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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]



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By ebakke on 9/17/2013 3:31:40 PM , Rating: 2
I say we don't worry about hypothetical problems and we instead address the real, current problems. If sob stories arise, we collectively tell the sobbers to grow up and get over it. Government forcing individuals to sell a product in a certain way or not sell a product in a certain way is broken. The only people who can argue otherwise, are those who are benefiting from the force being used against the others.

GM may like dealers for the same reason any other company doesn't sell directly to consumers. I can't buy gasoline from directly from the local refinery. I could only buy my snowblower through a Simplicity dealer. I can't buy nuts/bolts from the foundry.

Simply put, selling directly to the end customer is a lot of extra work. The sheer number of orders you're taking in is much larger (granted, for smaller quantities). You have to figure out how to get the product to the customer. You have to figure out support, repairs, instruction, updates, etc. You have to figure out distribution, and marketing. There are many problems to solve, and for some companies it's worth the extra effort. For others, they sell only to wholesalers. Others, sell through dealers. As with everything else in business, it's a cost/benefit analysis. What's your goal, and what's the cheapest and most effective way to accomplish it.


By Mint on 9/18/2013 2:00:44 PM , Rating: 2
I can't say I disagree with you about legislation. I'm just telling you why I think a phaseout will be more palatable.

You're overestimating the work needed for direct sales, though. Contractors will be lining up at the manufacturer's door to implement a sales and delivery system for even 0.1% commission of the $450B/yr new car market (plus destination). Dealers make most of their money from service anyway, so that's taken care of (service centers aren't closing down, even if they move to smaller lots).

You can't compare cars to other other goods like gas or nuts/bolts. Cars are a huge expense and they're nearly all sold at brand-specific outlets anyway. Can you name anything else that matches those characteristics?

Anyway, I'm not trying to make you empathize with the incoming plight of dealers with direct sales. I'm just telling you that it's going to be disruptive once it catches on.


By ebakke on 9/19/2013 10:54:17 AM , Rating: 2
quote:
I can't say I disagree with you about legislation. I'm just telling you why I think a phaseout will be more palatable.
Humans are resourceful, capable beings. They're more than able to handle the changes that would come about from removing these stupid laws.

quote:
You're overestimating the work needed for direct sales, though. Contractors will be lining up...
Which then just become new "dealers". And thus the original dealers don't have anything to fear. If it'll cost the manufacturers more money to sell direct, that's less of a price difference between the manufacturer and the dealer.

quote:
Can you name anything else that matches those characteristics?
I already gave you one: my snowblower. Or a lawn tractor. Or an agriculture tractor. A new Deere tractor dwarfs the expense of a new automobile, and is sold at brand-specific outlets.

quote:
Anyway, I'm not trying to make you empathize with the incoming plight of dealers with direct sales. I'm just telling you that it's going to be disruptive once it catches on.
And I'm telling you you're speculating. It might be disruptive in some cases. It might not be in others. But in either case, I don't much care. And I'm not sure why it matters. What matters to me, is not restricting the freedom of individuals to interact with others as they see fit.


"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il














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