Print 13 comment(s) - last by BuddyRich.. on Aug 15 at 7:31 AM

Tesla Motors will be allowed to open five retail stores

While Tesla Motors is continuing its fight to sell directly to customers in the states of Arizona, Maryland, New Jersey, Texas, and Virginia, the company has won an important battle in the state of Pennsylvania. Thanks to legislation signed by Gov. Tom Corbett (R), Tesla will be allowed to open up to five retail stores in the state to sell directly to customers.
State Sen. John Rafferty (R) sponsored the bill, which doesn’t name Tesla specifically and covers all electric car manufacturers.
"This was a means to provide the consumer with another option and it would be a positive addition to the marketplace in Pennsylvania as a result of providing that option," said Nathan Spade, a senior aid for Rafferty.
The legislation passed with the [surprising] backing from the Pennsylvania Automotive Association (PAA). The PAA supported the exception for electric car manufacturers even as dealership associations in nearby New Jersey are staunchly against giving Tesla Motors “special treatment.”

"The advocates of the Tesla exemption seem to confuse very different public-policy agendas,” Jim Appleton, President of the New Jersey Coalition of Automotive Retailers. “One is consumer choice; the other is consumer protection."
The National Auto Dealers Association (NADA) has also come out staunchly against the direct sales model, even going so far as to create a special section of its website to defend the dealership model, while at the same time attacking Tesla’s approach.
“Franchised new-car dealers provide the best, most efficient and most cost-effective way to sell and distribute new cars in America, and we’re proud of our businesses and business model,” said NADA President Peter Welch back in June. “Franchised new-car dealers benefit consumers through price competition, accountability on warranty and safety recall issues, and provide enormous economic benefits to local communities across the country.”

Tesla is gearing up for a big increase in production over the next few years, and is nearing a decision on a site for its Gigafactory battery production facility that it will operate in conjunction with Panasonic. The company plans to launch its Model X crossover next year, which will offer AWD courtesy of front- and rear-mounted electric motors.
Later this decade, Tesla will launch the Model III, which will become the company’s entry-level all-electric sedan which will do battle with the BMW 3-Series, Audi A4, and Mercedes C-Class. The vehicle is expected to be priced in the below $40,000 and will offer a range of at least 200 miles.


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Seems like a fairly calculated move by PAA
By siconik on 8/12/2014 10:37:25 AM , Rating: 2
I think they did the math and figures that letting Tesla to open a few stores and allowing the whole issue to recede from public consciousness was much preferable to the protracted fight in other states that not only generated a ton of negative publicity for the franchise dealers but also has the potential to lead to a the establishment general (not just Tesla-specific) direct sales model.

In the end, the dealers win a reprieve and Tesla gets its stores. I don't blame them but as someone who truly believes in the benefit of direct sales model as a strong competitor to franchise approach this is a loss. I think that any car manufacturer should be able to sell cars directory if they so choose, vs "Only if it's an electric car made by Tesla at a few locations" setup that now has been codified.

Here is what I believe is going to happen: other dealer associations with take note of that and agree to these "deals" thinking that a handful of stores from a single manufacturer makings specialty vehicles is not worth the PR nightmare. The new status quo will be established where both the franchise dealers (who have all the insensitive to smother direct sales) and Tesla (who will now have special privileged position that gives them competitive advantage over any other manufacturer) will work together to keep anyone else from selling directly.

RE: Seems like a fairly calculated move by PAA
By Nightbird321 on 8/12/2014 11:13:19 AM , Rating: 2
If the dealership model is better it will win the competition rather than lose it... In the era of the internet, lack of information no longer hurts the consumer as much as it did during the creation of the dealership model.

By drycrust3 on 8/12/2014 11:49:04 AM , Rating: 2
If the dealership model is better it will win the competition rather than lose it...

In both models staff have to be paid, the taxes have to be paid, insurance has to be paid, advertising has to be paid, etc, and all of it paid for by new cars being sold at a profit.

By RobertFahey on 8/13/2014 4:31:31 AM , Rating: 2
Ford and GM did try to ditch dealers circa 1999. Didn't work out.

RE: Seems like a fairly calculated move by PAA
By mars2k on 8/12/14, Rating: -1
RE: Seems like a fairly calculated move by PAA
By rocketcuse on 8/12/2014 3:00:35 PM , Rating: 4
I might be misunderstanding your point, but, 2 Republicans paved the way for direct sales in Pennsylvanian. It was the Democrats who back and are backed by the auto unions, who also bailed them out. The Republicans wanted them to bankrupt so they would wipeout the real culprit, the union contracts. So I don't think this is a Republican vs Democrat issue so to speak. It's nothing more than union bullying. It's the unions that dislike competition. IF you really want the Rep vs Dems, again, the auto unions back the Dems!

RE: Seems like a fairly calculated move by PAA
By Samus on 8/13/2014 3:22:57 AM , Rating: 3
Unions are systematically bankrupting the entire country. They're more powerful than they were originally built to be, to the point of complete corruption and rocketcuse said, bullying.

They need to be abandoned and workers need to be protected with workers rights at the state level much how consumers are protected. People don't need a union to organize and demand changes in the workplace...thats what collective bargaining is for and most states haven't banned it (yet) but the states that have banned it simply did so to limit out-of-control Union coercion.

By TheOtherBubka on 8/13/2014 8:16:04 PM , Rating: 2
I wholeheartedly agree. a quick look at industries that deal with large unions

Airline industry - Pilots, flight attendants, and grounds crews. Almost every airline has gone bankrupt dealing with their employees.

Auto industry - the history of GM, Ford, and Chrysler and their battles with union employee costs, retirement benefits, health care, etc. are well documented. All have teetered on/filed bankruptcy proceedings at one point in time.

Health care...heavily unionized nursing, staff workers, etc., well, the CPI's speak for themselves ('82-'84=100)
Hospital services is up to 701.3 for 2013
Medical care as a whole is now up to 425.1 in 2013

Anybody recommend a decent place to upload the plot of the CPI's for these industries as well as auto, gas, and a few others??

Talk about a loaded statement...
By Etsp on 8/12/2014 11:15:04 AM , Rating: 4
Franchised new-car dealers provide the best, most efficient and most cost-effective way to sell and distribute new cars in America
Of course they are, given that they are also pretty much the only LEGAL way to sell and distribute new cars in America. That's some doublespeak right there.

RE: Talk about a loaded statement...
By DT_Reader on 8/12/2014 12:17:04 PM , Rating: 2
If they're so confident in their business model, why do they need the force of law to impose it? Why are they afraid to have it compete in the open market? If it's "the best, most efficient and most cost-effective way" then it should win on it's own, without needing a law to suppress all competition.

RE: Talk about a loaded statement...
By Hakuryu on 8/12/2014 12:40:11 PM , Rating: 2
What franchise automobile dealers are afraid of, is a mega-dealer that could open stores in every state and sell cars directly from different established automakers like Toyota. This mega-dealer could offer cars at much lower prices, because every storefront would not need a sales force, garage, and so on.

Go online, pick your car, and then pick it up at a storefront. No looking for the best deal (ie lowest markup of a traditional dealer), because a mega-dealer would make money on bulk sales.

They aren't worried about Tesla, but the precedent of selling direct. Cut them out (the middleman), and the consumer wins, but they lose.

RE: Talk about a loaded statement...
By pmeow on 8/12/2014 3:38:13 PM , Rating: 2
Wouldn't car stores (I won't call it "dealer") run my a manufacturer, by definition, sell cars at MSRP? Sure, they may run/offer the same financing deals (when financed through the manufacturer's financing arm) as dealers, but I'd expect that's about it. We won't see the local dealer "blowout" equivalent?

In theory, sure, manufacturer's own internal costs would/should be lower than what a dealer would have to pay. But this presumes they pass that along to consumers. Are manufacturers (whether of cars or anything else) even allowed to compete against their own resellers? I make a widget I sell on my own website for $0.90 but I contractually sell you "wholesale" the widget for $0.91 because I can.

In the *long* term, if manufacturers can direct sell, and all manufacturers start competing directly against each other, sure, this would be good. Although at that point, it seems hardly different than my local Honda dealership competing against the local Toyota dealership, except it's now Global/USA-Honda vs Global/USA-Toyota.

I think a major benefit, I hope, would be better build-to-order, rather than take-whats-on-the-lot.

I certainly don't buy the whole NADA spiel about the dealership being the best way to get info, warranty/repair service, etc. They can, presumably, be provided by a manufacturer's direct sale storefront too. And if, by some chance, the dealer's staff are better trained, or have quicker turn-around time, are cheaper, etc vs the manufacturer's same service, I'll go w/the dealer. Or any other authorized/qualified repair shop that provides the "best" service.

Is the theory behind manufacturer-direct-sales that they *only* sell new cars and provide no other service? I goto manufacturer's store, order what I want, and that's it. But the store provides no sales help, test drives, repairs, etc?

FWIW, an old-ish (2009-era) DOJ analysis report ( ) highlights some interesting points. Not sure how much is applicable 5years later.

By BuddyRich on 8/15/2014 7:31:02 AM , Rating: 2
You'd think the math would be simple, I mean a dealership has to markup what they pay wholesale to cover their costs and afford themselves a small profit. Theoretically eliminating the middle man should always be cheaper (for the consumer).

Of course that assumes that a manufacturer will sell closer to their wholesale cost when selling direct to consumers, which I am not sure is a guarantee.

I do think the dealership model prevents collusion amongst the manufacturers, at least at the wholesale level, as there would be push back if wholesale prices rose too much.

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