
New Jersey Votes to Block Tesla’s Direct Sales - ibsathish
http://recode.net/2014/03/11/it-happened-new-jersey-votes-to-block-teslas-direct-sales/
======
oskarth
This is what pg tweeted earlier today:

 _Banning Tesla is an index of the corruptness of state governments as banning
Uber is of city governments._
([https://twitter.com/paulg/status/443469758369767425](https://twitter.com/paulg/status/443469758369767425))

A very astute observation, as usual.

~~~
sheetjs
PG is off the mark here. Companies like Uber explicitly ignore the existing
laws and regulations. In the case of Tesla, the ruling just passed.

~~~
pjg
Can you tell me why you think PG is off the mark ? Tesla is a company
marketing a product that people want. If people want Tesla their elected
representatives should not and cannot stop them from exercising their choice.
Passing laws to prohibit people from buying something available in the market
is an index of corporate interests using money to buy favors from elected
representatives i.e. an index of corruption. Do you have any claim to support
your argument other than a blanket statement "PG is off the mark here" ?

~~~
bsder
Because the rules for cab companies actually serve a purpose--they actually
ensure that there is some minimum level of service that the consumer can count
on in terms of service, fares, non-discrimination, insurance liability, etc.

If services like Uber and Lyft simply decided to be a cab company with
excellent technological underpinnings, people would have been quite happy with
them and they would have been quite profitable. And they could have blown most
cab companies out of the water. Buying up inefficient operators, consolidating
them, and bringing them into the modern world of technology is a really good
business plan.

Uber and Lyft are in trouble because they wanted to be _exit strategy_
profitable rather than simply profitable. And they decided to do this by
ignoring all of that icky stuff like liability insurance, commercial
licensing, and following the law. In addition, Uber and Lyft tend to want to
ply their trade in areas which are already profitable to cab companies rather
than taking over areas that are underserved. If they were brokering rides in
areas that can't get cabs easily, they would have lots of defenders.

There is a big difference between laws that actually protect consumers vs.
laws that protect middlemen. The fact that pg can't see the difference is a
pretty big issue.

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johnvschmitt
Here's how we got here:

1) Money buys political influence (duh!)

2) Most cities have small tax bases, where car dealerships are a very large
part of the tax base. City managers want a larger tax base to help fund their
plans.

3) Thus, car dealerships & local politicians have aligned incentives.

4) So, local laws (zoning, advertising, etc) favor car dealerships.

5) Higher offices are filled from the pool of local politicians, as they move
up the food chain.

6) Those politicians remember their contacts @ the dealers, who helped
fund/launch their careers, & they remain aligned with them in passing laws
empathetic to dealer's interests.

Of course, legitimately, car dealerships have HUGE capital investments (fast
aging inventory, large chunks of prime real-estate, staffing costs). Would YC
ever want to get into the traditional dealer space? No friggen way. Too risky
& doesn't scale.

And, nobody really buys a car without a test drive/showroom. So, nearly any
"online" sale is cannibalizing the dealer's investments.

So, we need to have some kind of online buying system where you MUST enter in
a dealer showroom code before buying, & they get some commission, as they DO
offer real value here folks.

IMO, the whole consumer retail system is going to evolve into "showroom +
online buying" in a fair system soon.

~~~
MBlume
Hmm, Apple does this just fine, but Apple isn't franchising the stores, they
just comfortably run them at a loss. The fact that the dealerships have
independent owners may make that more complicated. Your system seems
reasonably sensible.

And you wouldn't _have_ to enter a dealer showroom code, your dealer would
just give you a code for a "special discount" \-- this is how businesses
already track which of their ad campaigns are paying off.

~~~
ak217
Do you have a source for Apple running their stores at a loss? I doubt that
actually happens.

~~~
tjl
They don't run them at a loss. They're the most profitable retail stores in
the US (on a per square foot basis). At least they were in 2012. Since sales
haven't really gone down much, that's probably still true as Tiffany's (next
best) was about half of Apple's.

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free652
I hate dealers, every time I buy a car it is always a stressful experience.
Dealers are trying to cheat me on every my step.

Last time I was via PenFed Car Buying Service, got a "guaranteed" web quote:

Got the dealer:

Sure, we will honor the price. But all of our cars have door guards installed
- that's $500 extra. We just don't sell the cars without door guards.

Got the contract for the car:

Some extra maintenance plans included for an another $900, forced to remove
them. Oh and the dealer made an another mistake for $1000, couldn't add up two
numbers together (damn liar). An hour later got a fixed contract.

Got to the financing guy who is trying to sell me extended warranty and gap
insurance for about an hour.

And that's over 6-7 hours at the dealership... /vented

~~~
beachstartup
you are comparing the purchasing experience of a high end car (tesla) against
a low end one.

~~~
s0rce
I've purchased a $60,000 BMW and they still tried to sell stupid crap.

~~~
smsm42
Only logical - if you've got $60000 on BMW you've probably got more money to
spend on stupid crap, so why not try to get it out of you? ;) They'll always
try it, but the decent ones won't try it again after you say no.

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DigitalSea
Holy crap. Is this for real? Dealers are one half of the rotten pie that is
the car industry, just let the dealer industry die already. Much like the
music business tried fighting digital music only for it to completely take
over, the car industry eventually will change to a different model that isn't
reliant on an industry lubed up in snake oil and shady business practices.

Extended warranties, sneaky extras and premiums added to your contract, the
amount of crap you have to endure when buying a new car these days is
horrendously deep. If only more car companies sold directly and allowed you to
buy online like Tesla does, I know the lobbyist motor dealerships group would
never let that happen though.

No wonder the car industry is in the toilet, it's killing itself and Elon Musk
is one of few people trying to change things and he's met with resistance:
typical.

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bane
This is also the state that doesn't allow self-service when you pump gas in
your car.

~~~
denverpeterson
Thank you bane for saying what the rest did not (84+ comments).

Middlemen gotta get theirs.

Big Oil, Big Auto. Why would they have a problem with electric cars?

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EGreg
I would love to hear what kind of rationale can be given for banning a car
company from directly marketing and selling its own products to consumers.

~~~
bodyfour
The short answer: very few state legislators have auto manufacturers in their
districts, but every one of them has car dealers.

~~~
mcv
Nice. Protectionism and trade wars between US states.

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rsobers
Tesla has a showroom at Short Hills mall in NJ. You can go in, check it out,
test drive the car, and then order online. While it's really telling about
NJ's government, I don't think it'll impact Tesla or its customers.

Also, I love how the article title reads "New Jersey Votes", as if the
citizens got a vote in the matter.

~~~
freshyill
Ugh, the Short Hills mall. The _ultimate_ rich mall. _Of course_ they have a
Tesla showroom.

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tzs
The article is a bit misleading. It makes it sound like direct sales were
legal in NJ (and so presumably the only reason Ford and Chevy and Toyota and
the rest did not do them is that they did not want to), and the politicians
are now stepping in to make a new law to stop Tesla.

In fact, it looks like direct sales have been illegal for a long time, but the
law is poorly worded, and can be read in a way that bans direct sales for
Ford, Chevy, Toyota, and most other major car manufacturers, but does not
apply to manufacturers like Tesla, who _only_ sell direct.

What the new law is doing is saying that the old law is meant to apply to all
car manufacturers, not just Ford, Chevy, and so on.

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cyanbane
Whats to stop a NJ resident from going to NY to purchase a Tesla direct? Is
their a a big financial penalty for doing so when registering? What is to stop
a grey market of NY residents reselling them to NJ consumers if so? This makes
no sense.

~~~
btian
Nothing. Just as there's nothing stopping an NJ resident from buying a Tesla
on the Internet from her home.

It's just to annoy people who don't know what they want. They can still do
test drives in NJ, but can't talk about pricing, options, financing options
etc.

~~~
matt_heimer
> Just as there's nothing stopping an NJ resident from buying a Tesla on the
> Internet from her home.

And when Tesla creates a Oculus Rift based VR showroom? What if there was a
fancy VR showroom in the mall where several different vendors could show there
wares - would Tesla be the only company banned? It'd be fun watching that
battle.

------
DrStalker
Why aren't auto manufacturers jumping on the idea of selling directly to the
public? Do they get some benefit from middlemen that Tesla doesn't, or is it
just because they are so established doing things one way they won't consider
other ways?

~~~
icambron
It's for the same reason that movie distributors don't bypass theaters by
selling directly to the public. Originally, it was hard to distribute cars,
and car manufacturers didn't want to make the investment to open little
retailers everywhere. So they offloaded the risk and capital requirements to
third parties, who could customize themselves to the markets they were in
(what inventory to carry, where to locate, how to advertise, etc). Then those
dealerships became their main (only?) source of revenue. Now they're beholden
to their main sales channel. If they started selling cars directly, the
dealerships revolt (like a labor strike - what do they have lose here?) and
cut them off from revenue for a month. Similarly, theaters very explicitly
refuse to show movies that are directly release to the public, which means,
for the moment, that those movies won't make any money, and thus movies aren't
released that way.

That's a scenario no upstart car company would ever enter into willingly, so
Tesla of course didn't. And eventually, companies like Tesla will increase the
pressure on all car companies to sell directly, and the dealership cabal will
collapse. But in the meantime, that's a lot of tied hands.

Adding legal barriers through lobbying makes all of that worse, of course.

~~~
erichocean
_It 's for the same reason that movie distributors don't bypass theaters by
selling directly to the public._

Your understanding of the history of movie distribution as it relates to
theater ownership isn't quite right. You can read up more here:
[http://en.wikipedia.org/wiki/Block_booking](http://en.wikipedia.org/wiki/Block_booking)

In a nutshell, distributors (i.e. movie studios) owned the major theater
chains until 1948, when the Supreme Court demanded that theater production and
distribution be separated from exhibition (i.e. theaters).

~~~
icambron
Thanks. I guess I didn't mean to suggest the history was the same (I know
almost nothing about the history of theaters), just the current situation. So
sorry for the poor paragraph organization. I will stand by my assessment of
the status quo, though. I remember a few years ago, theaters refused to show a
Soderbergh movie because it was being released simultaneously on DVD and the
theaters.

Not a great article, but here's a reference:
[http://www.techdirt.com/articles/20060118/195200.shtml](http://www.techdirt.com/articles/20060118/195200.shtml)

------
andrewfong
I wonder what requirements are placed upon dealers. In theory, Elon Musk could
just open up his own "Elon's Teslas" shop and voluntarily sell the cars for no
additional markup. There'd be some additional overhead, but it'd still be a
much nicer arrangement overall than the current one I bet.

~~~
Lost_BiomedE
In Texas they have Tesla stores that only offer test drives. Then, you buy it
online in the shop from Cali.

------
akulbe
I think someone is paying someone else off. The automotive lobby is big and
powerful.

~~~
nickff
Public choice theory explains the situation quite well.[1]

[1]
[http://en.wikipedia.org/wiki/Public_choice](http://en.wikipedia.org/wiki/Public_choice)

------
0x0
What's stopping Tesla (or Elon Musk) from starting a new dealership
corporation that happens to sell Teslas?

~~~
m_darkTemplar
Apparently it's fine in New York though. Can you somehow just buy one in New
York and drive it back? It's not too far away.

~~~
joeblau
That depends where you live in NJ.

~~~
mayneack
I'm guessing the number of people that can afford to buy a Tesla in NJ and
can't make it to NY to get it is very small - for the current slate of Tesla
cars.

------
cm127
I didn't realize this was so common:

> Tesla has won recent legislative battles in states like Washington, Ohio,
> New York and Minnesota, but states such as Texas, Arizona and Virginia have
> retained or added laws limiting the company’s ability to operate stores.

------
drawkbox
Here we have a new industry everyone wants, a US product people want that gets
high awards, innovative, inspirational and lawmakers go and block easier ways
to sell it. Is this how we are going to compete on new industries and
alternatives?

This is the same middle man battle going on in other industries, years of
legacy middle men. Dealerships will still exist and Tesla won't kill them, let
them play.

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rhizome
Next up: New Jersey prohibits registration of cars bought direct.

~~~
ryen
Next up: New Jersey prevents people from pumping their own gas. Oh wait...

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smsm42
That's the state where it is considered too dangerous for you to fill up your
own car with gas, right? So one's expectations of that place's lawmaking
sanity should be already pretty low, and these expectations are now confirmed.

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tdiggity
Anyone know if they've considered the most logical route:

If you sell direct, no dealers. If you have dealers, you can't sell direct

In all of Tesla's battles, I haven't seen this brought up.

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xophe
Isn't this "Bridgegate" Christie?

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tnuc
Looks like Tesla is going to convert it's sales centers to "showrooms"

I have to admire Tesla for standing up to this corruption.

~~~
DrStalker
Does that mean you can go in, look at and test drive a car but not purchase
one, then you go home and order one online?

~~~
wmf
Yes, that's how they operate in several states.

------
PythonicAlpha
I thought, that the US are the land of free market?

Sometimes, it just seems to me the land of free market for those that can
afford it?

~~~
smsm42
Are you a time traveller from the 18th century or something? The good people
in Congress have worked for centuries to not let free markets remain too free
- otherwise where the good people in Congress would get the votes and the
campaign funds, if they couldn't tweak free markets to benefit this or that
interest group? Of course, the good citizens are universally (within tiny
margin of error commonly called "those crazy libertarians") cheering this
since they belong to one or other interest groups. The fact that while they
are screwing others with one special interest law other screw them ten times
with another ten special interest laws so at the end everybody ends up being
screwed ten or eleven times eludes their attention and will probably continue
to do so for many many years.

~~~
PythonicAlpha
No, I am from Europe, and in Europe we are told, that the US is the holy grail
of free market ... in the US, everything is better as in our countries, and
that is the reason, we have to shape them by this role model of freedom and
Democracy! That is also the reason, we constructed the EU with all its
strictly democratic possibilities for corporations to screw up the European
commission and don't have to deal with stupid local politicians that always
have some doubts (European commission has never doubts, that corporations have
the right thing to say ... as long as they are big enough and can afford it
...) -- btw. we also have the European parliament, but the constructors of the
system had the foresight to give them no ability at all to come in between the
right things and the commission -- the European parliament is somewhat for the
EU what the Queen of England is for the British. Costly, but has nothing to
say, that the Commission did not dictate.

But thank you for the little insight into the political system. Though I don't
understand to much what this Congress, Senate and whatsoever are all about ...

~~~
smsm42
>>> in Europe we are told, that the US is the holy grail of free market

The same forces opposing freedom in Europe exist in US. The US Constitution
sometimes slows them down (esp. in regards like freedom of speech, which in
Europe is commonly restricted) but they still claim many successes.

Then again, there's probably the difference in approaches in Europe and US. US
constitution starts with "We the people" and the EU constitution project
starts with [1] "HIS MAJESTY THE KING OF THE BELGIANS, /.../, HER MAJESTY THE
QUEEN OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND" and so it
goes on. Then again, it was rejected, so maybe there's hope yet :)

[1]
[http://www1.umn.edu/humanrts/instree/euroconstitpreamble.htm...](http://www1.umn.edu/humanrts/instree/euroconstitpreamble.html)

------
jrockway
What's next, the governor blocking lanes on the George Washington Bridge to
get back at a political opponent?

~~~
InclinedPlane
This isn't relevant to this discussion, you're not helping.

~~~
mayneack
This isn't relevant to this discussion, you're not helping.

~~~
jrockway
We must go deeper.

------
nrbafna
What are the regulations around setting up a dealership?

\- Can Tesla set up a proxy dealership whose only job is to take the order and
send out a receipt of purchase?

\- Can dealership be purely online?

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shardulm
Its surprising to see why Auto Manufacturers uniting against this , reaching
directly to Customer without middle man must be really good for them too ,
isnt it ?

------
vpeters25
IANAL, just wondering whether these state laws conflict with the
constitution's commerce clause. Has such legal theory ever been tested in
court?

~~~
npizzolato
What is the conflict? Unless there's a federal law that says that auto
manufacturers can sell direct to consumers in states, I don't see what
conflict there could be.

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zallarak
This is madness. Tesla's model of selling is simply better; it is cheaper to
the customer and cuts out unnecessary middlemen.

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shmerl
Corrupted law bought by car dealers. How can public accept such obvious
corruption?

------
hnriot
they could sell them in the Apple store. Solved.

~~~
marshray
They could call them novelty spinning-rims mobile device rechargers or
something.

------
snambi
Ah god

------
blazespin
It could also be because people are waking up to the irrational exuberance in
the tesla stock. Imagine selling all these cars but not actually delivering
them.

~~~
danhak
wait, what?

~~~
strlen
obvious short is obvious

