
Tesla Strikes Deal To Keep Dealerships In New York - houseofshards
http://techcrunch.com/2014/03/28/tesla-strikes-deal-to-keep-dealerships-in-new-york/
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Aqueous
Just goes to show you - it's sometimes better to ask for forgiveness than
permission.

Imagine if Tesla hadn't opened stores in these locations - they would be
indefinitely, unconditionally barred from doing so unless they had flouted the
auto dealer rules and went forward with the stores regardless. Now they have a
foothold. When you realize that the stakeholders (in this case, New York State
Politicians) have a political interest in you flouting their rules then the
rules just don't seem that rul-y anymore.

It's also what's going to get their foot in Texas, as well.

Elon Musk is one smart dude.

~~~
andrewtbham
I agree. It's like this fred wilson blog post. The genie is out of the bottle.

[http://avc.com/2013/10/the-genie-and-the-bottle/](http://avc.com/2013/10/the-
genie-and-the-bottle/)

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mattnibs
How is requiring a car dealer to sell through a dealership beneficial to
anyone besides the dealership lobby which spent millions of dollars in getting
that law in place? This is why I freely support any company attempting to
disrupt any industry that uses the US gov't to create laws limiting direct
competition (Healthcare for example).

Politicians who stand up for this kind of nonsense should be ashamed.

~~~
alistairSH
These days, it's not.

Originally, it was beneficial to the manufacturers to let franchisees take the
risk of opening new storefronts. The franchise laws were put in place to stop
manufacturers from undercutting their own franchises once the market was
established.

~~~
MichaelGG
That sounds so odd. If franchisees were worried about that, then the
manufacturer could sign a contract agreeing not to operate. Why does it need
to be coded into law?

~~~
eropple
And when the manufacturer undercuts you and you're already bankrupt by the
time the court case that the manufacturer's spendy lawyers will drag out long
past your ability to pay...what then?

~~~
MichaelGG
You're basically arguing that any contract between power-imbalanced parties
needs to be written into law.

~~~
_delirium
That's generally the case, yes. As one example technologists seem to like:
California invalidates noncompete clauses at the level of state law, not
through requiring every engineer to individually attempt to negotiate the
noncompete clause out of their contract.

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rtfeldman
Certainly no one should expect this status quo to last for long. The dealers
will keep lobbying to kick Tesla out, and Tesla will keep lobbying to lift
this restriction.

In that light, this is an interesting long-term strategic move on Musk's part.
It arms him with a "we've been selling in this state for X years with Y
thousand satisfied customers, so how can this be so problematic that it needs
restriction?" argument for his lobbying efforts a few years down the line.

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dangero
Wow so this seems actually worse than outlawing Tesla because what they are
doing is giving Tesla major privileges over any future competition. Seems very
monopolistic.

~~~
sliverstorm
Well, as is often the case, they got theirs. They cleared the hurdle, now
barriers to entry help instead of hurt them.

~~~
sentientmachine
With Communism, a person's job is determined by an external power. How is the
dealer network telling Tesla that they can't sell their car in NY not an
example of communism?

Put down that microscope citizen. I've already told you, you are a cashier,
cashiers don't use microscopes. Microscopes are for scientists. You can't be a
scientist. Get back to your station. Don't make me taze you.

~~~
jrockway
"With Communism, people breathe air. Since people breathe air in New York, how
is New York not Communist?"

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Oculus
Can someone with more knowledge of the (outdated) franchise law explain why
Tesla can't/hasn't created their own dealerships (that officially aren't Tesla
owned), but sell only Teslas?

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dangrossman
Because, under the same state laws, that's illegal as well.

"It shall be unlawful for any franchisor to ... acquire any interest in any
motor vehicle dealer in this state ... or to use any subsidiary corporation,
affiliated corporation, captive finance source or any other controlled
corporation, partnership, association or person to accomplish what would
otherwise be unlawful conduct under this article"

\-- NY Vehicle and Traffic Laws, Article 17A, Franchised Motor Vehicle Dealer
Act, S 463 Unfair Business Practices by Franchisors

There'd be little point to having the rest of the law on the books if it were
so easy to work around.

Note that "franchisor" as defined in that law includes all manufacturers,
whether they sell franchises or not. IANAL.

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coreymgilmore
These laws are crazy. They work for Tesla currently, but what about the future
and future direct-to-customer sales models by other companies?

When Tesla grows, they will need more than 5 dealerships in order to reach
more of the population.

When a new competitor tries to sell direct, these rules will make it
impossible for them to compete on an even playing field with Tesla and
therefore have to revert to the old dealership model. Win for Tesla, loss for
free markets and competition.

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andrewtbham
This is a great compromise for Tesla. The dealerships don't fear Tesla, they
fear their manufacturers will start selling directly over the internet and cut
them out of the loop. This should pacify their fears but still allow Tesla to
operate. Long term, I suspect, this will be overturned, but for now it's a
great compromise.

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diakritikal
As a bemused European looking at this situation. Did a new U.S. manufacturer,
just agree to sell cars in mob town?

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sandstrom
It is interesting that the US -- a champion of Laissez-faire in many other
areas -- is the only country in the world with such laws.

[regardless of whether one likes the idea of Laissez-faire or not, the
contrast is interesting]

