Automakers (GM) Oppose Tesla's Direct Sale Model - Take Dealer's Side

What else could GM say? They are stuck and they know it. As the article said they tired unsuccessfully to shed hundreds of dealerships but couldn't.
Their main argument is true: Tesla has a competitive advantage by not wasting money on dealerships but that's not Tesla's fault and not 'unfair' just innovation. Tesla didn't sign all those franchise contracts that GM and others did decades ago and create the powerful beast that is the dealership lobby. Now they can't get out from under them.

I couldn't help thinking, as I was reading the copy of the letter reproduced in the article, that GM's argument read something like "we have to carry around this millstone we have about our neck in our own business - Tesla should have to also".

This article, and GM's letter, while a true enough statement of the realities as I perceive them, also manages to recast the true position here. The correct position in every state and every circumstance is that there is a prevalent current business model involving franchisor's and franchisees, and laws have been enacted to protect franchisees from abuses by franchisor's of the past. That is well and good.

Enacting legislation or rules that forces a business that is not a franchisor to become a franchisor is illegal. For those wondering why Tesla doesn't have a franchise, even one, anywhere, this is the core of it. The moment Tesla has a single franchise, they'll be a franchisor and that will be end of the Tesla business model.

The proof is in the pudding.
If NOT having to use dealers is a distinct competitive advantage then by definition dealers are bad for consumers.

I would imagine that manufacturers might be inclined to go away from traditional dealerships **IF** they could reduce the price or make more profit on their cars.

This episode of Planet Money equates the cost of dealerships to customers to be on average $1800 per sale per year (14 million cars equates to $25 billion year)

http://www.npr.org/blogs/money/2014/03/14/290241292/episode-435-why-buying-a-car-is-so-awful

Also, the economic term of what it means to keep around dealerships in the year 2014 which seems to fit is "concentrated benefits and diffused costs" since the dealers are getting the benefits and the costs are born by the consumer who are not providing enough of a lobby to overturn. It would seem that if a bill was introduced and was allowed to be voted on by the general public that it would be passed hands down. I know it is not that easy, but in theory it should be possible to get a bill on the ballot of some state to remove the dealership requirement. In WA State it is possible with a certain number of signatures I believe.

richkae said:

The proof is in the pudding.
If NOT having to use dealers is a distinct competitive advantage then by definition dealers are bad for consumers.

Click to expand...

Exactly what I was thinking.

To make a level playing field, Tesla owners need to be required to change oil every 5000 miles, buy gasoline (at least one gallon for every 25 miles they drive or the amount the average luxury car uses), purchase water pumps, hoses, clamps, flush the radiator, and then pay for upselling of extra equipment. Of course, because there is a waiting list for Tesla's, the second sticker price should reflect a higher MSRP or at least a few thousand extra for a premium undercoating. Tesla service centers would not be allowed to send their staff to people's homes to pick up or deliver cars for service. Otherwise all those extras wouldn't make it a level playing field.

tslas said:

This is starting to get real hot.

In Tesla sales fight, automakers take the dealers' side | Motoramic - Yahoo Autos

Click to expand...

GM to Ohio Governor: “…Tesla would get a distinct competitive advantage…”

Aww, someone comes up with a better way of doing business, and lethargic behemoth General Motors thinks that’s not fair. So it cries to papa governor. Oh, the poor thing. Hint to GM: Survival of the fittest does not necessarily refer to the currently biggest.

GM and the others offered franchised dealership contracts out of free will in the belief that was the most efficient distribution method at the time. Originally, the only law involved was contract law. No statutes were required until the franchisors started bullying their own franchisees. Naturally, these franchise relationship laws should not apply to manufacturers that have never chosen to offer franchises.

The free competitive enterprise system encourages improved products and business models that benefit consumers. That may include the lack of need for franchises. It should be for consumers to decide and not legislators. Innovate and thrive, or stagnate and wither away.

I would prefer Tesla not get an exemption either. They don't need any favors...the government just needs to stop dictating the channel through which a business chooses to sell its products.

I'm so confused. I'm a registered Independent. I typically vote Democratic, but I'm in favor of the "Republican" view that government needs to stay out of this...yet the Republican governers are favoring the pro-government stance...i would have considered Voting for Christie prior to bridgegate...now i can't stand the guy.

Now I'm just a politically lost soul...

I'm so confused too (not really, jut saying how you might introduce this with politicians who support dealer mandates). Dealers say buying a car through an dealer is better for the public because there is price competition and they're your advocate for warranty service. If that were true they should welcome other car manufacturers having the disadvantage of not using dealers, it would give the existing dealers a competitive advantage. Instead they go to great expense and effort to force all cars to be sold through franchised dealers to "level the playing field" or "make everyone play by the same rules", etc. So that shows they think the franchised dealer requirement is a burden, not an advantage, and a car being sold directly would have a competitive advantage. They can't have it both ways.

As long as it's left up to the states to decide. Reasonable Federal regulation would protect existing contracts with franchisees, set reasonable standards for being able to handle mandated recalls and other concerns and prohibit the states from interfering otherwise in interstate commerce in vehicles.

TexasEV said:

I'm so confused too (not really, jut saying how you might introduce this with politicians who support dealer mandates). Dealers say buying a car through an dealer is better for the public because there is price competition and they're your advocate for warranty service.

Click to expand...

Both of those "advanages" are actually untrue. The majority of dealers today are very big businesses that own dealerships from all or most manufacturers and often spanning several states. So, yeah, you can go from the Chevy to the Ford dealer but when they're both owned by the same company, where is the price competition? Even if there are two or three dealer groups in the same metropolitan area there's still no more price competition then there is between Exxon and Shell. And as far as being the advocate for warranty goes--doesn't happen. The dealers are only interested in getting the maximum amount of cars through in a day. Mostly they just say "no warranty" unless you can prove otherwise. I've often had to call the manufacturer to get the dealer to honour the warranty.

So there's no need to be confused. Dealers really have no advantage today. Years ago when dealers were mostly family owned and sold one brand of car, there was some competition and the manufacturers had a lot of clout. Today a dealer has more clout than the manufacturer because of the multi-brand dealers. If a manufacturer tries to put pressure on a dealer, they can just close that brand's store and not be more than inconvenienced.