
Auto Dealers Whine That Tesla Stores Are Illegal - is74
http://www.wired.com/autopia/2012/10/tesla-dealer-illegal/
======
cs702
Anyone who's ever bought a car knows firsthand how unpleasant it is to deal
with traditional car dealers. The price of every vehicle is fully negotiable
but the negotiating room is opaque.[1] Key car features and options are
bundled in arbitrary packages and priced in ways that make pricing even more
opaque. Car salesmen (they're typically men) almost always have a fake smile
on their face and come across as smooth-talking, commission-seeking sharks
pretending to be one's best friend. Customers who bite the bullet and buy a
vehicle nearly always come away feeling like the dealer took advantage of
them.

Kudos to Tesla for taking on this cartel.

\--

[1] Edmunds lists the following types of fees charged by traditional car
dealers at the time of sale: "registration fees," "doc fees," "trade-in fees,"
"dealer fees," "holdback," "financial reserve," and "advertising fees." Good
luck trying to figure out what these fees ought to be for the vehicle you want
to buy. Source: [http://www.edmunds.com/car-buying/what-fees-should-you-
pay.h...](http://www.edmunds.com/car-buying/what-fees-should-you-pay.html)

~~~
talmand
It can be a rather unpleasant experience, plus it makes me feel bad to
immediately hate the person before I get to know his/her style of selling. I
know it's unfair but when that salesperson walks up I'm immediately "just go
away and leave me alone".

Plus the sad fact is that the salesperson is the middleman of the manager, who
is the middleman of the financier, who is the middleman of the dealership.
There are probably more steps I'm forgetting.

Why can't cars be sold just like any other product? What makes them so special
that government has to be involved, other than protecting monopolistic
practices? I may never purchase a Tesla but I would argue against anyone that
would want to stop this type of car sales.

~~~
jbigelow76
> Why can't cars be sold just like any other product?

Because then they run the risk of getting Amazon'd or Wal-Mart'd.

~~~
talmand
Why is that a risk? What's wrong with ordering a car from Amazon?

Or do you mean it's a risk from the dealers' perspective? Because I get that
and personally don't care.

~~~
jrockway
_Because I get that and personally don't care._

But you donate less money to political candidates than the auto dealers do,
and so here we are.

~~~
talmand
Thus, why I don't care if they fail and are wiped out.

------
geebee
"Whine" is an alert word for me. Any time someone tries to present his
opponent's argument through an unflattering characterization "whining,
stomping his feet, throwing a tantrum" rather than by presenting a well
reasoned argument, I immediately become more guarded and skeptical about the
argument I'm about to hear. Have you ever presented what you felt was a very
fair and reasoned argument, only to have someone disregard it all and tell you
you're whining?

I know, I know, you just can't expect too much from journalistic headlines.
"Auto dealers claim that tesla stores are illegal" doesn't have the same
punch. And based on what I've read here, I am on tesla's side (though it's
pretty hard to find anyone on the side of the auto dealerships).

~~~
raganwald
I sense the presence of the submarine.

<http://www.paulgraham.com/submarine.html>

------
talmand
"Oh no! It's a new business model that is different than our old business
model! We must use legal means to stop it immediately because we don't know
yet if we can compete with it!"

Plus, customers may like it better since the current method is usually
despised...

~~~
jetti
There is no competition to be had. The dealerships aren't scared of
competition from Tesla, especially since the price of a Tesla Model S is out
of range for the majority of car buyers. What they are scared of is that Tesla
sets a precedence for other manufacturers to follow suit which would then put
a lot of people out of work.

~~~
mratzloff
_What they are scared of is that Tesla sets a precedence for other
manufacturers to follow suit which would then put a lot of people out of
work._

Good. There's no reason it should receive protection by the government in the
first place. It's bad for the consumer.

------
jwr
Today I found out that USA (arguably the most libertarian country on earth, as
far as business is concerned) has strict laws governing the sale of vehicles,
said laws actually preventing companies from selling vehicles. I find that
quite amazing.

~~~
jetti
Not to mention that there are some states that just prohibit the sales of
vehicles on Sunday. That is what I find amazing. I can't imagine being told
that one day a week I'm not allowed to sell my product.

~~~
techdmn
It does seem a little odd, but as a resident of one of those states I think
it's awesome. I can peruse the lot with zero chance of being approached by a
salesperson. IMHO it actually facilitates car sales, because one day a week
people can look at new cars without immediately feeling like prey.

~~~
jetti
You can do that online any time. What you see in the lot on Sunday is the same
as what you would see online.

But as a resident of one of those states as well, I hate it. Not because I
want to buy a car on Sunday but because if the dealership is open the service
section of the dealership would also be open.

~~~
moheeb
No, what you see online is a digital representation of a physical product.
What you see on the lot is an actual physical product that can be touched and
smelled.

~~~
mcguire
...and sat in. Or not, in my 6'5" case.

~~~
jetti
Not when the dealership is closed though...that's the point of just looking
online when they are closed on Sunday.

~~~
mcguire
Very true.

Once upon a time, there was a used car dealer in Austin that unlocked all
their cars when they opened in the morning. And the only time a salesguy would
ask "Can I help you?" (anyone hate "What can I put you in?" too?) was when
they were walking by you after talking to someone else. And they took "I'm
still looking right now" for an answer.

I felt really bad when I couldn't find something I liked there.

------
AVTizzle
>>“Anything that gets you to the executed contract is part of the sale,” Bob
O’Koniewski, executive vice president of the Massachusetts State Automobile
Dealers Association, told the auto industry publication.

When I read this, I couldn't help think of another quote from a 2008 Wired
article [1] - ironically on Elon Musk and SpaceX. In it, he shares nails down
a guy names John Pike, who predicted doom for SpaceX.

The context is different but the quote works:

>>Wired.com: Your whole mantra is "cheaper and more reliable." But so far
you're zero for three, which is anything but cheap and reliable, and guys like
GlobalSecurity.org's John Pike say the reason it has taken billions of dollars
and tens of thousands of people to successfully launch rockets is physics, not
some new design or economic model.

>>Musk: Guys like John Pike have existed since the dawn of time, and if you
listen to people like that then things will never get better, never change.

Guys like Bob O’Koniewski have existed since the dawn of time. You can either
generate wealth by creating value or seizing and hoarding value. It's clear
which side of that dichotomy Elon and Bob each stand, respectively.

[1] <http://www.wired.com/science/space/news/2008/08/musk_qa>

------
sixQuarks
Henry Ford was the one that started the independent dealer model. It made
sense back then, because there was no way he could handle both the manufacture
and distribution of the vehicles across the nation.

Today, the average dealer makes about $750,000 in profit each year. Many of
these dealers are family owned and very active with local politics. In many
smaller cities, the car dealership provides a good portion of tax revenues.

With all this said, dealerships have incredible clout when it comes to
legislation. They pretty much ruined TrueCar.com's business model.

I think Tesla will be forced to offer independent distribution at some point
if they get larger. And I've read that they are planning to do so. The dealer
lobby is just way too strong in this country.

------
AVTizzle
Epic comment in the quotes:

"What is best in life? To crush the middlemen, see them driven before you, and
hear the lamentation of their lawyers."

------
jasonkolb
So my running list of things that are obviously outdated and fruitlessly
resisting their death throes now includes:

\- Auto dealerships \- Music labels \- Government secrecy

~~~
tomrod
Only 3? I figured Radioshack/Bestbuy belong in this category in the long run.

Would be interesting discussion on what industries denizens of HN think will
fall in this manner.

~~~
freehunter
Radio Shack made themselves obsolete. I don't think Best Buy is obsolete, but
merely needs a restructuring.

Radio Shack used to be great when you were working on a project and just
needed one more part; a capacitor, a motor/servo, a PIC, etc. I don't need
another phone reseller, I don't need useless RC cars, I don't need odd TV
remotes. I need an electronics store that sells electronic parts.

Best Buy is great for researching your purchases. I can read reviews of a
laptop online, but I can't feel it, feel the build quality or the keyboard, I
can't test the viewing angle. I can read reviews of TVs, but I can't see the
picture quality, I can't hear the speakers. I can't ask questions and get
answer immediately. Best Buy is great for this.

I don't mind paying a higher price if it means I get what I need as soon as I
need it. These stores should, IMO, focus on things that a customer would not
trust an online purchase for, and focus on adding value to these immediate
purchases. Radio Shack for parts, Best Buy for consumer purchases, each with
value added by knowledgeable salesmen.

~~~
jmaygarden
The number of people that would buy a capacitor, motor/servo or PIC is not
what it used to be. Electronics don't ship with schematics anymore or have
nice big through-hole components that are easy for a layman to replace. I miss
the old Radio Shack too, but we are in a tiny minority.

~~~
wiredfool
I actually went into RS this weekend for an electronic part, and _almost_ came
away with something. They had a 5A relay, I need a 15amp part. It would have
been far cheaper than the $10 shipping from newark or one of the online
places.

So Close, yet so far.

------
eric_bullington
All that the auto dealers are going to do with this effort is draw attention
to this cool new car. Sure, they might succeed in banning them in a state or
two (which is ridiculous), but in the end any publicity will benefit Tesla and
hurt the dealers (disclaimer: I am not a marketing professional).

EDIT: To clarify my vague statement above, I meant "banning" the Tesla display
store business model, not banning Tesla altogether. That's a much more
unlikely outcome, although I'm sure they would if they could.

~~~
camiller
"Sure, they might succeed in banning them in a state or two..."

More likely they will be forced to create a franchise dealership network.

------
BryanB55
There was a similar discussion on how terrible car dealers are a few weeks ago
on HN when tesla announced their stores. The car dealer model is clearly
flawed. As an auto enthusiast and someone who spends way to much money on my
cars I absolutely hate car dealers and the BS you have to go through to buy a
car.

Not only that but it seems that every time I go into a car dealership I know
more about the cars than the sales people. Most of the time they're just some
random guy off the street that decided to sell cars and got their training
from a generic book or reading the sales materials. It's like they spent more
time learning how to negotiate, con their customers and make the most
commission they possibly can than they do learning about the car and what they
are actually selling.

I feel bad for consumers that are not "car people" and go to a dealership
seeking info from sales people.

------
rickdale
"If, after the sales pitch, you’re ready to pull the trigger, you are politely
directed to a computer to make your deposit and place your order."

Sounds like their business model will be left for a judge to decide. I think
people on HN are angry because the auto industry feels like a monopoly and the
law that Tesla might be infringing on should be illegal any ways. But what the
judge wil have to decide is whether Tesla's interpretation of the law is
correct. In normal cases this could take a pretty long time and Tesla would be
able to operate until a judge says otherwise.

Without reading the law I would like to think that Tesla is onto something
here. Just like the rest of the angry HN users, I would feel satisfied to know
that the big auto industry wrote a law for their own benefit and technology
passed them by.

------
jakubp
I'm confused. Is this article saying that in the US it's _illegal_ for a maker
of the product to sell the product to whomever he wants?

How is that helping anyone but the dealerships?

~~~
camiller
Say for example there are five Chevy dealerships in the greater Omaha area. If
General Motors were allowed to own one itself it could give itself discounts
internally such that it could undersell the other dealers and put them out of
business. Once the competition was gone it could then raise prices harming
consumers. Competition is good for consumers and the laws in question are
aimed at protecting consumers.

Yes I know they are also competing with other brands, but some people are
brand loyal enough that they would not switch to Ford or Chrysler.

~~~
creamyhorror
"If Apple were allowed to sell its own products itself, it could undersell
other dealers and put them out of business...

Yes I know they are also competing with other brands, but some people are
brand loyal enough that they would not switch to Android or Windows Phone."

~~~
graywh
In regards to your edited quote:
[http://www.coolsprings.com/news/macauthority-closing-for-
app...](http://www.coolsprings.com/news/macauthority-closing-for-apple-store-
at-galleria/)

------
dasil003
Timing is ripe for Tesla to join up with other auto manufacturers to start a
PR campaign to get these laws overturned. Normally special interests are the
only ones who care enough to lobby about niche issues which is how we end up
with so much bass-ackwards legislation. But in this case it's manufacturers vs
dealers, and the public by and large hates dealers, so this could quickly be
turned against them and I bet they'd shut up pretty fast.

------
marcomonteiro
As an American, this disturbs me to no end. There are laws on the books to
prevent a manufacturer from selling their own product directly to consumers?
And what of the benefit? To protect a certain class of sales people.

I'm a licensed real estate agent (non-practicing) and I can understand the
need for government regulation to protect consumers from ignorant and
unscrupulous sales people but in no way is a home builder prevented from
selling their homes directly to home buyers. Real estate law, at least in
California, covers required disclosures which apply both to manufacturers and
salespeople.

I can understand limiting sale of certain classes of products that can be
dangerous if in the hands of the general public but not limiting sales to
monopolize a class of salespeople. Especially to the detriment of
manufacturers and consumers.

Am I missing something? I can't see who wins except for car dealerships.

~~~
beagle3
> As an American, this disturbs me to no end. . . > Am I missing something?

The fact that this surprises you means you've probably missed the hundreds of
other such laws that are on the books, and for which you are paying daily (and
dearly) without even realizing.

------
sbarre
So if "anything that gets you to the executed contract is part of the sale",
shouldn't all those independent car dealerships be paying the car
manufacturers for those expensive and slick TV, magazine and internet
advertisements they produce to get people to go to said dealerships to buy
their cars?

(Or do they already?)..

~~~
jellicle
They do.

~~~
jimm
Actually, we do. If you look closely you'll often see a line item on the final
invoice for something like "advertising" or "promotion". Yup --- they make you
pay for the advertising.

I learned this years ago from a site that walked through car purchase
negotiation techniques. Sorry, I don't remember which site.

~~~
damoncali
Semantics. We also pay for their air conditioning, tools, coffee, uniforms,
etc. if you want to use that logic. It's just broken out for some reason.

------
tzaman
True story (mine): I knew a car dealer that made it very clear to me that if I
buy the new car from him (and leave the old one there for a lower price) he'll
give me significant discount. I said to myself "can't hurt to try" and went
this route. The next day after owning the car (which I still own) the new
owner of my old car called to ask what's the realistic condition. Turns out
the dealer sold him the car for about $1500 more than I got from him, so I can
only imagine he made the same thing with my new car, earning him $3000 for
less than two hours of papirology.

I don't mind people making money, but for $10 - %15k cars it's an absolute
steal.

~~~
lysol
This is normal. The dealer makes very little from a new car. They have to
recoup that from trade-ins and selling used cars, which have a higher margin.
New cars don't offer a lot of wiggle room because the invoice price for them
is set, and they already sell them for little profit.

~~~
btilly
The dealer makes more than that from the new car. In addition to the invoice
price (which is significantly higher than the dealer price) they also make
money from add-ons, extended warranties, and the loan terms.

This doesn't stop them from making top dollar on everything else that they can
though.

~~~
ssimpson
And some manufactures have "holdback" which means the dealer can get a
percentage back if the car sells within 90 days. For VW it is 2% off MSRP.

<http://www.edmunds.com/car-buying/dealer-holdback/>

------
noarchy
The legal protection afforded to cartels is just astounding. I think just
yesterday the front page of HN was talking about the taxi cartels, and their
efforts to use the law to prevent competition. And now this? As others here
have already pointed out, this doesn't really resemble the free market that
the US is alleged to have.

------
crazypyro
I abhor when people use "veep". It just looks childish and makes no sense....

------
amorphid
If Tesla encourages one to buy the car at a terminal within the non-
dealership, to me that feels like something similar to self help checkout
lines at a retailer who offers home delivery. My best guess is that the car
dealership law was never intended to cover this.use case, and that both Tesla
and the dealer associations should be lobbying to change the law in their
favor. I'd hate to rely ok existing law for this one.

------
xmpir
tesla did some great work here. i can't follow the argument that automakers
selling cars kills competition. the analogy to apple stores is a perfect
example: there are still thousands of resellers offering apple products!

------
btilly
I am not a lawyer and this is not legal advice.

Every one of these sales takes place over the internet, and across state
lines. This is interstate commerce. How then are states able to regulate it?

~~~
icebraining
It's not that simple:
[http://law2.umkc.edu/faculty/projects/ftrials/conlaw/stateco...](http://law2.umkc.edu/faculty/projects/ftrials/conlaw/statecommerce.htm)

Since the regulations aren't applied specifically to out-of-state businesses,
and considering that many states have the same laws (hence there's no
unreasonable burden on out-of-state businesses), they may be legal.

I'm not a lawyer either, though.

