Print 34 comment(s) - last by rechiel7890.. on Dec 4 at 3:48 PM

Tesla still has a ways to go before it can bypass the National Automobile Dealers Association's annual lobbying budget of about $3 million

Tesla Motors wants to have its own method of selling its cars, bypassing dealerships entirely -- but that may be easier said than done.

According to the San Jose Mercury News, Tesla has a lot of challenges ahead if it wants to sell its electric vehicles without dealerships getting involved. Mainly, its obstacles are lawmakers and the auto dealerships themselves. 

Musk believes 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. 

However, auto dealerships are fighting back. If Tesla were to succeed at opening its own dealerships, other automakers could try to do the same. The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers, and that it will continue to defend franchise and consumer laws in the states.

Translation: Tesla is a threat to their current business model. 

A huge issue is that auto dealerships have much deeper pockets -- meaning that they have a lot more to spend on lobbying, and lawmakers will surely side with them when money is involved. 

In fact, auto dealers spent $86.8 million on state election races across the U.S. between 2003 and 2012. They also spent $53.7 million on federal campaigns. 

Tesla, on the other hand, has spent less than $500,000 on both state and federal politics. 

“The challenge we face, of course, is that the auto dealers are very strong and very influential at the state level, among the legislatures, making it harder to get things done.” said Tesla CEO Elon Musk. 

While Tesla has been able to fight off auto dealership assaults in some states -- like North Carolina -- it has had a more difficult time in others, like Texas. The state has laws that protect the franchise dealership system where car manufacturers are not allowed to run and own dealerships -- and Texas isn't looking to budge on that issue.
Musk has worked quite a bit to eliminate the conventional dealership model for his cars in Texas, going as far as supporting a recent Texas bill called House Bill 3351, which would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. He also offered to build a second manufacturing plant in Texas, and is even trying to appeal to Texas consumers by discussing a design for an electric pickup truck that would be stronger than any current gasoline truck.

Tesla made a case before the state legislature this past session that Tesla should be one exception to the state laws, and be allowed to sell its cars to the public directly. The state legislature blew it off without even taking a vote. 
But Tesla hasn't lost all hope in Texas. Rep. Eddie Rodriguez (D-TX) sponsored a bill to let Tesla to sell in Texas, and plans to offer a compromise in the legislature's next session that would allow Tesla to sell directly to consumers until it reaches 5,000 annual sales in the state Texas, and after that point, it would have to use a dealership.

Lobbyists say Tesla needs to staff up in Washington to "protect its interests." The company has one registered lobbyist -- Daniel Witt, a former aide to Sen. Dianne Feinstein (D-Calif.). Meanwhile, the National Automobile Dealers Association has an annual lobbying budget of about $3 million.

Musk said in April that he'd be willing to make the fight a federal battle

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

Tesla could certainly use some help on the federal level right now, as the National Highway Traffic Safety Administration (NHTSA) announced that it will open a formal investigation into the recent fires associated with Tesla Motors' electric Model S. 

Source: San Jose Mercury News

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

No dealerships for small start-ups is my vote.
By Swuycheck on 11/29/2013 1:54:11 PM , Rating: 2
I like the idea of "no dealership" if under xxx cars sold per state. I would even say it could be lower. Say around 3k per state? With Tesla only making 1830 cars a month ***that # = global market:( I don't think they will be able to compete with the big boys for a while. Not until they start building a cheaper model that isn't as difficult and time consuming to build. Or they get multiple manufacturing plants and utilize a greater division of labor/machines to increase productivity. Also, I don't really see this as whining, as the CEO of a company, he's just is vocalizing the difficulties he's faced while working with the states and how they are already bought and paid for by the dealerships. He should go the federal route if he concludes that it will be better for his company, especially if he can prove they are blocking his ability to also become one of the big players. It's his company's right to fight for what they need to be successful. That said, he will probably loose at the federal level though... since the politicians up in DC are also in bed with the dealerships. But what I would give to order my next car online and never have to deal with another "closer" in the small office of a dealership...

RE: No dealerships for small start-ups is my vote.
By Samus on 11/29/2013 2:44:06 PM , Rating: 1
I agree. Until your output is six-figures why do you need dealerships, especially when you consider the unique position Tesla is in with a minimal-maintenance vehicle. Aside from tires, brakes, light bulbs and windshield wipers, and assuming the rubber bushings/mounts and front-end components are reliable, what exactly is going to need service over a 10-year period?

That's historically what a dealership is for: maintenance and service. Unless there is a recall, nobody has to go back to the dealer unless they have an out-of-the-ordinary problem. Otherwise, all the dealership network will do is price Tesla out of the market. The entry price is already pretty high for most people, and their profits are still pretty thin. Those battery packs alone start at $15,000. Just for ONE part.

By 91TTZ on 12/3/2013 1:24:51 PM , Rating: 2
I agree. Until your output is six-figures why do you need dealerships, especially when you consider the unique position Tesla is in with a minimal-maintenance vehicle.

Give me a break. A Tesla car is going to need just about the same amount of maintenance that a normal car will. Most dealership maintenance does not involve the engine. Even when cars find their way to the junkyard, the engine usually still works- it's the rest of the car that deteriorated.

By ebakke on 11/29/2013 2:49:48 PM , Rating: 3
I like the idea of "no dealership" if under xxx cars sold per state.
I don't like laws with arbitrary numbers designed to manipulate the market in favor of one group of people over another. Let companies decide for themselves if they want to sell through dealerships or not. Period. Freedom FTW.

By rechiel7890 on 12/4/2013 3:31:56 PM , Rating: 2
My Uncle Wyatt just got a new cream MINI Cooper Countryman Wagon by working part-time off of a home computer. browse this site........bay91

By rechiel7890 on 12/4/2013 3:48:37 PM , Rating: 2
My Uncle Tyler recently got a nearly new red Kia Cadenza Sedan just by part-time work from a home computer... hop over to this website...bay91

By btc909 on 11/29/2013 10:24:24 PM , Rating: 2
Saturn wanted to grow but couldn't and was stuck getting absorbed by GM. I knew that company was doomed when the economy went into the bleeper.

RE: Saturn
By NAVAIR on 12/1/2013 12:05:14 AM , Rating: 5
Saturn was always a GM company from start to finish.

Texas so "Free Market"
By Shig on 11/29/2013 3:56:47 PM , Rating: 5
What a f'ing joke. Texas is "free market" as long as they can pick and choose what they want.

It's not like Tesla Motors is an American company, OH WAIT.

Texas go DIAF, thanks.

What about self-driving cars?
By DT_Reader on 12/2/2013 7:03:03 PM , Rating: 2
In 2025, when we can go to Amazon or Google and order a self-driving car, the dealerships are RIP. Order online, the cars deliver themselves, and there's nothing the NADA will be able to do to stop it.

RE: What about self-driving cars?
By 91TTZ on 12/3/2013 1:27:58 PM , Rating: 2
No, you'd probably have to order your self-driving car from a car dealer. Because the law says so.

It doesn't have to make sense, it's just the law that's on the books.

Let me get this straight...
By sleepeeg3 on 11/29/13, Rating: 0
RE: Let me get this straight...
By Reclaimer77 on 11/29/2013 9:59:08 PM , Rating: 1
OH they're BEYOND hypocritical.

Remember how "deregulation caused the recession" was their warcry just a few years ago?

RE: Let me get this straight...
By maugrimtr on 12/3/2013 11:38:26 AM , Rating: 2
Don't be stupid. Dealerships are the vampires of the vehicle market. They are middle men who buy from manufacturers (who are banned from selling directly) and sell to customers with a mark up (which inflates prices to the consumer).

Middle men serve a valuable role in lots of markets where consumers cannot access the source supplier easily. You may use an insurance broker because they have a) expertise in giving advice and b) they can crawl around all the insurers to get a good quote and perhaps save you money. Grocers are valuable unless you actually drive out to farms or the hard working farmers drive out to you daily.


They are brick and mortar stores that have state protection against competition. It's regulation - bad regulation. It doesn't protect the consumer.

My own experience with dealerships is to just check, get the fair list price, tell them how ridiculous their initial offer is, walk out from the outrageous ones, find the 1-2 reasonable dealers, achieve list price or less (with maybe some new features thrown in), and go get the keys. The result is usually being told that I'm robbing them blind.

Robbing them blind? They're charging me a markup for the privilege of not having the right to buy directly from a manufacturer, i.e. I'm literally subsidizing their existence as an indirect tax on my own hard earned income.

Liberals need at least some semblance of a good reason to support regulation. Clean the environment, okay, stop banks from investing in derivatives that implode economies, fine...protect vampires? You kidding?

I hope Tesla makes headway
By jharper12 on 11/29/2013 5:06:41 PM , Rating: 2
The dealership model is dated. It was from a time when there were so many car manufacturers and so few cars that it was a gamble to sell for any given brand. These folks had to spend a lot of money to sell these cars, and they wanted guarantees, thus the legal protections afforded today. Times have changed, and it's time the system changed. Dealership should be forced to actually compete. Want to stick around? Make the buying process more enjoyable, offer better service and stay focused on being competitive. I know a lot of dealers, and some are awesome and some aren't. The bad ones aren't going out of business, despite being terrible managers, because they have a geographic monopoly. They still don't make as much money, but they make plenty regardless. The industry is heading towards a dealership oligopoly, where large companies own lots of dealerships. What's that going to do to consumers? Soon you'll have one to three companies you can choose from to buy a car. Imagine your second largest capital purchase being serviced and managed by Comcast/Time Warner/etc. That's where we're heading, hopefully this pressure from Tesla will help to avoid that.

By KFZ on 11/30/2013 12:33:42 AM , Rating: 2
[The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers, and that it will continue to defend franchise and consumer laws in the states.]

How fitting. NADA. As in dealerships predictably marking up new vehicles by thousands of dollars and there's nada damn they want anyone to do about it.

Let's point out the obvious for anyone actually buying into this racket: dealerships aren't necessary to "ensure competitive prices", they're middle men making money off their business of selling things they neither engineered nor built.

This would be like a United Grocers Association that argues farms shouldn't be able to open their own markets or even put up a fruit stand on the side of the road, because it could potentially harm consumers who would otherwise pay a dollar less for a bag of apples at their Wal-Mart 30 minutes away.

NADA is pathetic.

By Reclaimer77 on 11/29/13, Rating: -1
RE: Whaaaaaa
By bigi on 11/29/2013 1:25:36 PM , Rating: 2
Ladies and Gents, ^ fist post from Texas.

RE: Whaaaaaa
By Samus on 11/29/2013 2:52:06 PM , Rating: 2
What he doesn't get is this should be a national issue. The dealership network is what has prevented new brands from forming for over 75 years. The United States has had no new domestic brands since World War 2, and all but 3 have folded because they couldn't sell directly to the consumer.

It's what forced Tucker Automotive (the most technologically advanced vehicles of their time, even by today's standards) to fold in the 40's because of Ford's strong-arm on the dealerships not to carry them, and Fiat out of the United States entirely in the 80's (now teamed with Chrysler just for their dealership network.)

RE: Whaaaaaa
By Just Tom on 11/29/2013 3:36:05 PM , Rating: 2
You're completely ignoring the stock scandals that really sunk Tucker and the fact he had lined up a couple of thousand dealerships. His demise was directly attributable to the lawsuits filed by his disgruntled dealers.

Having said that I have no problem with eliminating the requirement of cars being sold through dealerships. If a manufacturer is unable to service its vehicles the market will take care of it.

RE: Whaaaaaa
By Reclaimer77 on 11/29/13, Rating: 0
RE: Whaaaaaa
By foxalopex on 11/29/2013 1:27:27 PM , Rating: 5
I think your logic is a bit broken. You mean *LESS* regulations and laws right? Because the current law in some places seems to state that you NEED a dealership to sell you a car. If Musk had his way there would be no law like this. If you ask me it sounds like you like this regulation.

Even thou I don't own a Telsa or plan on owning one anytime soon, I would side with Musk on this one. You should be allowed to buy direct from the manufacturer if that's what you desire.

RE: Whaaaaaa
By Reclaimer77 on 11/29/13, Rating: -1
RE: Whaaaaaa
By flyingpants1 on 11/29/2013 1:36:21 PM , Rating: 2

What a big baby. Everyone else manages to sell vehicles in this country, but noooo. He's

"Everyone else" sells ICE cars, Tesla does not. Forcing Tesla to go through traditional ICE dealerships is insane because of the obvious conflict of interest. Are you sure it's not you who's being the big baby?

Just what we need, more regulations or laws.

It's the existing laws and regulations that may prevent startups like Tesla from selling a competing product.. Purported supporters of "free market" capitalism should understand that.

RE: Whaaaaaa
By Vertigo2000 on 11/29/2013 1:52:48 PM , Rating: 1
First off, are you attacking Elon Musk's ideas or are you attacking Elon Musk himself? Seems to be the latter, in which case you haven't contributed at all to the discussion.

Secondly, the Dealership model seems pretty antiquated from what I know about it, which, I admit, isn't much. How exactly does it protect buyers from unfair selling practices?

RE: Whaaaaaa
By danjw1 on 11/29/2013 2:00:09 PM , Rating: 2
How exactly does it protect buyers from unfair selling practices?

Oh, it doesn't really. It is just the claim of automotive dealerships. You don't actually expect them to explain how that works, do you? ;-)

RE: Whaaaaaa
By ebakke on 11/29/2013 2:56:49 PM , Rating: 3
Do things his way, or he'll go cry to Obama and make this a national issue. Just what we need, more regulations or laws.
They guy's advocating less regulation and you cry foul? C'mon. The "must sell through a dealership" laws are anti freedom and are pure political interventionism. I really don't see why you disagree with him.

Musk's appeal to the Feds is .. interesting. On one hand, I understand the Fed's legal ability to interfere, based on interstate commerce. On the other, the state has the legal right to pass these asinine laws in the first place. Should be an interesting legal battle.

RE: Whaaaaaa
By Reclaimer77 on 11/29/2013 9:36:11 PM , Rating: 2
They guy's advocating less regulation and you cry foul? C'mon. The "must sell through a dealership" laws are anti freedom and are pure political interventionism. I really don't see why you disagree with him.

Ugh you too?

He's NOT advocating for "less regulation". He's advocating that the Federal Government remove the State's ability to conduct business as they see fit, and put in place a system more to HIS liking. Which, coincidentally, makes him more profits.

How is this ANY different than the usual thing DT and Jason Mick rail against? A rich many lobbying Washington to get richer.

When Google/Apple/MS etc etc do it, it's evil and corrupt. When Musk does it, he's a hero.

RE: Whaaaaaa
By ebakke on 11/29/2013 11:53:09 PM , Rating: 2
Ugh. Me too. But then I jumped in my internet car and took a joy ride down the information super highway.

You're right. He's not advocating for less regulation now (with his current federal strategy) and he wasn't advocating it then (with his state-by-state strategy). All along he's been arguing for a separate, special carve out that effectively makes him exempt. He's effectively arguing for the same crap that has turned our income tax code from simple rates into an incomprehensible, massive pile of poo.

And I completely agree with your summary of DT's "political spending == the end of the world" one-trick-pony.

All that said, I'm curious what your thoughts are on the interstate commerce argument.

RE: Whaaaaaa
By ebakke on 11/29/2013 11:55:51 PM , Rating: 2
And for the record (yeah, this is more of a note-to-self..) it's *me* who's been advocating less regulation all along. Apparently I'm projecting my beliefs on Musk. Oops.

RE: Whaaaaaa
By NicodemusMM on 11/29/2013 6:37:58 PM , Rating: 1
Good point, Reclaimer! Screw the free market. Let the government regulate everything. Why the hell should a business want to conduct affairs without middlemen sucking up income and being a general nuisance. /sarcasm
Seems like you're a bit confused compared to your normal statements... or I've misread you all along and you're part or the liberal wing posing as a conservative.

Personally I'll settle for the current situation: let the states decide. I can always go across state borders to purchase the vehicle I want. I still think it's mildly idiotic that a dealership is required. Next step is requiring purchase of products... oh, wait... ACA is already here!

RE: Whaaaaaa
By coburn_c on 11/29/2013 8:56:53 PM , Rating: 2
State government has a good reason for supporting the dealership requirements. It keeps money in the state. If you allow manufacturers to direct sell they will under cut the dealers, and all that dealer markup/profit will move from in state to the stock exchange/ceo pay.

Middle men and unions built the middle class in this country, but by all means, destroy all three, then we can be free.

RE: Whaaaaaa
By Reclaimer77 on 11/29/2013 9:56:33 PM , Rating: 2
Good point, Reclaimer! Screw the free market.

The free market has already spoken.

Let me get this right, you actually believe with all the lobbying power available from the biggest car manufactures on the planet, their STILL being forced to do business this way against their will? Really, that makes sense to you?

You're right, it's an intolerable situation. They were just waiting for this little Elon guy to come save them...

Personally I'll settle for the current situation: let the states decide.

That's what I'm saying as well. Yet you call me a Liberal? How will States rights be upheld if Musk is allowed to lobbying Washington to force his way on the States?

Did you even think this through before insulting me?

RE: Whaaaaaa
By flyingpants1 on 11/30/2013 2:54:32 AM , Rating: 2
Let me get this right, you actually believe with all the lobbying power available from the biggest car manufactures on the planet, their STILL being forced to do business this way against their will? Really, that makes sense to you?

Dear God. Obviously not, and they are using that same lobbying power to force Tesla... their competition..


"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki