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Auto dealers are backing the bills in an attempt to uphold current sales models

Tesla Motors may see its stores banned in New York thanks to a pair of bills that look to protect auto dealers. 

Tesla has its own “Tesla Stores”, which act as showrooms for customers. There, they can see the models and even test drive them before making a purchase online from the Tesla website. Tesla does this as opposed to selling its vehicles to auto dealerships

But a new pair of bills, referred to as A07844 in the Assembly and S05725, may put an end to that in the state of New York. The bills would make it illegal to license -- or even renew licenses -- for all Tesla Stores within New York state borders.

In addition to a ban on renewing licenses for existing Tesla sites, the bills also make it illegal to license any future stores; amends New York's vehicle and traffic laws regarding "unfair practices by franchisors," and prevents New York from issuing/renewing the registration of any car dealer where a manufacturer holds a controlling interest (unless that certificate was issued before July 1, 2006).

The bills were submitted just before the New York Legislature adjourned for the summer. This means that they will sit in the New York State Assembly until January 2014 when it returns. No decisions were made regarding the bills before it adjourned.

As you can probably guess, Tesla isn't too happy about this. The electric automaker issued a statement last week regarding the bills:

The bottom line for New York consumers and New York suppliers is that if this bill passes, special interests in Albany will once again have gotten their way while robbing New Yorkers of choices in the marketplace, and Tesla will be put out of business in New York. The result would be that all of Tesla’s New York employees will lose their jobs.  It means that New York-based suppliers to Tesla will lose business and New York consumers cannot buy the most advanced electric car in the world today. Banning Tesla from selling its vehicles is also a step in the wrong direction for reducing carbon vehicle emissions and the green environmental movement in New York.  With the State of New York pushing so hard to lead green innovation supporting entire agencies for energy efficiency like NYSERDA, it is absolutely defies logic to ban Tesla from selling electric cars in New York.

From the beginning, Tesla’s goal has been to catalyze the market for electric vehicles and selling through intermediaries at this stage of the company will not work.  For Auto Dealer Associations to claim that restricting competition is in the best interests of the public is wrong and defies obvious common sense.  If we are kept out of New York, it forestalls progress and defeats innovation.

Tesla has created jobs in New York at both its stores and service centers and the sales of its vehicles go into supporting the local economy. Tesla remains committed to bringing electric vehicle technology and its customer focused sales and ownership experience to New York consumers, while complying with all local and state laws.

Back in April of this year, Tesla CEO Elon Musk openly fought for a Texas bill that would cut out the use of auto dealerships. The bill -- House Bill 3351 -- would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. The bill was filed by Rep. Eddie Rodriguez (D-Austin). 

Musk even said that if the fight for the Texas bill came down to a federal matter, he would either lobby Congress to pass legislation for the direct sales of EVs made by startup companies like Tesla (and tie it to an energy or transportation bill) or file a federal lawsuit to fight the state restrictions as unconstitutional violations of interstate commerce.

Musk is open to a dealership model at some point when sales increase, since dealerships do promote competition and keep prices down. 

Source: Green Car Reports

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By mugiebahar on 6/24/2013 10:12:16 AM , Rating: 2
To tell you the truth, I read the article and I thought I was going to feel 1 way on the subject and turns out I'm 50/50. I would love to hear all input as a great discussion (please no mud slinging) I know having dealerships in today's age may not be needed, Not like we have now. But by the same token we help employe people on a cost that we have perceived already. They get to buy the cars @ wholesale and sell it for whatever price. (Yeah it can be higher, but can be lower as well)

Truthfully asking, would the average dealership pass on the savings to you that would be negated from removing the dealership? (I'm really asking so its not a direct rhetorically) would losing jobs right now hurt us more then a sit down look on how to improve and set better guidelines?

I love Musk, to me he's a recent day businessman a la Tesla (ok not even as close, but the closest as we've come when blending business and science. But agreed there will never be another Tesla, he was the greatest)

I'm just interested in the opinion of everybody. And yes I think the idiots in government should go, they are hands down idiots. They jump to an idea hoping to get RE-elected rather then sitting down discussing ideas.

RE: Question,
By karimtemple on 6/24/2013 10:30:22 AM , Rating: 3
The argument to protect dealerships is sensational. It panders to the feeling of losing your own job.

This situation is not complicated. The Internet has been destroying legacy business models for the last decade, so any business that hasn't been able to keep up either:

A) can only blame themselves, or

B) it isn't their fault because until recently they were stuck in an alternate dimension where news of the invention of the Internet hadn't gotten out yet.

They had their chance to get it together, and they blew it. If you don't like the future, you should've killed yourself yesterday.

RE: Question,
By Ammohunt on 6/24/2013 10:43:30 AM , Rating: 2
Personally my experience at dealerships has led me to believe that car salesmen are the lowest forms of life. Its mostly BS sales tactics and the best interests of the customer are second to the almighty dollar(e.g. extended warranties,undercoating). In the case of GM once the car is off the lot they purposefully try to avoid warranty work(or any work at all on the vehicle). The death of the dealership protection model is long past due. If this government is truly about consumer protection they would abolish it.

RE: Question,
By lelias2k on 6/24/2013 11:22:47 AM , Rating: 3
You see, that's an example where generalizing is just wrong. Especially when you are putting the blame where it usually doesn't exist. I worked at a Chevy dealer for 6 months as a salesman. Here are my thoughts:

- The tactics are usually not from the salesperson. Most of the time it comes from management. I'd say 95% of the time.

- Yes, there are some sleaze balls who lie through their arses just to get a sale, but this I'd say it is in the same level you find anywhere. Gosh, how many Best Buy salespeople talk crap on a daily basis just to sell something more expensive to people who don't know better?

- We never tried to avoid warranty work, as far as I could witness. I think this depends a lot on the dealership, and once again it goes back to management.

So in the end, the salesperson is the one who takes the blame for everything, simply because he's the person you have most of the contact with. He/she doesn't set the price, doesn't define who much discount to give, doesn't close the deal (and in the process closes you on you all the extras you mentioned). But because he/she is dealing directly with you from the beginning, guess who takes the blame for everything?

All that said, I completely agree that we don't need dealerships, especially when it comes to electric cars, which have much less maintenance than ICE cars.

But the fact is that the world is changing at a pace that is much faster than society can keep up with. We are losing thousands of jobs every year to new technology, and we are neither replacing them nor reorganizing our society to deal with it. It is a time bomb, and I just hope it doesn't explode in my lifetime, because it will be ugly.

RE: Question,
By spamreader1 on 6/24/2013 12:09:25 PM , Rating: 2
I have to disagree, generalizing is right even if it is not PC some times. Most best buy salesmen I've met were car salesmen at some point in their lives. Sales managers are still salesmen. Granted you might not want to blame the guy in your face, but you can as they choose to continue to work in that condition.

Another point to me is if I want to buy a car, what's the point of pissing away 3-4 hours of my day with some guy who can't answer any questions without going back and forth to another guy in a glass room who is obviously the guy to make the decisions? Why can't I just talk to the guy who can make the decisions and be done in 10 minutes? Simple logistics.

It's the business model itself that tend to take issue with.
1. You have cars to sell 2. I want to buy car 3.Set a price, if I like the car and price I buy it, if I don't like either I walk away. Why is that so freaking complicated an issue? But then again the whole concept of haggling is idiotic to me anyway, neither party feels like they win at the end of the day. The seller is left feeling they could have gotten more, and buyer leaves feeling they could have gotten more for less, it's a lose lose situation >90% of the time.

RE: Question,
By Ammohunt on 6/24/2013 1:24:38 PM , Rating: 2
Another point to me is if I want to buy a car, what's the point of pissing away 3-4 hours of my day with some guy who can't answer any questions without going back and forth to another guy in a glass room who is obviously the guy to make the decisions? Why can't I just talk to the guy who can make the decisions and be done in 10 minutes? Simple logistics.

Could not agree more my favorite is the drama! and the serious looks like you are robbing him. Cost plus 10% sounds fair! lets do this thing.

RE: Question,
By lelias2k on 6/24/2013 5:27:29 PM , Rating: 2
When I said management, I meant upper management. Not the a**holes that sit behind the sales desks. Those are puppets too.

And I don't know why you were babbling about the whole experience, when I said in my post that I don't think we need dealerships either. Did you just need to vent? :)

RE: Question,
By BRB29 on 6/24/2013 12:24:50 PM , Rating: 2
he tactics are usually not from the salesperson. Most of the time it comes from management. I'd say 95% of the time.

And yet when some of you guys that make it to management, you still do nothing about it knowing the problems you faced and what customers endured. That's why most people think car salesmen are sleazeballs.

RE: Question,
By lelias2k on 6/24/2013 5:21:18 PM , Rating: 2
First of all, please don't say "some of you guys". I'm out of that business and I don't like the way you're pointing your finger at me.

Second, just because salespeople become sales managers, that doesn't mean that they own the business.

When I say management, I mean general manager. The guys that were salesmen 30-40 years ago and don't seem to understand how fast the market is changing.

And last of all, you can blame the salesperson as much as you want, but the uneducated customer is to blame too. Years before becoming a salesperson I already knew I couldn't step into a dealership without good research. You shouldn't do that while buying ANYTHING, much less a car.

If you're not smart enough to realize that, don't blame when other people take advantage of you. Because they will.

RE: Question,
By TSS on 6/24/2013 11:40:20 AM , Rating: 2
Wether it's benificial or not is very simple:
Manufacturer sells to dealership at cost+profit,
Dealership sells to you at cost+profit.

Manufacturer sells to you at cost+ profit.

Which of the 2 will be cheaper for you?

It's really as simple as that. Want stuff to be cheaper cut out the middleman. Or, if you want to make money try to become the middle man. Trust me, i'm dutch, i should know.

You're still going to need show rooms with salesmen, you don't buy something as expensive as a car without research and a test drive. So there's still going to be employment. But i imagine the atmosphere is better as they don't have to sell the car to you specifically (to get a comission i mean), they just have to praise the car.

That said, dealerships won't go away. This because dealerships while a detriment to the consumer are a benifit to the manufacturer. It allows them to sell more cars.

In part because of dealership salesmen but what i'm talking about is channel stuffing. Car companies count sales to dealerships as sales, what happens to the car next isn't the manufacturers problem. If the dealership goes bust because they bought too many cars, the manufacturer isn't affected.

GM dealership inventory right now is hovering around 800,000 cars. that's more then double since the bankrupcy and enough cars to shut down GM completly for half a year and nobody would notice.

In a way this could be benificial. Dealerships are like a buffer to manufacturers, should a paticular model be a flop maybe a few dealerships go bust but not the company itself. That said, the system is far more susceptible to abuse so i'd say it should go. Afterall one could argue that if the car company isn't able to continue producing succesfull cars why should they be allowed to continue to exist? I see no reason why a cash buffer couldn't do exactly the same job as a dealership for a buffer in case of bad times...

RE: Question,
By BRB29 on 6/24/2013 12:38:06 PM , Rating: 2
That said, dealerships won't go away. This because dealerships while a detriment to the consumer are a benifit to the manufacturer. It allows them to sell more cars.

No, once again you are commenting on a country you know nothing about.

The US is a very large country with a lot of people. Our mass transit is horrible. We say "driving is a privilege" but it's really a necessity of life. Just about everyone in this country needs to drive to live. The only city with an adequate metro system is NYC and it's surrounding cities. Even places like Baltimore and DC are mostly unreliable for mass transit. You cannot get everywhere you need and the wait is horrible(sometimes dangerous) at off peak times.

That being said, the number of vehicles sold every year will not go up or down because a dealer exist or not because we have to buy the cars anyways. At least not a significant change. Removing the dealerships can decrease price and cause a shift to more premium trims/models.

RE: Question,
By Spuke on 6/24/2013 5:09:34 PM , Rating: 2
Removing the dealerships can decrease price and cause a shift to more premium trims/models.
I could see this happening. If you've seen the difference between dealer cost and even MSRP, especially on luxury vehicles, eliminating the middleman would definitely move a lot of people upmarket on their purchases. The manufacturers are already satisfied with their profit margins so prices would only go down. Granted like someone else mentioned, manufacturers would have to have showrooms (to see the cars and for test drives) but servicing could remain separate.

RE: Question,
By foolsgambit11 on 6/24/2013 7:07:51 PM , Rating: 2
The price of cars (or any good) isn't set (only) by how many people mark up the price, it's set by how much consumers are willing to pay (the demand curve), which doesn't change based on who owns the point of sale. So your two scenarios would be:

Manufacturer sells to dealership at cost + profit,
Dealership sells to you at cost + profit.
Manufacturer sells to you at cost + (2x profit).

Assuming the supply side remains constant, which it may or may not. The question would be, is it cheaper for dealerships to have control over all their dealerships, with the bureaucracy that entails (middle management, oversight, accountants, setting prices for different markets, dealing with the variance in local laws, etc.) or to offload that to experts at the local level by use of an independent dealership system? My guess is that central control is more efficient up to a certain size, then a dealership model becomes more cost efficient - which is exactly what Musk meant with his comment that, as the company grows, they plan on going to an independent dealership model.

None of this, however, suggests that government should mandate one model over the other - in fact, it suggests the opposite. Mandating a dealership model is about setting up barriers to entry for small competitors, who can't get their models into showrooms. Those barriers to entry ensure that the major manufacturers AND the dealerships can make economic profit (by restricting substitutes for their goods, ECON 101 folks, which would shift the demand curve, resulting in lower prices and fewer units sold).

Ultimately, then, this isn't about sales models at all (either which is better for the consumer, or which is better for the sellers) it's about removing competitors from the market - which is always better for the seller.

RE: Question,
By 1prophet on 6/25/2013 12:47:56 PM , Rating: 2
That said, dealerships won't go away. This because dealerships while a detriment to the consumer are a benefit to the manufacturer. It allows them to sell more cars.

The greatest benefit to the manufacturers that dealers provide is the offloading of personnel, infrastructure, liability, and equipment costs to an independent entity known as the dealer, while still maintaining a lot of control through the franchise contract.

They also buy the vehicles using an open ended loan called a floorplan from the manufacturer, thus moving the vehicles accounting wise off the manufacturers books.

It's a win win for the auto manufacturers,

why would they want to own their own stores and have their own employees with all the hassles that go with it?

RE: Question,
By BRB29 on 6/24/2013 12:40:40 PM , Rating: 3
But by the same token we help employe people on a cost that we have perceived already

Those people wouldn't really lose jobs. Not all dealers will close. The ones that close will be replaced by the automaker's Stores. Those guys will just get a job there doing the same damn thing.

The only difference now is there's no rich guy taking a huge chunk of the purchase price.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA

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