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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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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)


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