
Tesla Faces New Jersey Challenge as Rule Change Looms - melling
http://www.bloomberg.com/news/2014-03-11/tesla-says-new-jersey-may-force-its-stores-to-close-correct-.html
======
brown9-2
There was an article two weeks ago about a similar effort in NY state which I
thought had an unusually revealing quote:

 _Deborah Dorman, president of the Eastern New York Coalition of Auto Dealers,
was at that meeting and said Tuesday Cuomo aides told the group the governor
would sign the bill if it passes.

She said the bill was designed to protect consumers because it required
companies to create a storefront in the state and was not directed at Tesla
because it sold electric vehicles. Some environmentalists have claimed the
bill unfairly targets electric car manufacturers.

“Everyone is selling electric cars, it has nothing to do with that,” she said.
“If you allow someone to come into the market with no overhead, that's an
unfair advantage,” she said._

[http://www.capitalnewyork.com/article/albany/2014/02/8540876...](http://www.capitalnewyork.com/article/albany/2014/02/8540876/proposal-
restrain-tesla-new-york)

~~~
toomuchtodo
> “Everyone is selling electric cars, it has nothing to do with that,” she
> said. “If you allow someone to come into the market with no overhead, that's
> an unfair advantage,” she said.

Being more efficient than your competitors in NY state is apparently an unfair
advantage.

~~~
malokai
An inefficient business model that continues to thrive due to outdated laws.
And that most consumers hate.

The government should seek consumer input on this.

I'm completely unsurprised that Arizona and Texas, supposed bastions of
capitalism, oppose a better form of business.

------
runewell
It's pretty sad when you're not allowed to sell your product to your customer.
If car dealerships provide such a valuable service then they should survive on
their own merits and not have to exist parasitically through legislation.

~~~
atom-morgan
Thank you! I'm surprised more people aren't able to pick up on how suspicious
it is for the government to make it _illegal_ to avoid a 3rd party.

~~~
ctdonath
Go read the Supreme Court's ruling in _Raich_. Upshot: they ruled a violent
raid on a terminally ill old lady's home was legal because her home-grown
state-legal doctor-monitored half-dozen pot plants _decreased_ demand for
_illegal_ interstate commerce.

If they want something illegal, they'll torture the law until it agrees.

------
timdorr
I can understand things like the Three Tier System for alcohol because that is
an addictive substance that can cause serious harm if improperly used. But why
is this same logic in any way applicable to automobiles? They want to impose a
required distribution layer between the manufacturers and the consumer.
Enforced middlemen.

Imagine if that applied to the startup world: "Oh hey, you want to buy this
SaaS product I built? Well, you can't sign up on my site, you'll have to buy
from one of my SaaS distributors."

Madness.

~~~
Meekro
Have you ever shopped for high-end routers, like Juniper or Fortigate? For
some reason they absolutely refuse to sell directly, and force you to go
through one of those stupid resellers that don't even understand the product
they're reselling. Ask the resellers any non-trivial questions, and they
forward it back to their contact at the main company.

Never understood that.

~~~
maratd
> Have you ever shopped for high-end routers, like Juniper or Fortigate?

A lot of people don't understand that this isn't just high-end routers. It's
actually all electronics.

Try to buy a motherboard directly from the manufacturer, or a monitor, or
really, anything else.

The manufacturer will direct you to their sales wing, at which point, you will
be instructed to buy from their approved distributors. Those distributors are
large companies that work as middle men.

And then even those distributors will not sell their goods to you unless you
have a reseller license and go through their application process.

~~~
rtkwe
What that does it vastly simplify the logistics for the manufacturers. If you
could order directly from them they'd have to hire sales people or people to
run their web store, shippers to pack and ship individual components instead
of just palletizing everything, and then have to deal with the laws of each
customer's country about taxes. It's much simpler for them and more efficient
on their end to just sell to a middleman.

~~~
maratd
> It's much simpler for them and more efficient on their end to just sell to a
> middleman.

In that case, Dell, Apple, Sony, and Microsoft must be morons. Because they
sell directly to consumers.

It's not about simplicity or efficiency. It's much more efficient to sell
directly to the consumer. It just takes an immense amount of resources that
smaller manufacturers simply do not have. That's why medium/small sized
manufacturers rely on larger middle men and retailers. Not because it's more
efficient, but because they simply don't have a choice in the matter. They
don't have the resources to go directly to the consumer.

~~~
rtkwe
Your example companies are working at huge scales compared to most companies
that go through distributors. The big difference there is that those companies
are selling consumer goods. Many companies that deal exclusively through
distributors are selling to businesses, it's a much different environment.
When you're working at a huge volume the difference in price makes a much
larger impact than if you're selling to a smaller number of companies and the
cost of setting up the handlers is dwarfed.

> It just takes an immense amount of resources that smaller manufacturers
> simply do not have.

Requiring less resources is a form of efficiency for the manufacturer. Being
able to simply ship to a single distributor vs shipping to many individuals
and having the infrastructure to process those packages, is more efficient to
the small manufacturers. It may not be on the wider economic scale but for
small companies it saves a lot of work.

------
CamperBob2
Big surprise, in a state where you're not even allowed to pump your own gas.
If they did allow Tesla sales, you'd have to hire someone to plug it in for
you. Electricity is dangerous, dontchaknow.

~~~
mullingitover
Having lived in Oregon (where motorists are put on a pedestal and actually
served by gas station attendants) and then California, I don't understand the
masses clamoring to pump their own gas. Is this supposed to be a privilege,
getting out of the car in potentially inclement weather and messing around
with flammable liquids?

~~~
CamperBob2
It's nothing but the broken-window fallacy in action. If I didn't want to pump
my own gas, I'd pull into a full-service lane instead of a self-service one...
but the market has pretty much spoken on that issue. I don't know where I'd
even _find_ a full-service lane anymore. There is almost no demand for it in
the absence of coercion.

(Yeah, yeah, I know, I should STFU and move to Somalia...)

~~~
pbreit
Another example, along with cigarette-free establishments, that the free
market is not capable of delivering.

~~~
CamperBob2
Smoke-free businesses are a gray area, because we're talking about an
addictive substance. Businesses that refuse to serve tobacco addicts are at a
disadvantage that apparently can't be overcome by additional patronage from
customers seeking a smoke-free environment. So the government steps in, in the
name of public health. I don't agree with these laws 100%, but I can see the
argument behind them.

Full-service gas stations, on the other hand, are neither prohibited nor
mandated in most states. They would exist if there was a market. There's not.
End of story.

------
velodrome
This is just an of desperation. Plain and simple.

I don't understand what is so unfair about it. Tesla is the one going into
these states as a newcomer, they have an expensive product, they have to pay
rent and hire workers. If these franchises want to complain, complain to the
manufacturer they are representing.

The thing is these franchises don't offer enough value-added services needed
justify the extra costs (or their existence). That is why they are afraid.
They know this (this is why they have such a bad reputation from customers).

Also, cars are increasingly becoming more complicated. These hybrids being
built now are so complicated that they require automated tests to be done to
detect issues. As technology progresses, these franchises will increasingly
rely on the manufacturer for assistance in solving problems that are not
simple.

I think the real advantage to Tesla is that the feedback loop is faster. They
can listen to customers and improve their products faster. Improving the
products can further reduce the costs and increase it's competitiveness.

~~~
gamblor956
Car dealers exist because they isolate the risk of local car sales from the
manufacturer. This includes not just inventory management but credit risk
management and other business considerations. Business-wise, this is a very
good thing. Car manufacturers are in the business of _making_ cars, not
selling them. (This is an important, if subtle, distinction.)

From a customer standpoint, they also provide a guaranteed location at which
the car can be serviced. If you buy a common car like a Ford or a Toyota,
you'll have your choice of mechanics. If you buy an import or a Fiat, your
only option locally may be the dealer you purchased the car from.

 _As technology progresses, these franchises will increasingly rely on the
manufacturer for assistance in solving problems that are not simple._

Yes, but if any such problem is severe enough that only the manufacturer can
deal with it, they've got a mandatory recall issue, and the manufacturer would
be _forced_ to handle the problem. Car dealers usually have the best-trained
(and first trained) mechanics for any model of car, pursuant to franchise
licensing agreements.

 _real advantage to Tesla is that the feedback loop is faster._

In the real world, fast iteration for physical products is not a good thing.
You end up turning any particular iteration of the car into a commodity, which
lowers demand because buyers will want to just wait for the next iteration.

~~~
jamesaguilar
> Car dealers exist because

If it were really the slam-dunk win you claim it is, Tesla would probably have
used dealers too.

~~~
gameshot911
I thought he offered a very fair counterpoint to all the anti-dealer arguments
presented so far.

------
gideonk
Planet Money did a piece on the difficulty in selling cars directly to
consumers.

Short version: the auto dealers are a powerful lobby group that prevent this
from happening.

[http://www.npr.org/blogs/money/2013/02/19/172402376/why-
buyi...](http://www.npr.org/blogs/money/2013/02/19/172402376/why-buying-a-car-
never-changes)

~~~
crusso
True, but I think that the genie is out of the bottle on this one. Tesla is
way too popular and residents of states that can't get them because of
lobbiests are probably going to make it uncomfortable for politicians who
don't eventually give in.

------
pbreit
I'm prepared to entertain a defense of a ban on direct-to-consumer auto sales
but have not yet seen a compelling one. Did such a ban make sense in the past?

~~~
protomyth
Here are two interesting papers:
[http://www.justice.gov/atr/public/eag/246374.pdf](http://www.justice.gov/atr/public/eag/246374.pdf)
[http://faculty.som.yale.edu/FionaScottMorton/documents/State...](http://faculty.som.yale.edu/FionaScottMorton/documents/StateFranchiseLawsDealerTerminationsandtheAutoCrisis.pdf)

My only comment is that if Tesla gets to do direct selling then Ford should
also be allowed.

~~~
pbreit
I could sorta see that at car price points there could be some structural
advantages for the manufacturers over the dealers that might benefit from some
protection. But it does seem like little more than local political power here
in 2014 USA.

~~~
protomyth
If the law were changed overnight so the manufactures could sell direct, then
I would expect the number of surviving dealerships to be very low. I would
imagine it would be dealers in used and exotic cars that survive or rural
areas that do multiple manufactures.

It is a local power thing, and I don't agree with it, but I also don't think
anyone should get an unfair advantage just because they are new. That doesn't
promote competition.

------
knodi
Direct sales should be opened up to all car manufacturers not just Tesla.
Tesla is no exception, if GM isn't allowed to do direct sale Tesla shouldn't
be able to as well.

~~~
cpwright
If GM wants to do direct sales, they should buy out the franchisee. Tesla
never sold away its franchise rights, so should be allowed to sell direct.

~~~
ctdonath
Allowed? Question is: by what delegated power does the government have any say
in the matter?

~~~
gamblor956
The power to regulate commerce at the appropriate level (in a federal system;
in non-federal systems this distinction is meaningless), which has been a
traditional power of government since the dawn of history.

------
stormbrew
It's a good thing the Republicans are around to fight for free enterprise and
a friction-free market!

... Oh wait.

~~~
protomyth
Both parties take money from auto-dealers, and sadly "small government"
doesn't seem to mean the same thing to everyone.

~~~
roc
It's an evergreen attempt to cloak plain-ole self-interest-and-politics in
more-noble-sounding attire. (Not unlike "States' Rights")

~~~
protomyth
I don't disagree with the first part, I do disagree strongly with the "State's
Rights" part. The Constitution is a balance and should not be Federal heavy
like it has become in the 1900's to today.

~~~
roc
I have no problem with States Rights. I have a problem with people trying to
dress up naked self-interest and practical politics by saying "States Rights".

Mostly, transparent attempts to restrict services and rights from subsets of
the citizenry. In either real attempts at discrimination, or cynical efforts
that are doomed to fail at anything but driving up voter turn-out.

------
Istof
While they're at it, why don't they also block Google fiber since it disrupts
a duopoly...

------
bedhead
Misaligned incentives in action.

