Not even arguing that Tesla should be allowed to sell cars without a dealership, why bother preventing direct sales from manufacturers, but only for this specific product category?
So they lobby the government that unless you protect us from the dealers, they will undercut our prices by selling directly to consumers, and we will have to lay off some of our employees, or go out of business. Then our small town won't have said dealerships anymore.
Especially now that we have the internet, these policies are antiquated and end up hurting consumers, by driving up prices. Without the middle-man, cars could be sold at lower prices.
1) design cars
2) design factories
3) manufacture cars
4) retail cars
So somewhere along the line someone figured out that cars are somewhat commodity, same as clothing or food. A grocery store sells several brands of food and department stores sell several brands of clothing. Cars could be done the same way.
Manufacturers liked it because it allowed them to grow much faster by selling franchise licenses and use that money for design of cars, factories and to actually build cars. It's an all around win.
But eventually manufacturers grow to the point where they aren't starved for capital anymore, have good market penetration and growth starts to slow. So a natural next step is to cut out the middlemen (the dealers who have paid franchise fees) and start direct-to-consumer sales efforts. This idea didn't sit well with the dealers who had paid those franchise fees and might have assumed they could amortize them over many years.
So laws got passed preventing manufacturers from competing with the dealers that they had sold franchises to.
But Tesla has never sold anyone a franchise ever. They're not doing naughty things to their former customers (the dealers) because they've never had dealers.
REQUIRING them to sell only to dealers doesn't make sense unless you're worried about Ford doing some kind of shady restructuring to get themselves out of all their dealer contracts and to start selling direct to consumers.
Back in the day, the dealers banded together so that wouldn't happen to them by making it law.
I can see that, for Apple dealers, it could be a major problem. Apple products are a specific niche, and you can't take your Apple dealer and turn it into something else with much hope of success. Selling PCs is a pretty different business.
But when it comes to car, surely selling Fords is much the same as selling Toyotas? If Toyota treated a dealership badly, why wouldn't they shop around for a brand that would treat them better? Is it that the American car manufacturing industry wasn't sufficiently competitive for that to work when these laws were being written?
but also
(2) Car dealerships need expensive inventory of illiquid assets and franchise licenses. If the franchise contracts aren't well written (perhaps collusion between manufacturers prevents competition over franchise rights), then a big auto company can maximize profits by selling franchise rights and then a couple years later looking at volumes of sales for which areas it makes sense to set up their own stores and undercut the franchise owners. The franchise owners need to amortize their franchise costs, but not so for the direct sales shops. The argument becomes that the historical implication has been that in the auto industry selling local monopoly franchise rights has implied no direct competition from the manufacturers.
Perhaps a better law would be that no manufacturer with existing franchise owners in the state can have direct sales in the state.
Perhaps a better law would be that no manufacturer with
existing franchise owners in the state can have direct sales
in the state.
In particular, if a local franchise owner sees the manufacturer opening up its own store down the road, the franchise owner can't (in the absence of side agreements) tell the manufacturer to take back the cars because they want out of the business.
But in brief, there is basically a vested power that does not want to allow innovation to disrupt their highly profitable industry. They rely on some fairly outdated laws to protect themselves.
The Tesla argument, which makes sense to me, is that since they have no franchise dealers, there is no reason to prohibit them from selling direct.
The trick is that they are actually three different business models. Apple makes money on the phones. AT&T makes money on the phone contract. Best Buy or Radio Shack make money on the protection plans and accessories.
Labor unions started with positive intentions and were needed to protect workers who were often overworked and underpaid.
Now many feel that labor unions mostly exist to support themselves and make it harder on everyone from corporations to consumers and their effects aren't near as beneficial as they once were.
The internet has made direct-to-consumer sales a much more viable alternative and the car industry has yet to realize it.
By the way, cars aren't the only products sold this way. Try to buy a Stihl chainsaw or a John Deere mower without going through a dealership. Try to buy a traditional name brand mattress or piece of furniture direct from the manufacturer.
There is a start up born nearly every day trying to "disrupt" this business model.
There's nothing wrong with the dealership model per se, but it's troublesome when it becomes mandated by law.
http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...
That type of behavior is what created franchise laws in the first place.
But make no mistake--this does happen to other types of franchises. These lawsuits simply don't make the news because they're not general-interest or (for HN) tech-interest events.