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Auto dealers versus Tesla

I’m pretty sure the dealers will win this round, but I doubt they can win in the long run.

Texas auto dealers and their lobbyists in Austin are targeting legislation that would allow Tesla Motor Inc. to sell its all-electric vehicles directly to customers — upending a longstanding protection of dealers in state law.

After quickly compromising on or abandoning interest in other bills, dealers have dug in their heels after a Texas House committee this week advanced a bill that would permit the Silicon Valley-based company to circumvent a mandate that automakers sell new cars and trucks only through franchised dealers.

“They’re looking to take the franchised dealer out of the loop,” said April Ancira, vice president of operators for the Ancira Auto Group.

“What this does is it takes a lot of competitive pricing away,” she added. “You would only have the manufacturer, and there would be no dealers to compete, which is always better for the consumer in the end.”

[…]

Lobbyists with the Texas Automobile Dealers Associations concede that Tesla, which sells all-electric sedans, is a small niche player. But dealers fear even the narrowest of legislation could open the door to other manufacturers that would like to cut out the middleman.

“It’s an easy gateway for the manufacturers to start piling in,” Ancira said. “All of the sudden, you see the franchised dealer model disappearing, and that could spread into other arenas outside of the automotive industry.”

[…]

Citing an Austin Business Journal survey that found 86 percent of respondents support allowing Tesla to bypass dealerships, the company said the ability to sell directly to customers “is the best chance that a new electric car company has of succeeding.”

“For (TADA) to claim that restricting competition is in the best interests of the public is wrong and defies obvious common sense,” [Tesla CEO Elon] Musk said in a statement.

He has visited the Capitol several times recently, hoping to foster support for the legislation among state lawmakers.

Sen. Leticia Van de Putte, D-San Antonio, said she has met with Musk and said he was persuasive. Still, “I’m really uncomfortable at this point,” she said. “I’m not convinced.”

I’ve compared Tesla to microbreweries, and it’s in the response from the dealers that the parallel becomes apparent. Tesla’s a small new player in a niche market that has a different business model that doesn’t fit with what the big established players do. More to the point, existing decades-old laws preserve the status quo and make it impossible for the new player to operate the way it wants to. The new guys go to the Legislature to get a bill passed that would carve an exception into the laws for their business, and the established guys go ballistic. My favorite part is where the established guys claim that by restricting the ways that consumers can buy the products they all make, they’re protecting the interests of the consumer. In the meantime, legislators who aren’t terribly familiar with the new business model but who hear a lot from the established guys about how dangerous this newfangled stuff is, are hesitant to take action. As they say, it’s deja vu all over again.

But here’s the thing. The new guys have tapped into something that a small but growing number of people want, and those people are passionate about it. They don’t accept that what they want is dangerous, and they have no desire to be “protected” from what they want. Over time, the new business model becomes more familiar, and more legislators come to understand and support it. It takes a few sessions, and a lot of grassroots organization, but eventually enough pressure builds up to force a way in for the newbies.

Obviously, I’m projecting for Tesla. I’ve not heard of a movement to replicate what the fans of craft beer have done as yet. But I think Tesla is smart enough to recognize that this is the best way forward for them, and like the microbreweries they benefit from the fact that the existing setup is archaic and stifling and makes no sense. It’s hard to defend the indefensible, and sooner or later something has to give. I don’t know how this will play out, but my money is on Tesla, or whoever succeeds them in the marketplace, eventually winning out. It’s just a matter of how long it takes.

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5 Comments

  1. Jim Shores says:

    One question. Without dealers, where will they take the vehicle for service work?? The factory? I don’t think that would be feasible. Unless the purchaser were to live in the general area, they would limit the potential for ever selling very many of these vehicles. -Jim

  2. There are existing service locations in Texas:

    http://www.teslamotors.com/findus/service

    Tesla is a niche market, and so I would expect there will be a limited number of places where it would make sense to buy one in Texas. It may be that over time, going to a dealership model makes sense for Tesla. I just don’t see any reason why they shouldn’t be allowed to do what they do now in Texas.

  3. Joel says:

    Dealers dont want to give up their crooked business model. Theyre afraid because Tesla has a revolutionary product that will put GM & Ford out of business. Anyone should be able to manufacture & sell their product PERIOD thats the way the free market system is supposed to work.

  4. trowaman says:

    Better analogy.

    Tesla wants to operate their own version of an Apple Store. Genius bar/Mechanic included.

    Sold.

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