backtop


Print 54 comment(s) - last by vitp.. on Sep 19 at 3:27 PM

Texas just shut Tesla down on the state level

Tesla CEO Elon Musk is determined to win the dealership fight by any means necessary -- even going to the feds.

A new report from Automotive News says Musk may take the dealership fight to the federal level since working at the state level hasn't been completely successful.

Here's the deal: 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.

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, and that was that. According to NPR's State Impact, the reason was because Tesla failed to lobby as much as the dealership associations. Tesla spent about $345,000 in lobbying while dealerships spent about $780,000.

Texas isn't alone in attempting to keep Tesla at bay. New York, Massachusetts and others have attempted to shut down Tesla's stores as well. 

With that, Musk is looking into taking his fight to the federal level in order to bypass each state's restrictions. Musk may lobby Congress or file a federal claim saying that the state laws banning Tesla-owned dealerships are unconstitutional. 

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.

Sources: Automotive News [1], [2]



Comments     Threshold


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

RE: Nope
By Motoman on 9/17/2013 1:23:12 PM , Rating: 4
2 or 3 still have to compete. If there were any validity to this argument at all, any and all markets where manufacturers *do* sell directly to customers would be all f%cked up somehow.

But guess what? They're not.


RE: Nope
By Flunk on 9/17/2013 2:01:48 PM , Rating: 2
No, 2 or 3 are a small enough number to collude on prices like cable companies, cell phone companies, phone companies and most other limited-market businesses do.

My point is that the argument is ludicrous considering the sheer number of companies building vehicles.


RE: Nope
By Flunk on 9/17/2013 2:03:52 PM , Rating: 3
This is actually why the dealership laws exist at all, there were only a very small number of manufacturers who colluded on pricing.


RE: Nope
By Motoman on 9/17/2013 2:25:46 PM , Rating: 2
What's to stop a small number of dealers in a given area from colluding?

This doesn't fix the issue. And, as noted, if it was an *actual* problem we'd see it in *all* such markets. We don't.


RE: Nope
By Solandri on 9/17/2013 3:11:47 PM , Rating: 2
The fact that you can easily shop outside the area covered by a small number of dealers. I'm shopping for a car right now, and I'm using a 150 mile radius circle to search for best prices. I'm even checking a 500 mile radius now and then in case there's a really good deal a little further out there.


RE: Nope
By Motoman on 9/17/2013 4:48:43 PM , Rating: 2
...a lot of people live in places where there's not anything for 150 miles around. And regardless, whether a shop is 150 miles or 500 miles away, that wouldn't stop collusion. Especially in the digital age.


RE: Nope
By Alexvrb on 9/18/2013 12:00:14 AM , Rating: 2
You asked what's to stop a small number of dealers in an given area from colluding. He replied to that, and now you're kind of throwing a different argument around. 150 miles... 500 miles... digital collusion. Well golly gee if factory owned dealers doesn't fix that, nothing will!

If you live someplace where you don't have anything around, there's nothing to stop you from getting boned either way - except for used cars. Realistically, whether private or factory owned, prices aren't going to go down. They'll charge you whatever they can get away with... quite similar to today!

I've seen surprisingly large discrepencies in pricing between dealers if you are willing to travel even 50 miles. Imagine if ALL of the dealers have the same "owner" - the manufacturer. Not only is normal selling price going to stay the same, now if you're interested in a particular model, you can't even play two same-marque dealers against each other.


RE: Nope
By Motoman on 9/18/2013 5:29:19 PM , Rating: 2
Sorry, but reality called and wants to let you know that you're wrong.

All you have to do is realize that if middlemen were a requirement for competitive pricing, then direct sales from manufacturers to consumers would be troublesome in all markets.

You can't say that middlemen are necessary for car sales, but not necessary for anything else. The universe doesn't work that way.


RE: Nope
By crimson117 on 9/17/2013 3:46:28 PM , Rating: 2
2 or 3 is still few enough for an oligopoly - look at the phone companies, how Verizon and AT&T both settle around the same high prices, and they sell basically the same plans as each other.

There are 10+ auto manufacturers, across many budgets, so there's competition there.


RE: Nope
By Motoman on 9/17/2013 4:52:08 PM , Rating: 2
quote:
2 or 3 is still few enough for an oligopoly - look at the phone companies, how Verizon and AT&T both settle around the same high prices, and they sell basically the same plans as each other.


There are artificial barriers around some industries, like limited amounts of bandwidth available, or maybe local governments giving monopolies/duopolies to cable companies, etc. So those are bad examples.

And the number of auto makers doesn't really matter - if it's 2 or 10, you could still get collusion - active or passive (active collusion is when the gas station on one side of the street calls the station on the other side of the street and they both set gas to $4 a gallon. Passive collusion is when one gas station changes it's price to match the other station every time they change it without any active discussion).

And...ONCE AGAIN...if such concerns were valid, we'd see problems in *all* markets where manufacturers sell directly to consumers. Not just ones where artificial forces create monopolies/duopolies/etc.


"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki