I usually take pride in doing my research well before buying something, but it had never really occurred to me that the dealers are forced middlemen. It had never occurred to me that it is ILLEGAL for Toyota to sell a car directly to me.
I am rooting for Tesla now with even more fervor. It's absolutely comical to me how politicians will tote the values of a capitalistic society, then turn around and get on their knees for special interest lobbies.
This is only a contradiction if you view the government as some sort of impartial referee in the game of capitalism. If instead you rightly view them as the biggest player on the field that bullies everyone else and picks favourites then there is no contradiction.
That's right. Floridian police raided several barber shops, with a warrant to ensure the barbers were licensed practitioners, and while they were at it they handcuffed people, held them at gunpoint, and even arrested several for unrelated crimes (coincidence?!).
And if only such an event were an outlier ... sadly, it's become common, around the country.
Don't be under the illusion that our system is built upon trust and volunteer acceptance. It's built upon overwhelming brute force.
>he military isn't going to take over a dealership with armed service personnel to keep Tesla from selling their cars.
Who do you think the car dealerships will call when Telsa refuses to shut his stores down? The police. They will confiscate the property, arrest the managers/owners and shut down the business.
That is overwhelming brute force whether you call it the military or the police.
Not completely, but society still heavily relies on it. The majority of people obey (most) laws because they believe it's the right thing to do, not because they're afraid of punishment. And if they didn't, we'd very quickly find that the existing police forces are completely inadequate to keep control of a herd of psychopaths.
Companies are a little different, since their decision making is often disconnected enough that the individual morality of their employees isn't necessarily reflected in their overall behaviour.
I'm going with the court system.
Businesses for the most part don't comply with the law because they are worried about a gun being pointed to their head, they are worried about being sued and being put out of business, or being sent to jail for something criminal.
Those are essentially the same thing. What do you think happens if a court rules that you cannot continue your business, but you do anyway? Or what happens if you are given a jail sentence and you physically resist being moved to jail?
Look at the FED.
That's bs post-hoc justification. There is no contract and few people agreed to it. Government is accepted because it works better than no government. We haven't found the perfect way to organize society (and it may not exist), so we stick around in the local optima.
>It's an organized, representative extension of the population of the country.
This is true in theory. In practice it's a big mess. Voters don't actually have that much control. Just a single bit of input "which party do you like more right now?" And maybe they shouldn't they because direct democracy isn't that great either. The real advantage of democracy is that if the rulers really screw up, if they make the population really angry, they will eventually lose their power when the next year divisible by 4 comes around. It also encourages the politicians to make an effort to be popular (which isn't necessarily what's best, but it's better than nothing.)
Good luck building your startup if your larger competition can get away with Mafia-like tactics.
Depending upon whether people choose to actively participate in their government, it can either protect or harm us. I meet far too many laissez-faire "free market" know-it-alls who have a strong wish for the latter.
Actually that's the very definition of a truly free market.
Right, so, the argument there is that a true free market is not a good idea. So we put up rules and regulations that we think will be beneficial to society, but we don't change the definition of "free market" to "the market structure that we find sensible."
In other words, governmental control is a direct limitation to the amount of freedom in the market, but we think that's a good thing. It's to everyone's benefit to restrict one's freedom to sell rotting rat meat labeled as beef.
In both situations, freedom is best defined as that which the weakest member of the group has. A society where the weak can be bullied by the strong, coerced and cajoled by threats of force, is not a society where those people can be considered free. Unless you think that slaves are also free people, provided that there are no laws concerning slavery.
Similarly, I don't see how a market can possibly be considered free if strong incumbent players are able to exert extra-market pressure on the weak players, to bully them in ways "outside" of normal market forces. Rather, a free market is one where all players are free to act on an equal footing, competing on price, quality, service, reputation, and other "market-based" differentiators, rather than through bribes, collusion, artificial barriers to entry, and the like - because the playing field is forced level by regulations which apply to all participants equally.
None of the great free market economists responsible for laying down the very definition of what "free market" means - from Smith to Friedman to Mises and so on - have argued that to have a free market you must be able to destroy someone else's life or property. They've argued the exact opposite, that among the most important things in a free market is property rights and the defense of said property rights.
A free market does not mean a market free of protected individual rights, it means a market free of the government initiating force against individuals to arbitrarily restrain free association among people, and a market in which the government performs its proper duties, including the protection of property rights.
No it isn't, the free market is a very defined thing, based on the number of actors in the system, perfect information, rational actors. It has absolutely nothing to do with the presence or lack of regulation (though obviously regulation can play a role in these factors)
Not if the social structures necessary to enable society to restrict that freedom inevitably lead to other inefficient/undesirable restrictions, and the bad restrictions end up outweighing the good restrictions.
Government obviously performs several functions which are necessary or extremely helpful for a free market, but it's not so simple to prove that these functions couldn't be performed without a government.
Given that that's not anything remotely like the common use of the term (which is about functions), maybe you should use a more appropriate term to avoid confusion.
On the contrary. I think my definition describes what most people think of as a government. If I show up at your door with 5 tough guys, explain to you that your neighborhood has voted to instigate a 25% income tax in order to maintain the roads of the neighborhood, would you consider me to be government? Would you comply? According to what you just claimed, since I would be performing a function generally associated with government, acquiring funds the same way as government, and using a similar justification (the vote) as government, it sounds like you would consider me to be government. And yet, I do not think most people would agree.
Or just as well see them as a parent that keeps the children from bullying each other.
EDIT: Also, the children work and the parent collects an allowance.
Yes, because that image is false.
The government is mostly the sock puppet of whoever has most money - biggest corporations and richest individuals, who essentially buy whatever politics suits them best.
Rest assured they derive great satisfaction from your misdirected anger against the "government".
There is a weird paradox, in that lobbyists are often the best source of quality information for legislators. They have the time and money to produce well packaged and well researched information. That it has a bias for the lobbyists clients follows from that, however.
Another paradox: Our system has us electing the most efficient marketers for a job that should center around strategic thinking and collating complex information.
I don't think a politician is concerned about jobs as much as they are concerned with campaign contributions.
I've seen first hand how campaign contributions work between the wealthy and politicians. It's unreal. In 2004 my uncle (founder of a big time HMO) contributed to the Bush campaign. In return he was granted exclusive time to the President to address whatever concerns he had. The White House would call him to guide the President on policy decisions. The White House will never call you or me for our opinion because we didn't pay for that privilege.
How funny it is to see people complaining about the "government", when really these days the government is merely the sock puppet of the biggest piles of money (big corpo, the ultra-rich), who use it to buy legislation and policy decisions that further their own interests.
While the dogs keep barking at the rag doll, the real person keeps kicking them in the backside.
Regarding employees, direct sales will reduce the number of sales people, yes. Or it'll change the nature of the salesman's job. From pusher on a commission to a salaryman. Now, Tesla and other electrics may not need frequent work done by mechanics (even the standard maintenance stuffs), but other cars still would. Just because I bought my Subaru from Subaru proper instead of the local dealership doesn't mean I won't need to take it in for service every 6 (or so) months.
And if electric cars really do have an effect on employment of mechanics and service technicians, then that's the consequence. We can't legislate the cars away to preserve jobs anymore than we can legislate manufacturing robots away to preserve the jobs of the assembly line worker. (That said, a change in employment status of a large segment of the population will have to be dealt with. Either by charity, retraining, welfare or some combination of those and other methods I've not mentioned.)
The registration fee is a fixed amount that is not dependent on the price of the car. You pay an annual registration fee in every state in which you reside and intend to use the car. The registration fee in most states goes into a restricted use fund that pays for things like road maintenance.
No, they are (in California, at least) ad valorem property taxes.
> The registration fee is a fixed amount that is not dependent on the price of the car.
As klinquist notes, this is incorrect in California.
When it was introduced it was only the manufacturers that were able to sell cars to you, by their own choice. The law was introduced to break the stranglehold that manufacturers had on retail operations. Car dealers were able, for the first time, to guide buyers through the positive and negative aspects of the features of one model against another in a climate where they weren't just bashing the competition to make a sale.
It is ironic you choose Toyota as your example because when breaking into the US market they faced similar problems as Tesla does now. At the time, in Japan, the car dealers sold cars door to door, there were no showrooms. And you dealt with the same dealer for all your life. Japanese joked that it was easier to lose contact with your parents than it was your car dealer.
Boy, does the US now hate Toyota http://www.bbc.co.uk/news/business-26650173
That's some spin Holder puts on the story.I guess he's got to try and get GM's bailout money back somehow, just another $23.9bn to go
This is why rulings like Citizens United are turning this country into a kleptocracy.
Citizens United doesn't make it easier to bribe politicians, the entire point of PACs running ads is to lobby voters directly instead of the traditional method of bribing legislators.
Please note, I'm using the dictionary definition of Freedom as reported by Google (https://www.google.com/search?q=freedom+definition) that says:
"the power or right to act, speak, or think as one wants without hindrance or restraint."
Not the other definition of freedom that says:
"the power or right to act, speak, or think as one wants without hindrance or restraint up to a maximum value of $2600 per candidate in a single election"
If that is the case, it restricts the rights of the poor relative to the rich. A rich individual can afford a TV advertisement campaign on his own. A poor individual needs to pool his money with the money of other like-minded people to be able to afford that same TV ad campaign. The common way for many people to pool their resources to act for a unified purpose is to incorporate.
If there was an automobile monopoly that defended its monopoly status with violence, and their only product was one crappy car, you probably wouldn't say "we have the best car that money can buy," because we all know that a competitive automobile market would produce better cars.
"Forced", in that they force themselves upon you.
Politicians are the one percents. The rich just have a better means to make them look away.
Why? Because they're parasites. The dealer network evolved to solve distribution problems from 100 years ago. It makes zero sense as a business model in the 21st century. "Ripe for disruption", as we'd say in these parts. All they have is inertia, deep political connections, and a century of regulatory mazes. But those are three very big things to have.
Still, they're fighting a defensive war. They will lose. The question is only how quickly, and at what cost to consumers?
Car dealers and independent auto service centers need protection from manufactures; dealers can service brands they don't sell should they choose.
The danger in allowing manufacturers to determine how sales are made is they will likely dictate how repair and maintenance is handled. While maintenance on an electronic vehicle is going to be significantly different my warranty should not be affected should I choose someone other than the manufacturer to repair it.
disclaimer, I work for a leading supplier of auto parts.
Those are two completely separate topics. The fact that dealers now service cars has nothing to do with the fact that they sell them. Otherwise auto repair shops wouldn't exist.
With Tesla, I don't think it is anywhere near as likely as you seem to. Look at this:
Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.
Beyond that, with unbelievably fewer moving parts and over-the-air updates, Tesla vehicles require far less servicing. For starters, they don't require regular oil changes.
None of which really needs to touched very often. Brake fluid should be changed once a year or so (yeah, neither do I). Same with the in-cabin filter. The rest is a 100K mile service on the Leaf, IIRC.
This is why Right to Repair laws are so important. https://en.wikipedia.org/wiki/Motor_Vehicle_Owners%27_Right_...
That danger only applies to you if you don't read the contract agreement before signing it.
Since most American legislators come from a legal background, the culture of national politics has this world view. Chinese leadership is majority engineering, so at least they have some sense that physics isn't impressed dollars and poll results.
Not to mention the fact that China seems the be having a massive problem with official corruption. In fact, China's official corruption problem is arguably worse than America's. At least our politicians are bought with campaign dollars. It appears that Chinese politicians and bureaucrats are bought with direct payments.
In short, we should expect the United States to be corrupt because of lawyers and China to be not corrupt because of engineers, and I'm just saying that's the opposite of the truth.
I really don't care all that much, I'm just really curious now why you bothered to mention China at all if what you were trying to say was that the US is worse than we thought.
"In May 2011, all of the equity in Skype was sold to Microsoft for $8.5 billion. Due to eBay's 30% stake at the time of sale, the company realized a net gain of $1.4 billion on its original investment in Skype."
It's simpler than that, though. On a local level, away from the large cities, it's not uncommon for the guy or gal that owns (not necessarily the same as the name is on the sign though) the local dealership to be the area's state senator or state representative. No amount of lobbying or money from tesla, etc, are going to convince him to vote against his/her own business.
The entire dealership system represents a market inefficiency that will correct itself. The only forces that are keeping the monstrosity around are broken political systems and force (physical or otherwise) paramount to coercion.
Consider that among all of the computer OEMs, Apple is the only one who has successfully operated a retail channel. (Gateway did once, but it wasn't very profitable)
Also consider another franchise model: fast food. McDonald's has a vast network of franchise and corporate owned stores. There is no discernable difference in customer experience or cost between the two.
That is one of the reasons that by and large fixed pricing hasn't worked with autos as much as everyone seems to think that it's such a great idea.
Negotiation and "buy now" kicks people off of fences. (So does inventory and other factors to be sure..)
So you are suggesting that Ford is interested in replacing the franchised model and operating and owning the establishments themselves?
Car dealerships in many areas are basically small businesses.
They are a model that work in the same way that many bakeries have route drivers that are one step away from being employees in a sense (Fedex also uses this in some areas).
I don't buy the idea that it's a given that a large existing car manufacturer would rather just build out and operate car dealerships and that there is no value to an entrepreneur owning that dealership. Or that that even adds to significant extra costs for the consumer. By "significant" I mean the extra cost per car because there is a dealer. (Which by the way you do need a place to get service (even with electric) and you do need a showroom and a local point of contact).
How much profit per car do you think the dealer makes exactly that the consumer will save?
(This is not a pro or con for dealers just something that came to my mind based on your comment).
The automobile industry has consumer protection laws that force manufacturers to honor warranties and emission control systems.
I actually have.
So please explain what you are trying to say.
Car dealers solve the risk management function. Selling cars is a risky business. Car makers are in the business of making cars, which is significantly different business activity with a wholly different risk profile and operational needs.
Tesla can sell direct to customers because its small enough now that the localized retail/inventory risks aren't significant. This business model (of manufacturer-owned dealers) simply won't scale to a national level.
This could be said for most middlemen such as Real Estate Agents and Financial Planners.
No, not every dealer works this way. Just the majority. If Tesla can make a change to this phenomenon, then good riddance to bad rubbish.
As an aside, this (long) story from Edmunds gives outstanding insights to how dealerships work, and what options are available to consumers.
It's fascinating to see how racial profiling comes into the mix. An ethnic group - according to dealers - will be known to have bad credit, or to pay the overcharged price no matter what without a fight, or (as dealers claim of white people) chiefly car-shop online and come armed with information looking for the best price.
Transforming the sticker price into a much lower (in terms of which number is absolutely bigger) monthly charge completely changes the psychology of it.
How many people don't do as much research as they should because they're thinking in terms of $500/month instead of $25,000? How much BS can the salesman then get away with because of that?
How often does a salesman successfully pitch some completely useless extra as being "only $20/month" when the buyer would never pay $1,000 for it if they actually sat down and thought about it?
How often do buyers end up spending way more than they intended to because they don't properly factor in interest, or the added cost of extras, or down payments, or the costs of taking out the loan itself?
I bought a car in cash last year and it made the whole process pretty nice. A whole fat layer of nonsense was just stripped away.
I realize this isn't practical for everybody, but how much of it is that it's outright impossible for people, and how much of it is that Americans are conditioned to buy cars on credit, end up spending more than they should and buying more car than they should, making it harder to save up money, making the whole cycle repeat.
In many ways, it's just another example of how it's expensive to be poor, and cheaper to be better off.
If I remember...
The original Daewoo cars in the UK were based on old Astra (and other Vauxhall) models, with body panels that were just not quite as well defined as the Astra originals. This appearance was a bit like the tacky Rover versions of Honda cars or how we imagine Chinese 'knock offs' to look. They were competing against Lada and other low price motors at the budget end of the price range. I don't think the service-by-Halfords arrangement worked out too well for them and other dealerships tried their hardest to do them down. Nonetheless they were a disruptive presence in the marketplace - at the time I lived in a rural part of Wales and those Daewoo efforts were quite common.
In a UK context the Tesla dealerships are probably more akin to the McLaren dealerships (I think these are owned by M(a)cLaren, i.e. Ron Dennis et al., but they could be a franchise). McLaren are an up-market premium brand and, having a McLaren dealership in nearby Knightsbridge, probably isn't going to stress out the Ford dealers on the A5 (or rural Wales) in the same way that Daewoo disrupted things. I think our American friends are over-worrying about the 'threat' Tesla are to regular car dealers.
The dealership is fully owned by the company as far as I know.
The reason I'm with Tesla is because I know why they're doing this. The automotive industry is for the most part terrified of EVs as they have far fewer moving parts, no oil changes, etc. They also have the potential to last longer and (eventually!) be easier to produce. Tesla is doing this because if given half a chance car dealers will sideline if not outright sabotage any EV that attempts to succeed in the market. They're going around the car industry because the car industry wants them to fail.
The retail side of the dealer network is really just a front door to the service department. Electric cars are supposed to have fewer service requirements, so if Tesla cannot defeat the franschise system, they are kind of screwed, as franchises will have to make more money on retail.
That is a much better description. For example, Ford probably doesn't care if Tesla succeeds or fails. They are stuck with independent dealers currently and any attempt on their part to change that will start a "starve out" of their sales as most dealers have multiple dealerships and sell multiple brands.
If Tesla doesn't break the franchise system, then Ford is no worse off than it is now and Tesla is blocked. If Tesla does win, then Ford can start selling direct itself.
Maybe it doesn't have to be that way. If you live in NJ, TX, or another state that doesn't want to let Tesla sell cars, let a state politician know. Maybe you think your U. S. Congressperson won't listen to you, but at the state level they are much more likely to lend an ear.
The problem is that you, and people like you, are not normal. Most ballots are filled out by slack-jawed yokels who choose their car because they liked the ad they saw for it on TV, and who choose their politicians in much the same manner.
The truth is, dealers do compete against each other ferociously. Yes, they will rip you off if you come unprepared, but if you shop your deal around to enough dealers, chances are you will get a zero-profit or even below-cost deal on your new car.
When the dealer franchise system has been gotten rid of (I give it another 15 to 20 years), supply and demand will be better matched and manufacturers will be optimizing their profits.
In other words, the current system offers benefits to the best negotiators, and screws everyone else. I'd rather even that out, especially since there will be plenty of competition between car makers anyway.
I don't know that people really get zero-profit or below-cost deals. I'm sure they think they do, but when people say that they're typically (not always, and not saying you're doing this) looking only at the car's invoice price, and ignoring holdbacks.
(For those unaware, manufacturers typically pay out a sum of money to the dealer when the dealer sells the car. This effectively reduces the invoice price of the car but, crucially, doesn't reduce the actual number on the invoice. Thus, you could buy a car "at cost" and the dealer still makes a profit because they get extra money afterwards.)
It's a FACT that some dealers will sell new vehicles for below cost. One very simple example is when dealers are trying to hit stair-step incentive goals near the end of the month. This is where a manufacturer will pay out a bonus incentive on EVERY vehicle sold that month, if and only if the dealer hits a certain sales goal. If they are off by 1, they don't get any bonus. If they sell that one additional vehicle, they may get as much as $100,000 in bonuses. Dealers sell cars for below cost all the time.
I'm not sure how your comment contradicts mine. If you get a $100,000 bonus for selling a vehicle, the marginal profit on that vehicle is damn near $100,000. Dealerships don't sell cars for a loss. Of course, that doesn't help the consumer unless the consumer wants that particular model, with the particular options that need to be sold to get the bonus.
Regardless, the stair-step incentives is just ONE of many examples I can provide.
The backlash against TrueCar's initial business model showed there were some dealers selling vehicles for below cost, in hopes of making up the difference with add-on sales. Whether these dealers made up the profit difference on the whole does not change the fact that at least some of those customers purchased vehicles at a profit loss to the dealer.
"[...] chances are you will get a zero-profit or even below-cost deal on your new car"
Let's say I'm a car dealer and I need to sell one more car to get my bonus. Let's say that car cost me $20,000. Let's say the bonus is $100,000. Now let's say I give away the car for free. I still have $80,000 more than I started with at the beginning of the comment.
Also, having recently purchased a new car, I noticed that every dealer specced them slightly different, so you couldn't easily compare the vehicles one to one. Something as simple as the color of paint changed the price by hundreds of dollars. Not an insurmountable detail if you are careful, but you really have to do your homework.
Not to mention that it becomes a massive time sink. Given a typical programmer's hourly pay, in many cases it would be more economical to pay out more money and get back to work than spend that time looking for the savings.
So, I do agree that shopping around can net you a better deal, but for all the effort required, I question if it is worth it. I'm going to very sad if I can't buy my next car online (and I hope it will drive itself to my door).
This is by far the most interesting part of what is a rather short and fluffy piece with a strangely assertive headline.
How exactly does a government/regulator quantify when the benefits of a granted monopoly (i.e. power, telecom, etc) has outlives its well understood purpose?
If you sell direct, you can't have dealers. If you have dealers, you can't sell direct.
Are dealers afraid that manufacturers like Toyota or Ford would just go up and undercut them? I doubt it, that would piss off a lot of their customers (the dealers). The dealer decided to open a particular branded dealership, so if you're in a Toyota dealership they shouldn't give a crap about what anyone else is doing.
it would be great for everyone involved.
It is likely to make cars more cheaper and car companies more profitable. How can any legislation banning it get passed in USA ?
The people who elect them or the lobbyist who fund them?
Unions need to go...they hurt innovation and sometimes completely destroy it.
"The state Motor Vehicle Commission last week unanimously passed a rule requiring franchised dealers to sell electric cars rather than allowing manufacturers to sell directly to customers as Tesla does at two showroom locations in New Jersey — at the Garden State Plaza and The Mall at Short Hills."
>requiring franchised dealers
And who is going to be franchising? The Unions will be. Maybe not in NJ but I gurantee other state's dealer unions are feeling the pressure that may come from tesla.
Ford was trying to let customers order cars online and they would deliver it within a couple weeks or less to a Ford hub. Some states pushed them out before they could try it.