

Tesla's fight with America's car dealers - browser411
http://money.cnn.com/2013/05/20/autos/telsa-car-dealers/index.html?iid=Lead

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jack-r-abbit
> _Until then, said O'Connell, Tesla will sell its cars the way it wants. If
> some states don't allow that, then Tesla will simply sell them elsewhere._

I think this last line of the article is very important. This has the power to
get the consumer on Tesla's side of this fight. If enough of the right people
in Texas (and other problem states) want this car and think the laws are
stupid... they'll need to find a way to make that happen. Laws can be changed.
If not then they'll just get them out of state.

~~~
mayneack
This is especially relevant at this stage of Tesla. I would guess that there
aren't a lot of people wandering through the mall to buy a tesla or making it
one stop on their trek through the dealerships. People (right now) are setting
out to buy a Tesla. It's also expensive enough to warrant going to one of the
already established outlets, even if that involves travel. I doubt not being
able to sell physically in North Carolina will really hamper their sales too
much.

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beat
This is a straight-up technological disruption of an existing sales channel.
The third-party dealerships are an artifact of primitive 20th century supply
chain management - they're basically a caching mechanism to handle latency in
the network, to put it in computerese terms. With the power of computers and
online ordering, Tesla has no need for these dinosaurs. They can "cut out the
middleman and pass the savings on to you", terms every consumer can
understand.

The fear for the dealers is not that Tesla will go around them, but that other
manufacturers will follow. The big car makers already have experience setting
up alternative brands to play with techniques that are too radical for their
mainstream business (remember Saturn?), so it would be easy enough for
something like GM spinning the Volt off as a new car company, not just a
Chevy, and running Tesla-style sales.

If that happens, dealers are doomed.

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auctiontheory
I love how Texas, of all places, puts up the most regulatory hurdles against a
new technology and business model.

~~~
nostromo
I grew up in Idaho. People there will talk about how important limited
government is... until you mention farm subsidies.

Suddenly they'll speak convincingly about the benefits of centralized markets,
price controls and protectionist trade policies with no sense of irony.

~~~
fennecfoxen
And Democratic partisans will attack regulation when Republicans are making
it, and many Republicans are perfectly glad to use the power of the state
regulatory agencies to stymie abortion clinics in any way they can get away
with. Everyone and their dog makes an exception for whatever's expedient;
bottom story of the day, honestly.

If you want something _notable_, get me a politician standing up for
principles which may be _against_ their immediate self-interest (e.g. Claire
McCaskill, D-Mo, on recent IRS shenanigans).

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lquist
Money can't buy press like this. Suddenly Elon Musk is the underdog fighting
the vested interests that be and Tesla is the little engine that could.

~~~
adventured
Fortunately for Tesla, they have a good decade of playing the underdog card
ahead of them. Ford and GM do $280 billion in sales combined.

~~~
nathantotten
It isn't Ford and GM fighting this, it is the dealers. I actually doubt that
GM and Ford care much about protecting the dealers. My guess is, or should I
say hope, that GM and Ford executives are looking at Tesla and thinking about
how they might make more money with that business model in the future.

~~~
adventured
It was understood that it's not GM and Ford fighting on this issue. The point
was, in reply to the OP, Tesla will be able to play the underdog card for a
very very long time.

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axus
The article brought up the point that Tesla owns all of the service centers. I
don't care if Tesla owns all the dealers, but having a monopoly on Tesla
repair would be bad for consumers. If the process for becoming a "Tesla
mechanic" allowed competition with the Tesla service centers, that would be
OK.

~~~
atourgates
Do the provisions of the Magnuson-Moss Warranty Act, which basically say you
can get your car serviced anywhere you want without voiding your
manufacturers' warranty, not apply to Teslas?

~~~
Shivetya
Going to have to wait for an owner to challenge it, or repair shop which tries
to obtain the necessary technical information to do so.

disclaimer, I work a major auto parts supplier, etc. It will be very very
interesting to see if tries to circumvent this law, which I doubt he can. If
anything shuts down his expansion it may be through this route. As in, they
may force them to curtail selling until they can provide the independent
support.

~~~
schiffern
>they may force them to curtail selling until they can provide the independent
support.

Wouldn't that just be the same manuals, training videos, and parts-ordering-
system credentials that they give to their own mechanics?

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orangethirty
The American automotive industry is where sleaze bags get trained. It is home
of the biggest scum of the Earth. I currently contract with a startup that
caters to it, and am impressed daily with how vile these people are. Its is
downright evil.

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darkarmani
> The traditional dealer franchise system is best for car buyers, Wolters
> insists, because it preserves competition between dealerships selling the
> same products.

I'm not sure I understand this argument. If I follow this argument to
completion, what they are basically saying is that when you have lots of
middlemen selling the same product, that "preserves" competition between them,
limiting the amount of additional cost they add. Wouldn't removing the
middleman also remove that additional cost?

~~~
Contero
I think the idea is that if the manufacturer was the only one selling, that
they could inflate their prices higher than what the middleman overhead would
be since they're the only one offering that product.

Why he thinks competition between brands isn't enough to counteract this I
have no idea.

~~~
darkarmani
> I think the idea is that if the manufacturer was the only one selling

But aren't they the only ones selling tesla cars to the dealers anyway?
Couldn't they just inflate their prices to the dealers?

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linuxhansl
Wow. In "The Land of the Free" a company cannot sell its own products as it
pleases and is potentially forced to go through middlemen that provide no
added value other then forcing folks to haggle?

This is not medicine we're talking about (where I can see pharmacists as an
important part of the system).

How can it even be suggested to be illegal to open up a store and sell your
own product? Should Apple be barred from selling their own products in Apple
stores and go through Walmart instead?

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beachstartup
there's a reason they call them stealerships.

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greyfade
Isn't this _exactly_ what happened to Preston Tucker?

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adventured
In a sane system, America's car dealers would be viewed as an illegal cartel
that interrupts trade and would be abolished. Indeed, a trade-interrupting
cartel is exactly what they had in mind as they pursued a legislative agenda
for decades to make it nearly impossible to sell new cars in the US without
going through their system.

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maeon3
Will Elon Musk fold under the pressure and cooperate with the dealer network
when they offer to sell at low to no markup to bring him into the extortion
racket of Car Dealers?

I loathe buying cars so much because of the snakes that run those Dealerships.
They want the car buying process to be so excruciatingly painful so people
will leave money on the table to "Just take my money and make the pain go
away".

How far are Dealers willing to go to make it illegal for Tesla to sell cars
anywhere? Would they go so far as to outlaw the production of Tesla vehicles
in America because it goes against the Dealer protection racket?

~~~
msluyter
_They want the car buying process to be so excruciatingly painful so people
will leave money on the table to "Just take my money and make the pain go
away"._

Well, this is why I bought my last car used from Carmax. Sure, you probably
spend more than you you might spend if you were willing to go to a dealer and
haggle, but I found it to be worth the premium.

~~~
rthomas6
I don't understand this unless you have absolutely zero tolerance for
negotiating a price. Why could I not simply print out a Carmax price of a used
car in which I'm interested, then take it to any other used car dealer with a
comparable car?

"Can you beat this price?"

"Yes." --> I just beat the Carmax price.

"No." --> I leave with my money (this one won't happen).

~~~
nknighthb
Car dealers are genetically incapable of giving such a direct answer. You can
either deal with their evasive swindling and haggle anyway, or just assume the
answer is "no".

~~~
nickpinkston
If you can't haggle for a better priced car, have fun trying to close real
deals / acquisitions...

~~~
toomuchtodo
I don't haggle. At all. I've sold a startup before for 7 figures. You know how
I closed deals with Fortune 500 companies when we were selling our product?
"Here's the price. Please feel free to shop elsewhere if you're not
interested." Same with selling the shop. "Here's the price (based on our
fundamentals). If you don't want to buy it, cool, someone else will. Or it can
keep printing us cash."

Haggling is overrated.

~~~
nickpinkston
Could've been 8... ;-)

~~~
toomuchtodo
Meh. I only need so much money.

~~~
nickpinkston
I'm only kidding dude!

~~~
toomuchtodo
I know :) I'm just giving you a hard time!

