Texas auto dealers say no special treatment for Tesla | Hacker News Reader

Texas auto dealers say no special treatment for Tesla

cnbc.com

28 pointscodegeek47 comments

>>"Once you start letting the manufacturers sell direct, then all of a sudden the dealers I have in 163 towns of under 15,000 population, they disappear"

Why, because they're artificially increasing prices for consumers? Texas should end special treatment for dealers, and let manufacturers sell cars directly to consumers, if that's what the market wants to do.

Dealers are some of the biggest donors; we need campaign finance reform

The alternative to this is to stop the politicians from imposing laws of convenience by voting against these legislators, or amending the state constitution.

What we need is a separation of state and economics. Who would try to bribe a legislator without any power over the levers of the economy?

Texas has a bit of a split personality, which I guess is fairly common in conservative states towards the West: on the one hand it tends to be in favor of small government, free markets, etc., but on the other hand it also lionizes small towns, rural areas, the "real Texas" that isn't Houston/Dallas/Austin. Those two kinds of preferences are often in conflict, since small-town Main Street, left to its own devices, does not necessarily prosper in a modern economy.

No, because the laws that protect exclusive dealerships against competition from the manufacturer are the only reason that dealerships exist (nobody would have invested money to build a business that could be shut down overnight).

What's interesting is that it's the car manufacturers themselves that lobbied for these laws to be enacted -- they wanted dealerships to be built, and knew that by tying their own hands they would reassure prospective dealers.

Of course, these laws shouldn't apply to companies that have no dealerships whatsoever -- it's not relevant to the purpose of the law.

In other industries, this is often achieved with geographical non-compete clauses, rather than by the state banning direct sales.

Autos are a bit special, due to the needs for servicing and the physical size and un-shippability of same.

I don't understand the distinction you are making. A dealership can sign a contract with the manafacturer that can geographically restrict the manafacturer in any way that is necessary.

"Once you start letting the manufacturers sell direct, then all of a sudden the dealers I have in 163 towns of under 15,000 population, they disappear," he said. "All we would have is dealers in the major metropolitan areas with one price controlled by the factories. That is not good for anyone, certainly not 26 million Texans."

That would be great! That would be great for everyone, except maybe the dealers.

I like how he says "price controlled by the factories" as if the factories have nothing to do with the price now.

Great for everyone, except for the people who now live five hundred miles from the nearest car dealer.

That's sort of part of the deal when you live in rural Texas. As a random example, take Van Horn (the location of Blue Origin, Jeff Bezos' rocket company). The only thing that claims to be a grocery store out there tends not to take very good care of its perishables, so the only real option for getting groceries is a two hour drive to El Paso.

Meh. If car dealers are so important to people, surely they can continue to operate and turn a respectable profit representing the value that their services provide.

There's really no need to make the decision (save money, or enjoy the services a dealer provides) for everyone at once in a state legislative body... not unless you're in what economists call the "rent-seeking" business, anyway.

If car dealers are so important to people, surely they can continue to operate

Car dealers are important for the same reason a shoe store is important. You've got to go in and try on the shoe first to see if it fits. But much like with shoes, consumers can figure out what fits and then go home and order from someone else.

The only difference is (in my eyes) it would be even worse with cars, because it's easier to spend an extra $5-10 supporting your local shoe store than it is to spend an extra couple thousand supporting the dealer.

Dealers are also a portal for interacting with the manufacturer for things like service, recalls, and TSBs. I'm not sure what, if anything, would step in to fill that void if they disappear.

That sounds like a premium experience that customers should pay extra for.

I don't know that it's worth as much as a few grand to drive a few miles with the dealer sitting next to me in the car. For a few hundred bucks I could rent a car for several days and base my impression on that experience.

There you go: "problem" solved! It turns out BFE doesn't need its own car dealer.

There are plenty of repair shops. Going to a dealer for service almost guarantees that you will pay above market price for both parts and labor.

That depends strongly on the dealer and region, in my experience. When I lived near my dealer I always took my vehicle there, because routine maintenance and even new tires were either less expensive than or approximately the same in cost as prices at local mechanics I researched.

The only reason I don't use a dealer now is because I found a fantastic actually-small-business mechanic who is closer to me, and who didn't try to pull the wool over my eyes and whose prices are reasonable.

Depending on the repair, I may be more than willing to pay extra. New tires for my '84 pickup? Sure, I can go anywhere. Overhauling the engine on a turbocharged BMW? Yeah, I'm going to want expertise & factory parts.

I don't think showrooming would be catastrophic to the industry. If test drives are important to selling cars, manufacturers could pay dealerships to keep their cars around on lots for that purpose, or come up with a meaningful incentive structure to reward them if the test drive leads to a sale (you can incentivize the customer to help with the tracking, too; just give them a big enough coupon). And alternative manufacturers could sell through the Internet or at their own dealerships, at their discretion.

And certainly used-car dealerships aren't going to evaporate under this scenario either.

> "Car dealers are important for the same reason a shoe store is important."

Interesting comparison. Are there any laws preventing sneaker companies from selling directly to the consumer in Texas? Do shoe dealers have their own special little protectionist laws?

Or could Nike open their own corporate owned and operated store to sell Nike brand merchandise, if they were so inclined?

It would appear that Nike has plenty of stores in Texas. Indeed they can operate in this manner as they are inclined.

http://www.nike.com/us/en_us/sl/find-a-store/

Great for them too, since buying a car from a dealership is one of the biggest scams the average family walks in to on a regular basis. This is especially true in poor rural areas where cars are non-optional - there's a reason that the owner of the local car dealerships is frequently the one of if not the wealthiest man in the county.

Without more proof, I'm not buying that rural car dealerships make their owners wealthy. I suspect it's the other way around, you can't own & resell (as that is how it works) fifty vehicles without a good chunk of change already in your pocket.

Googling for statistics about the profitability of rural car ownership seems to be a fruitless task, so I can only speak from the anecdotal experience of one who has spent most of their life 1. living in rural areas and 2. has worked for and started businesses providing services to rural car dealers with the son of a big-shot sales manager for multiple dealers. (Alarms/physical security and web services/social media bullshit, respectively.)

Every car dealership I worked with had obscene profit margins (primarily from service), dealerships routinely collaborated with each other (a handful of old men owned most of the major dealerships for hundreds of miles and went to lunch together regularly), and all had nothing short of abusive business practices. Most of the owners had started out as salesmen and eventually worked up enough money to get a dealership of their own, at which point they rapidly expanded to multiple dealerships (which would imply a well above average rate of return on investment.)

Thankfully the 2008 crash gutted a lot of them. Hopefully tesla and the manufacturers can deliver a killing (legal) blow - without government-enforced monopoly status, they'll die quickly because they really don't really add any value to the consumer and cost tons of money.

Sorry for the rant, the entire subject is infuriating.

Are you're purchasing cars every week? we're not talking about groceries here, cars are a long term investment and if you're saving money by not having a middle man that extra drive once every 3-10 years (lease/purchase) is not going to be a big deal. Plus, 500 miles? are you referring to Alaska?

> Great for everyone, except for the people who now live five hundred miles from the nearest car dealer.

Don't expect draconian legislation to support your lifestyle. I'll subsidize the postal service, so everyone gets mail at a reasonable rate. But that's it. It is not a right to live in the middle of nowhere and still demand the luxuries of civilization (to be imposed by legislation).

Please name a place in Texas that would be five hundred miles from the nearest car dealer in the worst conceivable scenario you can imagine.

In fact, I challenge you to find a place in Texas that would be two hundred miles from the nearest car dealer in that scenario, that is not already two hundred miles from the nearest car dealer (Terlingua?)

Driving 500 means there is 1,000 miles between car dealerships. Texas is only 773 miles wide so 1 dealership could probably cover just about the entire state if that's your benchmark assuming you can't buy a car outside of Texas. More realistically, a few people might end up 250+ miles from a car dealership, but as you only need to buy a car every few years that's hardly a big deal.

So there is no market for the cars then, or is there? I don't understand. Should we leave it to the free hand of the market and not regulate it, and let it sort itself out?

Car dealerships make a profit based off of information disparities. What value do they add in today's world?

Off the top of my head,

- Place to window-shop and test-drive many different cars

- Place to get your vehicle serviced by manufacturer-trained techs

- Place to get TSB's, recalls, etc performed

How much the second point matters does vary, depending on the quality of your local independent shops and your vehicle. Some vehicles are dirt simple, some are really weird & complicated. Case-in-point; would you rather have Joe's Gasoline Imports work on your Tesla, or Johnstown Tesla?

I'm not in love with dealers, but it's frustrating to see people writing off the whole notion altogether, pretending they will be better off if the only access to Tesla is a mail-order catalogue.

Nobody's talking about a world with no dealers, just whether they can be owned by the manufacturer or not.

Exactly. The only reason dealers might disappear in a world where manufactures are permitted to sell directly to the consumer is that dealers do not actually offer any advantages that consumers actually value.

If dealers provide such a necessary service, then they won't be in any trouble. That they think they are in trouble is really them saying all that you need to know about them.

> pretending they will be better off if the only access to Tesla is a mail-order catalogue.

Except Tesla is available outside a mail-order catalog via Tesla-owned distributorships.

Ok, so if dealerships provide a valuable service, then why are they so worried about allowing manufacturers to sell directly?

If those things you identified are truly important, then manufacturers will end up paying for them one way or the other (i.e., directly or by allowing dealerships to take a cut of car sales). If dealerships are an efficient way of providing those services, then why in the world would manufacturers abandon this existing network of service providers?

Now, maybe it is the case that the current dealership model is the best way to deliver those services to customers. Maybe having factory-owned service centers leads to poor customer service. But won't the market figure that out?

> I'm not in love with dealers, but it's frustrating to see people writing off the whole notion altogether, pretending they will be better off if the only access to Tesla is a mail-order catalogue.

This is an interesting straw-man. In normal states, Tesla is allowed to set up fixed-location service centers and "car stores" in malls. Potential customers can take cars on test drives and a salesperson walks the customer through the purchase process. Even in Texas, Tesla has showrooms and a limited ability to set up mass test-drive dates. What Tesla is trying to do (but being prevented from doing by silly laws) is make sure that customers don't "only access to Tesla is a mail-order catalogue."

I don't understand why it should be illegal for the manufacturer to provide the services you listed, except through a third party. Nobody is suggesting that a car manufacturer shouldn't be allowed to have a network of third-party dealers, just that car manufacturers should be allowed the option of running sales and service directly.

This is an interesting straw-man

It's not a straw-man, it's exactly what I hear some people saying they want.

"For the record, Tesla has not said it will locate its new Gigafactory in Texas in exchange for the state changing its franchise laws."

Are there any legal restrictions on a company making demands like this?

Not really, lots of large projects that have a choice of states carry with them "nice to haves" which are policy changes that would make the choice "better." Intel played this game with their factory they put into Arizona, Google with data centers (and Google Fiber of late), Tesla with battery factories.

Why would there be? Corporations asking for laws to be changed is like a citizen petitioning. Money is speech, Corporations are people.

How about "no special treatment" for auto dealers, i.e., repealing the crooked state franchise laws that give auto dealers a legal monopoly on auto sales?

How about, no monopolies on anything? Cable and phone companies make deals with the city to make sure they are the only ones in town.

As for the new car dealerships, I've hated the laws for a long time. I should be able to go to WalMart and buy a new car.

How about no special treatment for Texas auto dealers?

If computer retailers do not get their own special little protection in Texas, why should auto dealers?

The argument about closing rural dealerships is silly. Dealerships make their money servicing cars and not from selling them. So there will always be a need for service centers in those rural areas as long as the OEMs keep selling enough cars one way or another to warrant it. Otherwise other independent garages will prop up and service customers.

There are tons of indie garages already, and you're way more likely to get a fair deal at them than the dealer - a mechanic who owns his own shop will quickly die if he does a bad job while a dealer that does a bad job will continue to exist indefinitely.

The whole story of conservatives supporting de-regulation and free markets is really just a cover story for crony capitalism.

Liberals don't hide the fact they want to re-distribute wealth to low-income people. Conservatives should just come out and say they want to keep their rich donors rich.

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