Tesla Buys a Company in a State Where It’s Barred from Selling Cars
techcrunch.com
techcrunch.com
They're indirectly making a link between Michigan jobs and Tesla's success. As Tesla gets bigger it'll make that law look like it's holding Michigan's manufacturing industry back rather than helping the state's car sellers defend their businesses. People care about manufacturing jobs a lot more than retailers.
It's probably because they want internet in their cars... not because they are trying to put the state legislature on the arm.
And why is Tesla so against dealers? As long as Tesla is showing the "internet price" then customers can see exactly how much the dealer is higher so buying from a dealer wouldn't even be a bad experience. A Tesla dealer would be more like CarMax, or at worst a Saturn dealership.
I think it's worth considering that Tesla may in fact be demand constrained not production constrained, and that's why they need to sell in these states where they earn less. And they don't want dealers because they are much more transparent about demand.
I'm not a representative of Tesla, but if I was Elon Musk I wouldn't want my product being sold by dealerships either. The dealership industry is an outdated, parasitic system that has nothing to offer Tesla. It is little more than a middleman which saps away profit that could be going to Tesla itself. On the other hand Tesla has everything to gain in revenue, image, brand value, and consumer experience by running their own boutique stores.
The dealerships have also gone way too far trying to get legislation passed to stop Tesla and protect their parasitic business model rather than adding any real value that makes them useful to Tesla.
That in my opinion turns this into something more personal, a battle in which Tesla wins more respect the more they fight back. By refusing to sell the vehicle entirely they actually gain in status (the more difficult to obtain good gains value) and they progress toward the longer term goal of making profit free of parasitic middlemen. The alternative would be to make a few more dollars in the short term by using dealerships but lose in the long term. The Elon Musk suite of companies has always been very long term focused so I'm not surprised to see them working toward long term vision rather than giving in on a short term battle.
Basically to Tesla the future is selling their goods (not only cars but also Powerwalls, and whatever else they have in development) directly to customers in order to improve profit margin, and they aren't going to give in on the road to making that happen. A boutique store for selling vehicles today can sell Powerwalls the next year. This makes Tesla much more robust instead of being reliant on a middleman.
Ordinarily, middlemen are great. Small farmers can get away with selling at Farmer's markets, but Supermarkets drive an enormous volume of sales. Likewise, Walmart, Target, Fred Meyer's, etc. are all generally pretty good to their suppliers and customers.
The big difference when it comes to cars it that customers actively hate car dealerships. I don't know of a single person who is even ambivalent towards the process of buying a car.
If Tesla could take that part of the car buying process and make it great, it would be an enormous competitive advantage. Dealerships and the other car manufacturers know this and are terrified that it might work.
From that perspective they really have no reason at all to cooperate with dealerships. The car dealerships are too narrowly focused, whereas Tesla is transitioning into more than just a car company, and selling more than just cars.
Tesla did take that process and make it great: They opened showrooms and you just order online at a specified price. Easy! Not the same as dealerships though.
As a supplier, supermarkets impose constraints such as, "your apples must be exactly this size and colour, with no blemishes, and cost 5% less than you charges for them last year. If you fail to deliver the 2T per month that we require, you pay us penalty fees. If we don't sell your apples, you pay for disposal. If we have a special on apples, you'll pay us the difference in price. If you sell your apples anywhere else than our supermarket, we charge you penalties."
No, middlemen are not great.
I think the anti-dealer stance comes from dealers not having an incentive to sell EVs when they are familiar with traditional ICE cars. There's been quite a few stories of Nissan having issues with their dealerships not being very interested in selling Leafs for instance.
http://seekingalpha.com/article/3147926-tesla-motors-tsla-q1...
Elon says credits sometimes sell for as little as 50%. They are rumored to be getting 9 credits for most cars sold in ZEV states (most cars in US). Credits are worth $5000 in offset fines. So $22k per car even at heavily discount ZEV prices.
I don't think Tesla is against dealers per se, it just wants to control end-to-end experience like Apple does. It's totally understandable for a high-end manufacturer.
So now Tesla has motivated the economic development people in West Michigan to push to repeal the law that stopped Tesla from selling cars because it will mean more jobs for them.
I predict Tesla will eventually be allowed to sell cars in the state as a result of this purchase so it is a double win for them.
There's also a trade-secret aspect to this. Since Tesla previously had to farm this out, there was a chance of a competitor seeing their dies at the 3rd party company. Not so now.
The mobility we have as white-collar tech employees is rare. A blue-collar Michigander is not going to follow Tesla out of state.
This is blaming the victim (namely Tesla). The only blameworthy party is the Michigan government and Michigan voters as a whole.
> The mobility we have as white-collar tech employees is rare. A blue-collar Michigander is not going to follow Tesla out of state.
That's false. White collar and blue collar workers are equally free to move around.
Which means they're banned from selling cars. They have to use intermediaries to sell cars for them.
> No one in Michigan is allowed to sell manufacturer-direct.
Imagine if the recording industry had successfully lobbied for laws that prevented anyone from selling music directly.
"IndieBandFoo isn't banned from selling music in the US, they're not allowed to sell artist-direct. No one in the US is allowed to sell artist-direct."
This restriction is no less ridiculous.
That's not true.
That's not true. A dealership in Michigan can "buy" Tesla cars, or whatever mechanism exists. "Tesla is refusing to do business in Michigan" would be a clearer way of putting it.