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Bill sponsor received $8,000 in campaign donations from the North Carolina Automobile Dealers Association

Living in the Research Triangle Park (RTP) area of North Carolina, which I nickname Silicon Valley East, I quite frequently see Tesla Model S sedans and Roadsters silently cruising down city streets and interstates. However, the North Carolina Senate Commerce Committee unanimously approved a measure that would make it illegal for Tesla Motors to sell vehicles directly to customers without the ever-present "middleman" in new car transactions: car dealerships.
Not surprisingly, the NC Automobile Dealers Association (which represents North Carolina's franchised car dealership) is behind this latest stab at Tesla. But according to NC ADA President Robert Glasser, this isn't an attack specifically aimed at Tesla. Glasser notes that the precedent Tesla has set for direct sales could set into motion a chain of events that would topple the entire dealership model of business.
“We care about the franchise system,” said Glaser. “The whole point of the retail system is to protect the consumer.”
Of course, Tesla Motors sees things quite differently. “They’re trying to insulate the dealer franchise model from any competition,” said Diarmuid O’Connell, Tesla’s VP of Corporate and Business Development. “It’s a protectionist move to lock down the market so we have to go through the middleman – the dealer – to sell our cars.”

And here's an interesting tidbit that shines a whole new light on the story. Slate reports that Sen. Tom Apodaca, the Republican sponsor of the bill, received $8,000 in campaign donations (the maximum allowed by state law) from the NC ADA.
It's pretty clear to see why dealerships are shaking in their boots at the prospect of Tesla (and other auto manufacturers) selling directly to customers. Tesla managed to deliver a whopping 4,750 Model S sedans to customers during the month of April. Compared to other luxury sedans that also dance in the $70,000 to $100,000+ price range, the Model S outpaced monthly sales of the Audi A8 (1,462 units), BMW 7-Series (2,338), Lexus LS (2,860) and Mercedes S Class (3,077).

 Tesla Model S
Tesla has sold 80 Model S sedans in North Carolina and has an additional 60 orders in queue from residents. The overwhelming majority of those sales have come via the internet.
And one could argue that an electric vehicle like the Model S needs less attention from dealerships due to the much lower maintenance needs of the electric motor and battery pack. Quite simply, there is potentially less to go wrong with a Model S compared to BMW 750i with its twin-turbocharged V8 and 8-speed automatic transmission.
Despite this new speed bump in Tesla's road to electric vehicle proliferation, the company has been showered with a wealth of good news in the past week. Last week, Tesla reported its first profit in its ten years of existence and Consumer Reports gave the Model S a near perfect rating: 99 out of 100 possible points.
Tesla's stock is up 57 percent since its quarterly earnings were released last Thursday to just under $90/share.

Sources: News Observer, Slate

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By Motoman on 5/14/2013 12:04:09 PM , Rating: 5
“We care about the franchise system,”

Of course you do.

“The whole point of the retail system is to protect the consumer.”, exactly, does the consumer get "protected" by that "system?"

RE: lolwut?
By othercents on 5/14/13, Rating: 0
RE: lolwut?
By Motoman on 5/14/2013 12:20:50 PM , Rating: 5
Uh-huh. Then why is the same not true of everything else you can buy from a manufacturer directly?

Answer: because it's a lie to start with.

If Tesla, for example, did such a thing then consumers would buy cars from someone else.

And if all the manufacturers got together and did it all in unison, that's collusion and price-fixing, and illegal as f%ck.

Think of all the other things you can buy directly from a manufacturer...including, as pointed out, a new house - probably the biggest purchase you'll ever make...and now try to rationalize that argument.

Doesn't work.

RE: lolwut?
By kingmotley on 5/14/2013 12:27:44 PM , Rating: 4
Oh, well, point me to a dealership where I can buy a Camero ZL1 for retail. Nevermind anything reasonable above what they charge, I'm just asking for retail. Nope. All dealers charge $5k to $7 over and above the retail price.

That is what you get when you force monopolies into the dealers.

RE: lolwut?
By Motoman on 5/14/2013 12:36:21 PM , Rating: 1
I'm not familiar with the ZL1 myself, but I assume it's a limited-edition unit that's in higher demand than there's supply.

Ergo...price goes up. Same thing happens to any item that has limited supply and high demand. Not just cars.

Regardless, as you noted, that's happening from the *dealerships* now. And it's perfectly legal...they can legitimately get more for the car because it's in such high demand and limited supply. There's not a legal issue there.

I don't know what point you're trying to make.

RE: lolwut?
By Adonlude on 5/14/2013 1:10:19 PM , Rating: 3
And for that the rate just went up 10%...

Legislating dealers into business is total BS. Why do we allow Apple stores to exist? Where is the middle man there?

RE: lolwut?
By Motoman on 5/14/2013 1:51:30 PM , Rating: 4
There isn't one. And there isn't a need for one.

I really don't know what point was under attempt with the Camaro post up there.

The fact of the matter is there's no possible grounds upon which to force cars - and only cars - to have to be sold through middlemen.

It makes no sense.

RE: lolwut?
By Reclaimer77 on 5/14/2013 7:21:13 PM , Rating: 3
I agree with you but if that's the way it is, than it's unacceptable to give a special exemption to Tesla "just because".

If everyone else has to sell their vehicles through dealerships, then so does Tesla.

RE: lolwut?
By topkill on 5/14/2013 8:40:49 PM , Rating: 2
I don't get your logic. It's clear the law is wrong, so the answer isn't to screw "yet one more manufacter". The answer is to fix it for everyone, not keep on screwing anyone else that comes along. We, the consumers, are getting hurt by this.

Frankly, this is government getting involved in our lives and I can't believe you aren't screaming about it.

RE: lolwut?
By Reclaimer77 on 5/14/2013 8:54:18 PM , Rating: 3
Where did I say I'm in favor of the law?

To be honest I have no idea what goes on between dealerships and manufactures on the business side and if it's beneficial to both. For me to arbitrarily weigh in on that would be speaking from ignorance.

I'm merely stating that the law should either be repealed, or applied equally. I'm not in a favor of granting Tesla a special exemption. That's all I'm saying.

Frankly, this is government getting involved in our lives and I can't believe you aren't screaming about it.

Yeah well if I screamed every time the Government got involved in our lives I would be like one of these crazy guys with a zillion posts on some Internet blog or...

Oh,wait.... :(

RE: lolwut?
By topkill on 5/15/2013 1:19:45 PM , Rating: 2
LOL Points taken.

RE: lolwut?
RE: lolwut?
By jmunjr on 5/14/2013 8:31:57 PM , Rating: 2
I bought the very first Nissan GT-R in Houston in 2008 for MSRP, a car that had way more appeal and demand than the ZL1. Sure, most people paid over sticker at first, but I didn't because I shopped around and scored a deal. That is how the free market works. If everyone just settled and bought products for the price they were told then the free market would fail, but consumers care about price and do shop around and price rises and falls accordingly.

Th ZL1 is a specialty car, if that dealer was able to mark up ALL of their inventory then obviously something would be amiss. It is not a monopoly when one product is prices over the suggested retail price, it is the market correcting itself. If dealers can sell the ZL for that markup it is because that is what buyers are willing to pay because it has high demand and a low supply.

RE: lolwut?
By othercents on 5/15/2013 8:40:58 AM , Rating: 1
Uh-huh. Then why is the same not true of everything else you can buy from a manufacturer directly?

Do you actually buy anything direct from the manufacturer? We go to the grocery store which is a middle man. We go to Walmart or Target which is a middle man. We go to the gas station which is usually franchised and a middle man. We go to the motorcycle shop and they sell all brands and they are a middle man. We purchase phones from AT&T, T-Mobile, Verizon, etc and they are all middle man. We purchase clothing from Nordstrom and Macy's. We use middle man everyday and we choose which middle man to use based on service, pricing, and convenience. Even with the newer stores like Gap, J.Crew, Express, American Eagle, etc. there is still direct competition that are middle man and these stores are fairly new. In the past J.Crew sold from catalog and didn't own stores.

Think of all the other things you can buy directly from a manufacturer...including, as pointed out, a new house - probably the biggest purchase you'll ever make...and now try to rationalize that argument.

To compare cars to houses, do houses get built out of state and then shipped in to be sold? Are there any housing companies that sell houses in all 50 states? When you go looking for a house do you have competition and choice or it is all one type of house sold in different colors for the same price? Housing is different, however it is only one of the few items you can purchase direct from the manufacturer.

Doesn't work.

If it doesn't work, then why did Elon say he was willing to go with the franchise model once he started to produce more mainstream vehicles?

The better question is if the franchise system for cars is outdated? Would it be more convenient if you could buy a new car from one lot that had all brands? Or direct mail order from the manufacturer? It would be, however that doesn't mean the franchise system is bad.

RE: lolwut?
By Manch on 5/15/2013 11:24:48 AM , Rating: 3
I buy fruits and veggies from the farmers. They also deliver my milk and eggs. Now I didnt buy the milk and eggs directly from the chicken and cows, so I guess you could say the farmer is the "middle man".

My metal frame building was ordered straight from the manufacturer(out of state), shipped to my farm and then I had it errected. There's a living space inside of it too. You wouldnt notice the difference between my living room and one in a regular house except maybe the fals ceiling.

More and more houses are being prefabbed in sections and transported to the build sites.

I've bought several items online direct from the manufacturer. so yeah it's not unheard of or rare as you say.

RE: lolwut?
By lelias2k on 5/15/2013 5:09:38 PM , Rating: 3
So I guess Dell, HP, Apple, Nike, Adidas, etc, all quit selling their products on their websites, right???

Come on, the whole thing is a lobby. Please tell me when a lobby is watching over consumers' best interests.

RE: lolwut?
By BRB29 on 5/14/2013 12:27:22 PM , Rating: 3
So can home buyers, but most people would rather use a realtor even though it would save them tens of thousands of dollars. Dealers can steal exist even if direct sales are legal.

Dealership is a middleman business created when there were only 3 main automakers. There were little competition as all 3 automakers was not accessible in every city. So usually, in most small towns there's only 1 brand selling and they can charge whatever they want. Dealers are made to create competition between same brands. Kind of like Target and Walmart selling the same cereal.

Today, we no longer have a barrier of accessibility. We can easily go online and order anything. There's also many more automakers to choose from. Competition will happen regardless of dealers.

The dealers are just trying to keep their cash cow businesses of reselling. They form an association to lobby and keep themselves in business. Instead of practicing good business and service, they rely on laws.

RE: lolwut?
By Mint on 5/14/2013 1:38:50 PM , Rating: 2
That's a pretty good explanation. Thanks.

I do suspect that there will be a lot of potential chaos in transitioning to a dealer-optional system. Manufacturers still have incentive to provide showrooms for test drives and trying out features, but they may have a very different payment system as opposed to the current commission based one.

Dealers would be screwed for a while as customers use them for test drives but then buy direct at a lower price. Only when they start closing down and impacting sales will manufacturers support them.

RE: lolwut?
By Brandon Hill on 5/14/2013 1:58:54 PM , Rating: 2
Dealers would be screwed for a while as customers use them for test drives but then buy direct at a lower price. Only when they start closing down and impacting sales will manufacturers support them.

They could get lessons from Amazon shoppers using Best Buy as a showroom ;)

RE: lolwut?
By boobo on 5/14/2013 11:16:46 PM , Rating: 3
To be fair, people who buy in brick and mortar stores will often go to Amazon to check product reviews.

RE: lolwut?
By somedude1234 on 5/15/2013 5:38:25 PM , Rating: 2
I did exactly this earlier today!

Specifically, I was in need for a new wireless router so I researched online, checked out reviews on Newegg, Amazon and elsewhere. Then I checked out prices locally and online and decided that the price at my local Fry's was competitive enough to justify a short drive to pick it up today. Sure I could have ordered it online and maybe saved $5-10, but I have the kit today and that was worth it to me.

Also, I got to overhear one of the Fry's guys explaining router choices to a different customer while I was there, and thought two things:
1. That guy actually knows a little bit about what he's talking about, so refreshing for a modern electronics retailer (cough, Best Buy, cough).
2. Even so, I'm glad I researched online instead of trying to decide which one to get while I was here in the store.

RE: lolwut?
By Manch on 5/16/2013 1:50:19 AM , Rating: 2
Best Buy employees are notorious for talking out the @$$. The AAFES stores on the bases have a similar issue. They have these so called "Manufacturer Representatives" that sometimes come to the store. 99% of the time what flows out of there mouth is gibberish. It annoys the hell out of me, so when Im in there and they're feeding some poor bastard a load of poo, I usually say something. I try to be polite about it, but some of them get really nasty. I had one "rep" start to yell at me. I just kept telling him to read the box. The other customer that he was trying to "help" read teh box, looked at the guy funny, handed it back to him and walked off lol. Dude came up to me a few miuntes later and asked me for recommendations.

RE: lolwut?
By BRB29 on 5/14/2013 2:09:11 PM , Rating: 2
If Tesla can set up a network maintenance and repair shops, then I assume setting a sales office with test cars is much easier.

A small office with 5-10 vehicles outside ready for test drives all day. If you want to buy one, then you can build it online or in the store itself. Financing can be done by just about any banks now and they can have a kiosk there also.

The direct order system actually ends up saving automakers a massive amount of production costs. There's less waste because they usually have to guess how many of which trim and options to equip since most are prebuilt. Demands for vehicles are also 100% predictable as they have data immediately.

I think dealers were a good intention back then but it is becoming increasingly irrelevant now.

An efficient business model would be:
Instead of reselling vehicles. They should turn themselves a service center for repairs/maintenance and warranty work. They can charge automakers for rent of using their office and parking lot to giving customer test drives.

This model is much more efficient as it takes the liability away and income is predictable. Service work actually generates more cash flow than selling vehicles now.

Why is this model more efficient? What people don't realize is that dealers didn't pay for any of the cars. They work on a line of credit. So essentially, it's the bank's money. The interest is high because its risks are high. That's why dealers are very eager to get vehicles off their lot when it's been there a while. The owners of dealerships don't really care because he takes money home every month. But if the businesses loses millions and close, he is not liable since all liabilities dies with the corporation. His millions are secured in his personal accounts and he just open another dealer.

Home developers do the same thing.

RE: lolwut?
By lelias2k on 5/14/2013 3:02:29 PM , Rating: 3
Now, back to Tesla:

Tesla's ability to sell units will be limited if it can not have units and maintenance facilities in places where people want to buy them.

Then they are the ones who should be worried, not the government, wouldn't you agree?

RE: lolwut?
By BRB29 on 5/15/2013 7:36:33 AM , Rating: 2
EVs actually have very low maintenance because there's barely any moving parts. Conclusively, they don't need as many maintenance shops for the same amount of vehicles. It also looks like they designed their cars to be more on the modular side where you can easily swap part.

I'm also sure modern mechanics can adopt to fixing EVs since it's easier than ICE cars.

RE: lolwut?
By lelias2k on 5/15/2013 5:11:42 PM , Rating: 2
I honestly have no clue how my answer ended up on your post. I was replying to another post. Go figure.

But yeah, your points are spot on.

RE: lolwut?
By wiz220 on 5/14/2013 3:10:56 PM , Rating: 2
I see no reason why you couldn't have a store (like Tesla has) that was big and offered test drives. You can have a dealership-like experience without the "dealer" it would just be a store built, maintained and run by the car company. The consumer might save money since there would be no middle man. That setup might work better for some companies and not so much for others, I think the main point is that there is zero reason for it to be legislated (aside from protectionism of course).

RE: lolwut?
By BRB29 on 5/14/2013 2:20:01 PM , Rating: 2
To clarify

What the automakers had back then was almost a vertical monopoly. It was top to bottom controlled by them. Everything from service to sales to parts. That was not going to be good for consumers so dealers were needed. But the world has changed since then.

If you remember the energy giants that used to rule us. They are also broken up the same way. Your utility company can longer provide you with energy. Most people don't realize it but your utility is a service provider. The part of the bill where you pay the energy goes to someone else. It's automatic but you can change who you get energy from and what type of energy just by calling customer service.

RE: lolwut?
By somedude1234 on 5/15/2013 5:45:21 PM , Rating: 2
… you can change who you get energy from and what type of energy just by calling customer service.

Technically, all you're doing is changing an entry in a billing database somewhere, and likely altering the price you pay to the utility company (which is then passed onto the energy producers).

You're not actually altering where your energy comes from... that's dictated by physics and the design of the energy grid, which isn't smart enough to allow point-point routing of energy from supplier X to customer Y.

RE: lolwut?
By Helbore on 5/14/2013 1:01:01 PM , Rating: 5
Huh, what?

Where do you think the dealerships buy the vehicles from? That's right, the manufacturer! If the manufacturer wanted to put their prices up to unreasonable levels, they already can - because the dealership has no choice but to buy from them.

The reason that doesn't happen is because there are multiple car manufacturers. If one made their prices unreasonable, people would simply buy from a different manufacturer.

The dealerships don't like direct sales purely because it removes their cushy position. Buy a product from the manufacturers, slap a hefty margin on and rake in the cash for very little work. They're simply running scared that the internet might have made their necessity obsolete and - in order to actually compete - they will need to add value to their services.

That's the thing - if the dealerships actually provide an added worth to the consumer, then the consumer will continue to buy predominantly from dealerships. The problem is these dealerships are clearly not convinced by their own worth and are worried consumers will see them as an unnecessary expense when faced with an alternative.

Well folks, welcome to consumer-driven capitalism. Provide something of worth - make money. Provide an unnecessary financial burden - get driven out of business by someone with a better business model.

Announcement to car dealerships, the gravy train is about to arrive at its final destination. All change please.

RE: lolwut?
By lelias2k on 5/14/2013 1:31:41 PM , Rating: 5
As a former car salesman, I agree 100% with you.

The problem is that dealerships don't know how to deal with the internet, even though it has been around for almost 20 year.

This has been popping in the horizon for that long and these people are freaking clueless about it.

Same as product knowledge. Car salespeople in general are like Best Buy employees: clueless about their products. Are there exceptions? Sure! But in an industry where the average turnaround of a sales person is 6 month, who are we kidding?

Dealerships are good at two things: pushing people into vehicles they don't want and overcharging in the financial side. Again, there are exceptions, but this is what I have seen happening.

Finally, smart customers are already using the internet to get the best deal available, and guess who is losing money: the salesperson. The manufacturer still has its margin, the dealership still has its margin, and the salesperson gets what they call "the minimum". Little guy always get screwed.

I'm all for direct sales! If it didn't kill Best Buy (yet), Amazon, and others, it won't kill dealerships so soon.

PS: Interesting it happened in NC. Home of Nascar.(translation: biggest dealership owners in the US)

RE: lolwut?
By tayb on 5/14/2013 2:24:53 PM , Rating: 2
Competition vs Monopoly sales of vehicles in an area. If the manufacturers were doing sales locally they could undercut the price the dealerships and after the dealerships fail they could increase the price to an unreasonable amount.

You have this whole thing backwards, actually. We currently have a monopoly and allowing direct sales to consumers would break the monopoly.

Dealerships buy cars from the manufacturers and mark them up any % they want. Consumers can't do much about it beyond shopping at a different dealership with a lower markup. Dealerships currently have a monopoly on car sales. This would be similar to saying that Dell isn't allowed to have an online store and they must only sell through authorized retailers. We wouldn't accept that. You have your monopolistic worry flipped upside down.

Allowing manufacturers to sell direct to consumers would force dealerships to actually provide a desirable service above and beyond what a consumer would receive by going to and ordering a Mustang. It would also force dealerships to compete for sales which would certainly lower prices.

Would this spell the end of new car dealerships? Probably, but the business will be replaced with something else. The majority of car buyers sell their old car at the time of purchasing the new car. Someone or some business is going to have to handle this transaction.

RE: lolwut?
By Spuke on 5/14/2013 4:09:52 PM , Rating: 2
Someone or some business is going to have to handle this transaction.
It's called Autotrader.

RE: lolwut?
By Reclaimer77 on 5/14/2013 7:56:42 PM , Rating: 2

I don't think you're using the right word here. There aren't any monopolies in the car business.

Exclusivity yeah, monopolies no.

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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