
FTC Officials Back Tesla’s Right to Sell Cars Direct to Consumers - prostoalex
http://techcrunch.com/2015/05/11/ftc-officials-back-teslas-right-to-sell-cars-direct-to-consumers/?ncid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29
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chisleu
Having bought a new car recently, and having to drive 100 miles, past 4
dealerships, just to get to a dealership that was willing to give me a
reasonable price (still high, but reasonable) for a car that is in low demand,
I support every company's right to go around the dealerships. They are
disgusting.

While sitting around waiting for 20 minutes "cooking" in a dealership waiting
for the man to come back with a price for a used car, I heard 4 other salesman
standing around, pretending to be customers, laughing and making fun of people
who had come in to buy a car. Some pretended to be gangsters who had to "go
geyt sum monnah frum muh baby mommah's couch". Another pretended to be school
teachers who had to pay the down payment with 3 different checks. It was
disgusting. I left after it was obvious that the man was making me wait for no
reason, and when I left, he sent me a text message with a price for a base
model, used car, for ABOVE the new price not 100 feet away from his desk, at
the dealership next door.

It was a very abusive process. I've never been in another situation where you
ask how much something costs, and they say "make an offer!"

That's like going into Walmart and asking how much a TV is, and they say
"What's it worth to you?"

Gross. I felt like I was dealing with conmen from the start. I will never buy
another car from a dealer.

Tesla has the power to lead the way into eliminating these middlemen monsters
and I hope they see more support in that regard.

Note: I needed a pretty specific car because I'm extremely tall and I'm having
back problems from having to slouch in normal sized cars. Because of this, I
had limited options in the way of dealers.

~~~
matwood
Unless you're being forced to buy a car because of a wreck or something
similar, you have to remember that you have 100% of the power. I've had
salesman and "sales managers" laugh at my price and then chase me out as I
walked out, only to call me a week later offering my price to which I told
them was no longer good so it needed to be lower. I've had the finance guy
literally not shaking my hand at the end of the deal and telling me never to
buy a car there again (I had to correct his _mistakes_ over and over). Buying
a car is war, and if you approach it that way it can be quite amusing.

Some other stories, I had a friend when buying one of his cars it was a month
long negotiation. I would be in his office, the phone would ring he would pick
up say "No" and just hang up on the sales guy. Pretty hilarious actually.

Another friend walked into the dealership, money in hand and told the guy a
price and that he had 45 minutes before he had to go back to work. He said it
was awesome watching the salesman run all over the lot in the heat, but the
deal got done.

If someone does not want to negotiate, CarMax is okay. The prices are not the
best, but they are clearly shown online and the buying process is dead simple.

~~~
thrownaway2424
This is true. The buyer has all the power in a car purchase, especially for a
sports car or motorcycle which are nonessential to daily life. I'll tell you
two stories of acquaintances. One wanted a Lamborghini, so he researched what
he wanted, drew up a letter to the dealer and included a cashier check for the
price he was willing to pay, and a return envelope. Initially the dealer
responded in the negative, but without returning the check. Six months later
his car arrived.

I accompanied another friend to a motorcycle dealer. He had previously
negotiated the price of the bike and brought cash in that amount. He puts the
cash on the counter, and the salesman starts running this game about how the
owner really likes that bike and doesn't want to sell it, except at a higher
price, and all this. The buyer reaches into the giant stack of cash --
thousands of dollars in $20 bills always seems like a lot of money -- counts
out a thousand dollars, and puts it in his pocket. He says the remaining
amount of money is the most he's willing to pay after hearing the salesman's
story. The salesman disappears, comes back and desperately tries to close the
deal at the original price, but eventually has to settle for the money that's
literally on the table.

There is almost nobody more desperate than a car salesman, so dealing with
them is actually pretty easy.

~~~
deegles
As much as I would like to do this to a shady used car salesman, I'm hoping I
will never need purchase a car again. I'm going to use public transport,
biking, walking and carsharing until self-driving cars arrive. I'm sure many
millennials are in the same boat.

~~~
mlucero
Not sure if you've ever heard of Carmax, but it's designed to be the opposite
of what you experienced.

I used them to basically order the car I wanted over the internet. I browsed
their site, found the cheapest one in their inventory, and paid to have it
shipped to my local Carmax. They called me to let me know the car was there
and I went and test drove it. The price was set, so no haggling, and just
friendly service. It was the best experience and probably the only way i'll
buy a car again.

Check it out next time... it really was surprisingly good service...

ps. I've had the car for 6 years and ended up being an overall terrific buy...

~~~
xacaxulu
If you buy slightly nicer luxury-ish vehicles (M-series BMW, E/S class
Mercedes, Audi, Porsche) the extended warranties are unbeatable. It's nice
getting a Porsche Cayman rebuilt for $150 deductible because you purchased a
$4500 100,000 mile warranty. Jalopnik had a write-up on a guy who bought the
much maligned Range Rover and basically recouped his purchase cost in 1 or 2
warranty-covered repairs.

------
brianstorms
Not a single mention of "service."

The FTC, TechCrunch, and the mainstream media are ignoring another aspect of
the protectionist legislation that is put in front of Tesla customers: not
only can't you BUY a car in a number of states, you can't get SERVICE on one
either.

For example: New Mexico. The NMADA (New Mexico Automobile Dealers Assocation)
has made sure there are laws on the books that make it impossible for Tesla to
not only open a store in the state, but also they can't open a service center.
Even though on Tesla's own website it shows a map with a "Coming Soon" icon
for a service center in Albuquerque, it really isn't coming any time soon
because the law forbids Tesla from opening a service center. So owners in New
Mexico are kinda screwed. Some of them don't even realize it. If you are a
Tesla owner in NM, and you need service some day, you have to call Tesla and
have a service person come from either Phoenix, AZ or Denver, CO -- 7+ hours
away by interstate. And if your car has to be taken back to one of those
service centers, you're looking at significant expense because of the flatbed
transportation. Not to mention hassle.

All this to protect a bunch of sleazy old boy network car dealers who don't
want Tesla educating the New Mexico public about how bad they have it with
dealerships and service centers.

I wish the FTC would talk about the service angle as well.

~~~
reustle
> you're looking at significant expense because of the flatbed transportation.
> Not to mention hassle.

Is it stated anywhere that this is what will happen, and the customer will be
liable for the cost?

------
vvanders
Our experience at the Tesla store was quite pleasant.

The ordering experience was literally walking to an mac in the back part of
the store and bringing up teslamotors.com.

No paperwork, or shenanigans. We were actually talked down from a few options
we were thinking of based on the sales person saying that they weren't quite
worth the cost if it wasn't something you were interested in(leather seats,
winter package).

Closest experience I've had was when I bought a Saturn ages ago. No hassle,
just here's the price and features we offer.

Detroit better look out because if Elon has his way Tesla is going to eat
their lunch.

~~~
sounds
Yes, you are absolutely right. But in case it isn't obvious to everyone
already:

1\. Detroit as a city, and the industry that built it, is dead and gone.
Nothing will bring it back. The auto dealership network across the US has
tried to adapt to changing technology too many times to count, and apparently
is still waaay behind.

2\. Tesla _might_ not successfully disrupt the auto industry, all by
themselves. But like sharks, once there's blood in the water, it's only a
matter of time. Many businesses want a piece of the US auto market -- and I
mean "want" like a shark wants its next meal. I personally think Tesla is here
for the long haul and has a huge first-mover advantage.

3\. The only question is what this means for the infrastructure. Refueling
stations. Brick and mortar parts stores. Parts websites. Tooling industries.
Inspection and emissions and repair businesses, both brick and mortar and
online. Imports. Dealerships. Financing. Fleet management. Warranties.
Lawsuits. US Department of Transportation regulations and the political power
structure that surrounds it.

Tesla will almost certainly make some mistakes. But so far the trend has been
extremely positive.

~~~
NickSharp
Detroit, as a city, is neither dead nor gone.

------
SCdF
What possible reason, from anyone's perspective, is there to say it's not OK
for Tesla to sell their own products to people?

Is this literally 100% because the US is so corrupt that car dealers are just
making laws that make them money? Or is there a sliver of an argument here
that has merit?

I neither live in the US nor own a car, so the idea that Toyota can't tell you
a Toyota or whatever is bewildering.

~~~
MichaelApproved
It's part of an old set of laws that were put in place to protect dealers. It
kept a manufacturer from selling a market to a dealership, allowing that
dealership to expand the market in the area for them and then moving into that
market on their own.

Meaning, Ford sells a dealership the Los Angeles region. The dealer spends
money advertising how great Fords are in the local market. Sales go up. Ford
decides to open its own dealership in Los Angeles and compete directly with
that dealership.

The law was useful a long time ago. However, it shouldn't apply to
manufacturers who don't have dealerships that need protection. Entrenched
businesses are using that law to keep out competition.

~~~
SCdF
Thanks for the explanation, that makes sense.

------
feld
"A fundamental principle of competition is that consumers – not regulation –
should determine what they buy and how they buy it."

Hey how about that three-tier system for alcohol distribution? Perhaps that
should go away too, yeah?

~~~
vpeters25
Before prohibition breweries owned the bars to the point sometimes you could
only buy a single brand of beer for blocks to no end. That squeezed small
breweries out of the market. When lifting prohibition, Congress created the
tier system to prevent something like it from happening again.

Ken Burns' documentary about prohibition explains it really well.

~~~
whatusername
That doesn't currently happen? I'm in Aus - so things are different - but
certainly here there's an awful lot of pubs with only the one mega brewers
beers on tap (aka - either SABMiller or Lion Nathan). In the same ways that
most smaller stores have either coke or pepsi but not both. They are not
_forced_ they are just _incentivised_.

~~~
rayiner
I've never seen anything like that in the U.S.

~~~
whatusername
Do coke and pepsi do it with smaller stores?

It's not that it's only one brand of beer. It's just that of the 10 options -
they're all owned by the same mega corp.

------
adventured
The automobile industry should be a: "sell car -> build car" business model.
Eliminating the vast majority of inventory, and limiting damage from failed
products.

It's absurd in premise that you can go to a dealership and look at a hundred
vehicles; six of each make, of varying colors - all sitting there, with the
dealership and the automaker praying they get sold.

Keep one of each model for viewing and test driving. Take orders and
customizations. Pick your vehicle up in a week, save 15% (thanks to vast
reduction in waste, and the elimination of the middle-man sales commission).

I had a conversation with the publisher of Forbes almost 20 years ago about
this concept. It's sad so little progress has been made in that time.

~~~
mynameisvlad
It's possible to get a custom order car right now, and if you tried buying
one, you'd know why it sucks. It takes __much __longer than a week to get the
car, try __several __months, and that won 't magically change, it just can't.
Considering that it takes over 45 hours of non-stop driving to go from Orlando
to Seattle (chose a southeast point and northwest point to show how long it
takes at its worst), you can see how a week might be a stretch. It would take
two of those days non-stop in best conditions, leaving you with 5 days to
build the car.

Hell, even buying a Tesla means you have to wait a month or two for your new
car to arrive.

~~~
mikeash
Teslas take a month or two just because they're backlogged. The actual
production time is not that great. The total time between my car entering
production in the factory and being available for me to pick up on the east
coast was 12 days, of which 6 was the actual building and 6 was transporting
it across the country. A week might be a stretch, but two is conceivable, and
three should be quite practical. "Several months" certainly could be reduced
substantially for cars that don't need to be shipped over an ocean.

------
fiatmoney
US state and local politics make much more sense when you realize that in any
given area, the two most powerful political interests are likely to be car
dealerships and real estate developers.

~~~
derefr
An interesting thing to me, is that car dealerships start off in what's
usually the edge of town (where lot space is cheapest), but are usually the
last thing to go when a city expands and the area around the car lot
gentrifies. It's an odd effect, that I assume has to do with the dealership
managing to keep its rent down by hook or by crook.

~~~
duskwuff
Cities are hesitant to get rid of car dealerships because they bring in _lots_
of tax revenue.

~~~
cheald
Car dealers also tend to be the among biggest financial contributors to local
politics, too.

~~~
derefr
This makes me wonder if there's clear statistical trends in municipal politics
that pop out if you graph cities by number of car dealerships.

The information would be especially interesting near zero. I imagine, though,
that it'd be hard to find a city in North America without any car dealerships,
so it'd probably be easier to do an analysis on European countries with some
cities that don't have cars at all.

~~~
TorKlingberg
> European countries with some cities that don't have cars at all.

I am not sure what cities that would be.

~~~
lttlrck
Venice is the only one I can think of right now. But it's definitely an
outlier.

~~~
mikeash
I wonder if Venice has similar stuff going on with boat dealers.

------
billhathaway
If you are purchasing a new car and don't love the negotiation game, check out
Costco's auto program. I got a much lower price on a new car versus what
truecar.com was offering. The downside was that not many dealers participate
and you didn't get to see the price until you arrived at the dealer. You
didn't have to commit to the purchase. Also, make sure to sell your old car as
a separate transaction (preferably a private sale if you can) to minimize
dealer hijinks.

------
rtpg
Couldn't Tesla sell solely from a different state and just have a showroom in
other cities? I thought that inter-state trade can't be hindered by states.

~~~
dangrossman
Tesla only has showrooms. Their stores are pretty much the same everywhere.
There are no cars you can buy and drive off in.

In states where Tesla can sell direct to consumers, the showroom has sales
people who can talk to you about buying a car, and sit next to you to answer
questions as you do so at teslamotors.com.

In other states, the showroom does not have sales people. The staff can answer
questions about the car, but not about purchasing (pricing, financing, etc).
If you want to buy one, they direct you to visit teslamotors.com.

In no case are people in a state prevented from buying a Tesla car. The buying
experience is the same everywhere: go to teslamotors.com, configure and order
a car, and either pick it up or have it delivered to you after it's been
manufactured.

As for the legal aspect, the federal government does have the ability to
regulate interstate commerce, and federal law preempts state law. When there
is no federal law, however, the states are free to regulate in that area. If
Congress were to enact a law guaranteeing the right of manufacturers to sell
direct to consumers, this would preempt the state laws prohibiting it, and
Tesla could have sales people in all its showrooms. IANAL.

~~~
mikeash
You're largely correct, but there are some pretty substantial differences in
the experience.

First, Tesla does actually have some cars you can just buy and go. They're
(currently?) the minority, but they're there. They're starting to sell used
Teslas, and they also have "inventory cars" which are showroom, test drive,
and loaner cars which have finished their corporate service and are ready to
be sold.

Second, test drives are pretty key to the whole process (even if you can't
test drive the specific car you buy, most people want to test the model) and
even that gets caught up in this whole nonsense. Until recently, you couldn't
even get a test drive in Virginia. I had to go into Maryland to try one out.
Tesla had a showroom in Virginia but they couldn't even let you drive one, let
alone sell you one.

Third, in states where they are allowed to sell, you can configure and
purchase on site rather than online. The effect is the same, and they're
basically just punching the order into the computer for you, but for people
who prefer buying from a real person it can matter.

Fourth, taxes and registration are different depending on how you bought it.
When I bought mine in Virginia, I had to take delivery in Maryland, and the
sale was actually processed in DC. I had DC temporary tags, and I had to
handle Virginia registration and pay Virginia sales tax on my own at the DMV.
Now that they can sell directly in Virginia, they can handle registration and
sales tax themselves, which saves a decent amount of hassle.

Finally, it can affect the post-sales experience in extreme cases. For
example, New Mexico is so strict about this stuff that they won't even let
Tesla open a service center. You can buy one there, but you'll have to go
extremely out of your way to get it serviced.

------
re_todd
As Clark Howard says, it can take a lot of stress out of the equation by
negotiating via email. Then they can't make you wait 30 minutes or an hour as
they pretend to be talking to their boss, and you can communicate at your
convenience.

------
white-flame
"Tesla has long borne the brunt of these kinds of state laws, which were
ostensibly first put in place to protect consumers..."

Does anybody know the backstory of this customer protection?

------
ddingus
Good. We very seriously need this.

My very first time in a dealer was in '88, and I bought a Sprint, the little 3
cylinder car, for something like $5K and change. The total finance amount was
12K! And I was young too.

Oh well, that actually was a great little commuter car, and I got much more
than that 12K out of it, but knowing how shitty the dealer was just chapped my
ass big. Never did forget it. Won't either.

While the kids were growing up and I was paying the house off, I really didn't
see any need for new cars. Just bought reasonable used ones, mostly for cash,
and that really saved me a ton. But we eventually ended up wanting an SUV for
the dogs, camping, kids, friends.

During the years I was away from the dealers, I moved from a pure tech role to
one with a heavy sales / consulting component. Turns out I was ready, and went
to battle. The people here saying it's war really aren't kidding. I think the
no bullshit fixed price dealers are OK, but that price really isn't all that
good of a deal. It's just not painful. Good for them to offer a reasonable
offering to the market.

Sadly, I wanted a Ford, which meant going to an older school type dealer.
Slimy as hell. For what it's worth, I've put the overall strategy here on
Quora: [http://www.quora.com/What-are-the-best-bargaining-
techniques...](http://www.quora.com/What-are-the-best-bargaining-techniques-
when-buying-a-car-from-a-dealer/answer/Doug-Dingus?srid=uUDp&share=1) Lots of
good tips on that question overall too. Online, etc... I think the share means
you can read all the question answers for that shared question.

It's an ugly process, and it took me about 8 hours to buy that car. I had to
do things like when they left me, I would leave too, going to the other end of
the lot after getting my free coffee, and just staying there waiting for them
to trudge out there, only to walk all the way back, and do it again. It's
actually funny in hindsight, but maddening at the time.

Or, I would end up in ego contests: "Are you man enough to buy this car?", to
which I actually said, "Only if you aren't such a bitch I would be embarrassed
to admit buying from..." good god. But that worked. Got the manager with the
brass rings and went to town on the deal proper. Nothing reasonable was going
to happen as long as I was dealing with the front end bruiser. Sad.

The Expedition I wanted was MSRP at something like $42K? Maybe $40. I got it
for $31,500 and that's one hell of a lot of margin. My guess on the invoice on
it was in the high 20's, btw and I got them to show it to me after about 4
hours. But the pain was not over!

The owner of this dealership had a very hot daughter doing contracts. She
wrote one up, leaned into me hard and said, "since I know you so well already,
how does this one look?" Also funny looking back, but maddening at the time! I
had to cross out lots of ugly numbers, and that was because they had packed
all that money back into the contract! Worse, had I not been dealing on the
front end, some people probably get the ugly treatment on both, paying way too
much for the car too.

Since then, I've helped a few people get cars. I ask for a percentage of what
I get out of the price of car. I've gotten $1K pretty easy, with people
actually wanting to pay me more, which seems to me a great indicator of just
how painful dealer purchases really are.

Tesla isn't interested in any of this. They want to make a great car, ask an
appropriate amount for it, and sell it to people who see the value. Nothing at
all wrong with that, and if these dealer clowns had any soul at all, they
would be working double overtime to build trust rather than abuse it at every
turn.

There isn't anything in this process I find redeeming. Go TESLA! Edit:
Actually, that's not true. If one is into the brutal sport of it, doing battle
with a dealer to score a sweet price on a car they worked way too hard to sell
can be gratifying, but this really isn't high value for the vast majority of
people.

I'm not really a vindictive sort of person, but man! Many dealers have
something ugly coming their way, and I hope they get it big. To the few out
there doing a fine job of it, I'm sorry. The company they keep must be
absolutely terrible.

------
nosuchthing
Interesting take away: " a unique new category of vehicle dubbed “autocycles.”
"

And this $6800 tron like gas powered tricycle with 84mpg -
[https://www.eliomotors.com/](https://www.eliomotors.com/)

~~~
crucini
Neat. I notice 2 of 4 pictures show inclement weather, which is probably to
show their advantage over motorcycles. Since in general a 2-wheeled motorcycle
is more enjoyable than a trike.

Can this thing provide the crash protection of a normal car? If not, why not
get a normal MC?

~~~
nosuchthing
"Each Elio comes equipped with a Safety Management System that includes three
airbags – a reinforced roll-cage frame, Anti-Lock Braking System, and 50%
larger crush zones than similar vehicles. "

------
xacaxulu
This 1000 times. Dealers are unnecessary middlemen and provide no value added
service. They are a protected cartel and serve to disenfranchise regular,
every-day car buyers. My last vehicle was purchased using TrueCar
(truecar.com) and I highly recommend using this service to make sure you are
getting a fair price if you unfortunately have to work with dealers. Hopefully
more and more Teslas will be available soon!! I'd buy one on principle alone.

------
SN76477
Dealerships are middlemen who CAN but not always have a place. If for instance
you had trouble getting financed a middleman could facilitate the process of
buying a car.

If you didnt know exactly what you wanted in a vehicle again, a middleman
would be helpful.

If you know what you want and just want to buy the damn thing, you dont need a
middle man.

------
Dwolb
Has anyone done the math on if Tesla will be able to meet future demand
without sending supply to 'dealerships' (or other lots?)? I'd imagine a large
portion of a dealership's cost is in inventory/inventory management. (could be
wrong though...)

~~~
vvanders
They're built on-demand is there's very little inventory sitting around.
Typically the service center here in Portland only has 10-15 on site for
delivery.

At the pace they make changes to the car it really doesn't make sense for them
to manufacture large batches and those not interested in waiting can pick up
an inventory/CPO.

~~~
Dwolb
Not sure it's possible to maintain at production targets. 2014 if I recall,
Tesla did ~35k units. That's ~12 cars/ hr if we assume 12 hour work days.

Their 2016 target is 100,000 cars or 33 cars per hour by 2016. So for example
they'd have to both double their plant capacity then get 50% better at making
cars. Seems like a tall order but perhaps doable for a guy like Musk :)

~~~
akgerber
'Up to May 2010, NUMMI [now the Tesla plant] built an average of 6000 vehicles
a week'
[http://en.wikipedia.org/wiki/NUMMI](http://en.wikipedia.org/wiki/NUMMI)

------
joelrunyon
Could this be perhaps as big of a contribution to the auto market for
consumers as actually having an electric car? What if Tesla makes the
dealership model obsolete. That would be an incredible side effect.

------
pnathan
I back the right of any manufacturer to sell direct to consumers. Go Tesla!

