Tesla's fight with America's car dealers
money.cnn.com> 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.
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.
> If enough of the right people in Texas... they'll just get them out of state.
It's very unfortunate that the state is Texas and not a state like Rhode Island. They (dealers) have 15 hours of protection in Texas.
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.
I love how Texas, of all places, puts up the most regulatory hurdles against a new technology and business model.
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.
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).
Kind of like how republicans are all anti-gay until their first kid comes out?
> Suddenly they'll speak convincingly about the benefits of centralized markets, price controls and protectionist trade policies with no sense of irony.
Well, maybe a farmer. This Idahoan doesn't hold with the farm subsidy system currently going.
Corn pone pinions.
I'm not sure I understand the apparent surprise here.
Firstly, there is a reason why, when driving through small towns, the names you see on the car dealerships are among the richest (if not the richest) around. Further, it is far from shocking that they have leveraged the power they have to entrench themselves.
What is so special about Texas that you would think they would be unique?
Texas likes to boast about smaller government and more personal freedom. Except with cars apparently.
If the tea party were a state it would be Texas and Austin would be forced out.
Austin is not near as special and 'weird' as it thinks it is. I say this living in the largest city in the U.S. with a gay mayor, also located in Texas.
You know nothing jon knee.
Yeah Houston (I'm assuming you are talking about Houston) is a really progressive place. I do love Austin (its a young city and I'm a young person) but its not some shining light in the center of Texas. It's really not that different than any other big city in Texas.
Houston was just about split in the last election (Obama won Harris County by 585 votes). Austin went heavy for Obama (60.2% to 36.2% or just under 100k votes). Houston has quite a ways to go before being liberal. The hispanic vote makes Texas as a whole pretty interesting though.
"Liberal", "good", and "Democrat" are not necessarily synonyms.
I don't care if Houston is 'Liberal'. I prefer pragmatic and reasonable. If the two go hand and hand, so be it, but I don't think that's always the case.
> If the tea party were a state it would be Texas ...
You appear to have internalized the meme that Tea Party is a synonym for Country Club Republican. This is probably not accurate.
> You appear to have internalized the meme that Tea Party is a synonym for Country Club Republican.
What does "Country Club Republican" mean to you? To me it means one who goes against their core values for the sake of a rich special interest at the expense of the masses. Here[0] every single House Tea Party member votes to protect oil subsidies despite this contradicting their core beliefs[1] in: "Protecting Free Markets", "Eliminating Excessive Taxes" and "Eliminating the Deficit Spending". In this case using taxes and/or debt to fund a non-free market.
[0] http://thinkprogress.org/politics/2011/03/01/147597/house-go...
No, the tea party as a group lines up with Texas on immigration, guns, taxes, gays, science, religion, etc etc. Country Club Republicans stay in the enclaves.
I still can't figure out why you think 'lives in Texas' means something other than 'Texan', other than successful left-wing advertising and right-wing propaganda. Texas is pretty much a microcosm of the US with an independent streak and a strong geographical affinity.
But the Venn Diagrams for the two have significant overlap.
I am guessing because Texas is infamously a red state, and Republicans are perceived as claiming to be against government regulation.
Probably.
Family was surprised that the anti-Tesla legislation in NC was spearheaded by some R's.
Hasn't stopped 'em from voting red, though.
Stupid is as stupid does.
Hey.. they's my family. This is what HN sinks to?
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.
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.
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.
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.
I'd say it's legitimate. If you're the youngest successful American car company and the only one from this millennium I'd say it's not wrong to do. It's similar to how Stanford is thought of as a relatively new school because it was organized in 1891, much more recently than rival schools.
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.
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?
I don't see how that law comes into effect in this situation unless they left something out of the article. It didn't say Tesla is preventing others from opening services centers, just that Tesla owns them all so far.
There's probably a non-trivial amount of model specific knowledge needed to repair a Tesla that can't be picked up at a general mechanics' school. Maybe when Tesla's sales volume increases there will be a higher demand for mechanics that Tesla couldn't fill and 3rd party shops will open.
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.
>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?
I think we are up for another fight on this topic very soon, but not only with Tesla. There are existing laws that force manufacturers to provide standardized maintenance interfaces, provide guidelines to shops etc., but increasingly cars are controlled by propietary computer systems.
And the whole thing takes a turn for the absurd when you consider electric cars. Sure, force manufacturers to provide documentation on how to replace a bumper.. but its purely naive to think you could have just any mechanic service a completely computer controlled high-voltage battery compartment.
It might matter later in Tesla's life, when they have a larger number of cars on the road (3 to 5 years), but right now Tesla is the only one who can ensure the quality of the customer experience. Ensuring a good customer experience, right now, will sell more cars than lowering the cost of maintenance.
yeah, i agree with that 100%. more than buying a car from a dealership, i hate getting my car serviced at one. the other complaints are just the dealers bitching because they know their unfair, shady practices are soon coming to an end.
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.
> 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?
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.
> 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?
Exactly. Price differences for the very same product is not competition, its market inefficiency.
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?
there's a reason they call them stealerships.
Isn't this exactly what happened to Preston Tucker?
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.
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?
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.
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).
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".
If you can't haggle for a better priced car, have fun trying to close real deals / acquisitions...
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.
Could've been 8... ;-)
Meh. I only need so much money.
I'm only kidding dude!
I know :) I'm just giving you a hard time!
Not everyone does such things, and I'm sure among those that do, you'll find many who don't care to waste hours with used car slimesmen to save a few pennies.
It's good practice though!
Note that it's not "can't", but "don't find it worthwhile". I might pour my heart into a big acquisition while simply walking away at the first sign of hassle when trying to save $500 on a car.
Just download the Vinny app and know what wholesale price is http://myvinny.com/
Wow, this looks great. Too bad I use Android. I'm in the market for a used car so this would be really useful.
Do they follow the black book value?
They use the dealership feeds, so they have every transaction of the car, and compare that to other prices of comparable cars in your area, and show you all that data.
Thanks! Which "dealership feeds"? What they pay for cars at auction?
Is that sarcasm or cognitive dissonance?
I don't see how this will stand up if Tesla chooses to fight it. I don't think the laws were intended to guarantee the extension of the dealership model to entirely new manufacturers. The laws were intended to protect dealers from having the manufacturer come in and undercut them after they were established in the market.
On the other hand, I think the dealership model exists for a reason. There's a racket aspect to it, but would a Ford or GM really want to manage customer sales and showrooms all over the US?
> On the other hand, I think the dealership model exists for a reason. There's a racket aspect to it, but would a Ford or GM really want to manage customer sales and showrooms all over the US?
Yeah, that's a great reason for the dealerships to exist, but not one for them to have some sort of legally protected chunk of the market.
To your latter point, it's certainly possible. You could replace "Ford or GM" with a large 90s computer manufacturer, e.g. HP, but Apple eventually decided they wanted to via Apple stores.
I don't know that Apple is a good model. They have high volume of relatively inexpensive gadgets that they've managed to convince people should not last very long. The lifetime and service expectations of a car are completely different. If I bought a car and the battery went dead, and the manufacturer's solution was 'ship it to us and we'll send you a replacement in x days' that would be a unacceptable. Likewise, people aren't going to put up with streamlining support by saying stuff like 'no you can't replace your battery, if the car dies you just buy a new one.'
My experience with the HPs of the world is on the business purchase side, but I've never bought 'from HP'. I could initiate the conversation with HP, but they always hooked me up with a solution vendor or whatever were calling a dealer at the time. Same w/ Cisco, Dell, IBM, EMC, Microsoft etc.
Assuming you have an Apple Store nearby, the dead battery issue is dropping off your laptop at the store, going to lunch, and then picking up the repaired product.
Dealerships are more like Geek Squad.
I'm not convinced. When I had to do anything more serious than basic maintenance, the answer has frequently been "we'll order a replacement part, it should arrive in x days."
If they don't want to manage them, they won't.
Go to carmax.
full disclosure: I work in the automotive industry. (Although not for them)
I'm going to second this.
I've bought two Jeeps, two Corvettes, a Buick, a Camry Hybrid, an Infiniti G37, and my wife's Lexus CT200h from Carmax (over ~12 years). The experience has always been extremely pleasant. I hate to haggle. Hate it. Carmax is awesome if you're looking for a used car.
I understand the aversion to haggling but, consider that it is one of the most economic uses of your time. If you haggle for 10 minutes and get $50 off, you are working at a rate of $300 per hour for the duration of the haggle. Not money to be sniffed at by any measure.
You know how long I had to haggle at a shady Toyota dealership to get my brother his Yaris? 4 hours. 4 HOURS. Haggling does not take 10 minutes at a car dealership once you get to a certain point in the process.
I make enough money that I can throw it away on not haggling for a car. Carmax can keep whatever I left on the table by not dealing with a douchebag car dealership.
How much did you get off? If you got anything over $1000 then that 4 hours was time well spent. There's a good chance you don't make $250 per hour at your normal job, you're the exception if you do.
Rich people spend thousands of dollars on private planes just so they don't have to deal with the BS flying commercial. Dealing with a car sales person is no more fun than going through airport security, i happily pay a premium to not deal with those people.
Or get an auto broker through your credit union.
Planet Money did a great podcast on the history and political power of the dealer system, and why buying a car sucks so much - http://www.npr.org/blogs/money/2013/02/19/172402376/why-buyi...
This story was recounted in a yesterday article on the topic:
"I sat down in Palo Alto with Elon Musk, hat in hand, and said we want to partner with you, you can have it exactly as you want it — 'Tesla of Austin,' " said Wolters of the Texas dealers association. "You can do it just as you want to, within our law, you just can't own the showroom."
Musk, Wolters recalled, didn't cotton to the suggestion, leaving the room quickly, but not before pledging to spend an inordinate amount of money to battle automobile franchise laws.
Bringing another billion dollars into the company? Loading up on ammunition.
http://online.wsj.com/article/SB1000142412788732476700457848...
I don't think he will, and I hope he won't. But Elon tends to be a guy who thinks very long term, and I think he knows the future for Tesla would be much better if they sold their own cars, and never depended on the dealers again. Plus, it's not like he's in a bad position with Tesla right now, and he's desperate.
If he was going to cave, he'd have caved already. There's nothing in it for Tesla now. The whole attempt to force Tesla into the existing supply chain model, at ZERO demonstrable benefit to consumers, looks bad politically. No politician will want to be seen publicly defending the dealers.
> No politician will want to be seen publicly defending the dealers.
Defending "local small business owners" on the other hand...