sales through NADA? That's just another layer of bureaucracy that the consumer don't need.

RE: Yea!
By invidious on 3/27/14, Rating: 0
RE: Yea!
By FITCamaro on 3/27/2014 5:04:02 PM , Rating: 1
Don't you know that government solves problems?

Yeah I laughed pretty hard after writing that too.

RE: Yea!
By Mint on 3/27/2014 5:07:16 PM , Rating: 3
That's exactly why the laws should be removed. If that happened, I strongly suspect dealers would negotiate with manufacturers and come to an exclusive sales agreement.

But there would still likely be savings for the consumer, because thousands of independent dealers will never be as efficient as a unified distribution entity (as we see everywhere in the economy).

RE: Yea!
By Grast5150 on 3/27/2014 6:49:22 PM , Rating: 2
That is not how things work in a free market. Dealerships are the result of government mandating/restricting free market.

Your argument assumes that prices would have to be higher if the manufacture had to stock. You mean like almost everyother product? That is the lamest excuse I have ever heard. The only thing dealerships due is raise prices by being a middleman. this means the auto manfactures can churn out a stead stream of car regardless of there ability to be sold. The dealerships are the buffer. The dealerships are not Robin Hood. All of the cost of having inventory of cars which people do not buy is rolled into the cost of the cars that are selling. Otherwise dealerships would go bankrupt.

Dealership need and show go away! Using the free market as an excuse is lame!!!!!!

RE: Yea!
By Reclaimer77 on 3/27/2014 7:00:53 PM , Rating: 4
Dealerships don't need to go away. Simply declare all laws forcing the use of dealerships illegal.

If manufacturers want to use dealers, great. If they don't and want to direct sell, that's great too.

RE: Yea!
By milktea on 3/27/2014 7:11:56 PM , Rating: 2
Agree, Dealerships don't go away.
Just let the manufacturers decides if they should use their 'own' dealers or the 'private' dealers.

RE: Yea!
By milktea on 3/27/2014 7:33:48 PM , Rating: 2
I'm not saying Auto industry doesn't need dealerships. I was questioning why US have 'franchise' laws requiring that new cars be sold only by dealers (not owned by the Auto manufacturers).

And in response to your statement about the 'financial burden and risk of inventory', apparently Tesla believes that they can better manage that.

The question is why is there a 'franchise' law in the first place? And why do we need 'Automobile Dealers Association'? That to me is just plain bureaucracy. And it's taking tolls from consumers.

RE: Yea!
By 1prophet on 3/28/2014 5:35:07 AM , Rating: 2
Why franchise laws?

The regulation of auto franchises arose as a response to car manufacturer opportunism early in the twentieth century.

According to Surowiecki (2006), in 1920, Henry Ford took advantage of its established dealer network by forcing dealers to buy inventories of new cars that they were unlikely to sell.

The reason that the company could “force” dealers to take the cars was that they had all made important investments in their facilities and reputation. Thus they had sunk costs that could be expropriated.

Ford and General Motors used the same strategy again during the Great Depression. These episodes demonstrated to policymakers that the franchisor, with its greater information and fifi nancial resources, might exploit investments made by the franchisees. Federal regulation followed these periods

By BillyBatson on 3/27/2014 7:32:23 PM , Rating: 2
This is definitely not a win. They are allowed to keep their 2 stores and open a 3rd but that is it? What a crock. Why can't auto dealers sell directly to customers? Dealerships mark up prices, often times rip people completely off if there isn't a no haggling policy (I think only scion has set prices??), often times know very little about the differences in their products because they try and pitch whatever they are told to and sell based on incentives for that month and the amount of commission they will receive from any given model at the time the customer is looking to purchase. Tesla's approach is leaps and bounds better than any dealership down to the warranty and maintenance. With cheaper overhead and fewer markups I think more people would purchase new cars if they could do so directly from a manufacturer.
Dealerships just don't want Tesla to start a precedent where all manufacturers sell direct to consumers because they know consumers would have no reason to go to dealerships anymore. So why is the US government so concerned about auto dealerships? They aren't worried about say Amazon putting brick & mortar stores out of business so why are they so concerned about auto dealerships and are they legally allowed to protect them in the first place?

By Solandri on 3/27/2014 9:19:42 PM , Rating: 2
It seems like Tesla could win this on the basis of the interstate commerce clause. Instead of having a "dealer" who sells you a Tesla you can drive off the lot, they could just have "showrooms" which allow you to try out the car and explain/show the different options to you.

After visiting the showroom, you would actually purchase the car online from Tesla in California for delivery. At that point it's an interstate transaction, which states are not allowed to regulate.

RE: US Govt. has no right to protect auto dealerships
By BRB29 on 3/28/2014 11:44:57 AM , Rating: 2
Yes, they're already doing this. However, at some point when mass production is achieved at over 500k vehicles a year, you cannot keep delivering to individuals anymore. It is very hard manage 500k individual vehicle deliveries. They can get around that by having a pick up lot in each city.

But I think the situation here is that Dealers will continue to force new laws to target Tesla specifically. So whatever work around methods they use might get busted by new laws.

I think the federal government needs to step in and set a standard to supersede all these crazy state laws. What happened to capitalism that we are fist pumping for?

By Rukkian on 3/31/2014 4:57:17 PM , Rating: 2
Actually, in the states that are banning it, they are not allowed to let people test drive them. How many people would actually buy a car (especially one with this new of technology) without being able to test drive it first? I do wonder if they could "lease" cars out to people to test them in that situation for say $1, but not sure if that would even work.

In NJ, once they have to stop selling, they can have showrooms, but not allow test drives at all.

By Dr of crap on 3/28/2014 12:42:02 PM , Rating: 2
REASON - follow the money.
You don't hurt the hand that feeds you!

Dealers are clearly shaking in their boots
By Mint on 3/27/2014 4:23:25 PM , Rating: 1
They're looking at opinion polls and comments from politicians like Perry, and scared sh**less that they opened up a can of worms that posed a minimal threat. By striking a deal with Tesla, they're protecting 99% of their business without risking everything.

Let's see if dealer associations in other states follow suit, or whether they feel it's too late to reverse course and fight to the death.

RE: Dealers are clearly shaking in their boots
By Reclaimer77 on 3/27/14, Rating: -1
RE: Dealers are clearly shaking in their boots
By Mint on 3/27/2014 4:58:06 PM , Rating: 2
Did you even read my post?

They're striking a deal with Tesla precisely because they DON'T want a groundshaking change to take place. And Tesla will accept it because it gives them an edge.

If they thought maintaining the status quo was a 100% certainty no matter what, then why would they be giving Tesla an exception?

RE: Dealers are clearly shaking in their boots
By Reclaimer77 on 3/27/14, Rating: -1
RE: Dealers are clearly shaking in their boots
By Mint on 3/28/2014 8:48:26 AM , Rating: 2
Tesla was already selling vehicles in the State. This isn't some huge event like you're making it out to be imo.

And if this deal didn't happen, they would have been told to stop, just like they were in Texas and NJ.

And please answer my question. The major auto makers can leverage SO much more power than Tesla. Why are they being so silent on this?
The major automakers depend on the existing dealer network to sell their cars. If any of them get into a big fight with their dealer network, that would be even worse than a UAW strike.

It'll take a long, long time and gobs of capital for manufacturers to set up their own showroom network to replace dealers.

They're content with the existing system for now, but they're going to push for direct sales also. BMW is already getting into a small fight with their dealers:
GM is pissed about this deal in Ohio:

We're just getting started with major manufacturer involvement.

RE: Dealers are clearly shaking in their boots
By rountad on 3/28/2014 1:39:31 PM , Rating: 2
GM admits that NOT having a mandatory third party dealership is a distinct competitive advantage!

RE: Dealers are clearly shaking in their boots
By Mint on 3/28/2014 3:15:07 PM , Rating: 2
Precisely. All automakers want the freedom to sell direct, but they're not going to push for it until they're sure that there won't be any consequences from angry dealers.

By rountad on 3/28/2014 4:33:36 PM , Rating: 2
That's true, too, but my point was that it refutes the NADA point that they are acting in the best interests of the customer.

Musk's mafia comparison was apt...

Free Markets
By jhapp on 3/28/2014 7:25:58 AM , Rating: 1
Fair is imposing a state tax equal to all federal and state subsidies given to the manufacturer. Expose Musk for what he is.

RE: Free Markets
By 1prophet on 3/28/2014 8:58:35 AM , Rating: 3
Fair is letting GM and Chrysler go bankrupt and not having the taxpayer bail them out plus GM playing accounting tricks claiming they paid the loans back.

But let's keep picking on Tesla.

RE: Free Markets
By 1prophet on 3/28/2014 8:58:59 AM , Rating: 2
Fair is letting GM and Chrysler go bankrupt and not having the taxpayer bail them out plus GM playing accounting tricks claiming they paid the loans back.

But let's keep picking on Tesla.

How could anyone say that with a straight face...
By quiksilvr on 3/27/2014 4:33:25 PM , Rating: 2
But auto dealers say that they are necessary middlemen between auto manufacturers and consumers. They've insisted that their role provides fair play for consumers when it comes to warranties and service issues.

Where is the statistical data, surveys, facts and figures to support this asinine claim? How about treat the consumers with respect and be honest:

We don't want to evolve with the times and instead of streamlining our processes we are going to go with the traditional, inefficient and convoluted sales method to secretly trick you into paying more money via "accessories" so that our job's existence continues. Futhermore, we are going to go against the principles of our country by barring anyone that tries a different method without our approval and cut.

This is so ridiculously anti-capitalist it literally hurts my brain. I'm literally hurting because of this.

By boeush on 3/27/2014 6:51:50 PM , Rating: 3
This is the typical trajectory. Start with Laissez-faire capitalism. Quickly, certain conglomerates emerge as market leaders and capital hoarders. Then those conglomerates corner the market. Then they collude with each other and with lawmakers to set themselves up as legally-authorized and state-enforced monopolies. Eventually they run the government in all but name. The final end-result: bye bye Laissez-faire capitalism, hello fascist plutocracy...

Greed is good, they say; agree or disagree, greed is at least predictable.

I wonder how kosher this is?
By Nagorak on 3/28/2014 1:13:23 AM , Rating: 3
I'm kind of curious what the law here actually says, because if it singles Tesla out to allow direct sales, I don't see how that's going to stand up in court. It seems to me you'd have to let all automakers be able to sell directly, if you let one do it. Although they could have come up with some way to limit it based on company size or sales, basically tailoring it for Tesla, but not specifically naming them.

Not much new here
By docinct on 3/27/2014 4:35:52 PM , Rating: 2
"Small" but important victory for Tesla.
Other than the first four paragraphs of the article, this is just a rehash of previous ones.
(Can't Tesla have one individual become a franchise dealer for their cars and then staff it/)

By Gunbuster on 3/28/2014 10:48:38 AM , Rating: 2
If dealerships are not mandated where will I get my $4000 worth of scotch-guard, rustproof undercoating, and molecular diamond windshield coating?

Great news!
By Roy2001 on 3/28/2014 3:55:50 PM , Rating: 2
Give the auto maker choice to let them and customers to decide how to deliver the cars!

The whole situation is ridiculous.
By elkinm on 3/31/2014 1:54:07 PM , Rating: 2
Its great that Tesla got a deal, but I just cannot find any reason why any sales can be banned legally.

Dealers offer no benefit to the consumer, and as far as service, I will buy that argument when the dealer guarantees the service to the CUSTOMER's satisfaction.
And Teslas don't need the service that typical cars require so a dealer is just not needed.

The real answer is in the courts. I don't want a GM death trap one of many other currently recalled vehicles.
Last time I checked Tesla is by far the safest rated car so if I can't have one I will sue and want a giant check from the states and the dealers for endangering my life as long as Tesla is not available or other cars are not as safe.

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