Car Dealers Sue Tesla, Citing State Franchise Laws • Hacker News Board

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#81

Post by shawn-butler » Sat, Nov 10, 2012, 4:38 PM UTC

Osmium wrote: post #73

NathanKP wrote: post #5

That is ridiculous. A car is a product like any other product that can be sold. Apple sells phones and MacBooks directly to the public. Outlet malls have clothing manufacturers selling directly to the public. The car dealerships is an outdated model and this is a sign that they are desperate. They are just suing because once the Tesla stores prove to be more efficient other car manufacturers will follow suit.

I have to admit, as an outsider, I can't fathom how a law like this even exists especially in a place like America.

I can recommend reading this paper[0] It discusses the history of the relationship between the auto manufacturers and their dealers and the reason why franchise laws now exist in every state.

Concludes that state regulation is necessary to the extent it neutralizes the disparity in bargaining power between the automakers and the dealers, but that current legislation no longer achieves this and only benefits the auto dealers.

[0] http://EconPapers.repec.org/RePEc:reg:wpaper:628

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#82

Post by saturdayplace » Sat, Nov 10, 2012, 4:46 PM UTC

1123581321 wrote: post #77

gpcz wrote: post #20

Earlier quoted context omitted.

Its easy to say that at the macro scale, but what are you suggesting car dealerships do on the micro scale? Learn how to build their own cars and sell them in defiance of the current laws on the contingency that the judge rules in Tesla's favor?

I would like to see emerge a car-buying agent. The agent would deal with all manufacturers and used car lots (still a need for this) and help the buyer get exactly what they want at the best price. However, there will always be some new car retailers because some people like to buy new cars in person and drive them immediately. I think the standards for sales staff will continue to change away from the old commission…

These agents actually exist. This is how my grandfather has bought cars in the past two decades. He gives the agent a set of parameters and the man shows up with a car my grandfather is willing to purchase.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#83

Post by colinshark » Sat, Nov 10, 2012, 4:50 PM UTC

andrewtbham wrote: post #57

mrkmcknz wrote: post #30

Earlier quoted context omitted.

Maybe I'm too naive to see why manufactures having their own showrooms would be such a problem?

As a modern example: look at luxotica for an example of a monopoly. They own large shares of the manufacturing and retail for eyeglasses, and they charge exorbitant prices. They own Oakley, Ray-Ban, LensCrafters, Pearle Vision and Sunglass Hut. They also operate Sears Optical and Target Optical. They also produce eyewear under license for names such as Coach, Anne Klein, Bulgari, Prada, Polo, Versace, Ralph Lauren, a…

...And brands like BonLook and Warby Parker are disrupting the old industry right now.

My wife and friends (24-27 years old) have been getting their glasses at $100 a pop, no strings attached, from these companies for a few years.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#84

Post by Shivetya » Sat, Nov 10, 2012, 4:52 PM UTC

Osmium wrote: post #73

NathanKP wrote: post #5

That is ridiculous. A car is a product like any other product that can be sold. Apple sells phones and MacBooks directly to the public. Outlet malls have clothing manufacturers selling directly to the public. The car dealerships is an outdated model and this is a sign that they are desperate. They are just suing because once the Tesla stores prove to be more efficient other car manufacturers will follow suit.

I have to admit, as an outsider, I can't fathom how a law like this even exists especially in a place like America.

Wait till you see the laws surrounding the sale of liquor and cigarettes. There are many protected industries, some protected for business reasons and some for tax purposes.

Tesla is not only upsetting the apple cart when it comes to sales but service; I do not agree with their service side changes because it takes choice out of the hands of the consumer. (disclaimer : I work for a parts distributor who happens to own repair shops too).

Dealers are rightly upset because the current system requires them to put up a lot of money in facilities that must be built to specific guidelines. Throw in having to meet manufacturer set requirements for sales and service they do have a large investment. Contrary to belief, the majority of new car dealerships are very good people who do go out of their way to help people.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#85

Post by redwood » Sat, Nov 10, 2012, 4:54 PM UTC

Osmium wrote: post #73

NathanKP wrote: post #5

That is ridiculous. A car is a product like any other product that can be sold. Apple sells phones and MacBooks directly to the public. Outlet malls have clothing manufacturers selling directly to the public. The car dealerships is an outdated model and this is a sign that they are desperate. They are just suing because once the Tesla stores prove to be more efficient other car manufacturers will follow suit.

I have to admit, as an outsider, I can't fathom how a law like this even exists especially in a place like America.

America has anti-trust laws. Companies are not supposed to be allowed to wield undue market power (e.g. be able to set the price of their type of product). Now this is obviously complex. But basically a lot of anti-trust battles led to the de-verticalization of numerous businesses: from film studios which owned theaters, to Standard Oil which owed oil, railroads, refineries, distribution centers, etc.

The idea is to make sure there is market efficiency, e.g. competition, in price throughout, so the consumer doesn't get screwed.

Now the idea of a franchise law like this one is done in a similar vain: it appears to ensure better competition for big car makers to bring their goods to consumers.

The problem is this law is written from a perspective of a couple major car companies that dominate the market.

There has always been an argument that a small player cannot be considered to wield market power, and that thus they should be allowed to be vertical. Apple for a long time avoided any anti-trust issues (while Microsoft didn't) even though it was very much vertical, by being small! Tesla presumably will use the same argument.

Bottom line there are two sides to laws like these: on the one hand, in Tesla's case, they seem anti-competitive. On the other hand they are made to bring about a kind of competition. Clearly the courts will need to resolve this...

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#86

Post by glabifrons » Sat, Nov 10, 2012, 4:54 PM UTC

reeses wrote: post #40

reinhardt wrote: post #22

Earlier quoted context omitted.

No, go out of business and look for a real job.

The auto industry (in the USA at least) has a huge negative reputation for unethical conduct by the dealerships, especially in sales and service (for which they are claiming protection). It's going to be exceedingly difficult to find sympathetic jurors.

I couldn't agree more. I've heard _very_ few flattering stories from coworkers and friends over the decades of their experiences with car dealerships and their service.

When you factor in something unusual, like a Wankel engine, the experience gets exponentially worse. Just browse any RX-7 or RX-8 forum and you'll see nothing but horror stories whenever anyone asks "where should I have my car serviced?". So much for the dealer's investment in "expensive equipment and training". They don't... they hire the cheapest labor that meets their loose requirements.

Now take that difference even further and eliminate the ICE and replace it with 6k+ Li-Ion cells with their own cooling system, an AC induction motor, high powered inverter and the related heavy cabling, and you're going to have massive confusion and problems in a dealer whose primary sales and training is for conventional vehicles. Of course, a possible answer could be _exclusive_ dealerships with _extremely_ strict requirements for training and such, but I'm sure there are probably laws against that as well.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#87

Post by nlh » Sat, Nov 10, 2012, 5:01 PM UTC

larrywright wrote: post #80

Car sales has always struck me as an industry that was ripe for disruption. Why do we still need car salesmen?

Same reason we need any type of human salespeople -- sometimes people don't want to do all the research & comparisons by themselves and its nice to have someone guide you in the right direction.

Now - that being said - I don't disagree with the sentiment here. The traditional car sales model sucks and I think is ripe for disruption. But don't necessarily throw the baby out with bath water ;)

For example - I bought an espresso machine for a friend the other day. I called one of the better retailers out there and spoke to a super-helpful saleswoman who talked me through the various options, gave me differences between models, what's worth paying for and what's not, and based on my personal preferences, helped me pick the right one. It was a totally pleasant experience.

But what made it particularly excellent was that she wasn't (to my knowledge) pushing one particular brand/model. She had at her disposal about 20 different brands and guided me to the "best fit" based on my needs.

Maybe that's an opportunity for car dealers in the future -- maybe manufacturers sell directly and we get independent "car sales consultants" who don't work for a particular brand....?

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#88

Post by thaumaturgy » Sat, Nov 10, 2012, 5:01 PM UTC

njharman wrote: post #32

mmariani wrote: post #15

Earlier quoted context omitted.

> ...Tesla show room locations do not sell cars, only provide information about them. Now how much would you bet that this argument will win this case for Tesla?

Depends if jury believes putting down deposit is "buying" or not.

Tesla has an online reservation system (https://www.teslamotors.com/own). From http://automotivedigest.com/2012/10/dealers-annoyed-with-tes... :

> Tesla’s stores are a bit different – essentially showrooms to gain consumer interest and education. For those impressed and wanting to buy, they’re directed to a computer to make their deposit and place their order.

Tesla here is clearly navigating on purpose through a gray area in which the customer is technically not buying anything from the show room.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#89

Post by kawera » Sat, Nov 10, 2012, 5:02 PM UTC

rubyrescue wrote: post #55

mrkmcknz wrote: post #30

Earlier quoted context omitted.

Maybe I'm too naive to see why manufactures having their own showrooms would be such a problem?

Imagine that Ford only allows maintenance at company owned stores, because they don't sell replacement parts to dealers, then they charge $500 for a fan belt, etc.

That's exactly what Nikon does.

Re: Car Dealers Sue Tesla, Citing State Franchise Laws

#90

Post by vonhonkington » Sat, Nov 10, 2012, 5:05 PM UTC

MrBlue wrote: post #59

shawn-butler wrote: post #56

Earlier quoted context omitted.

Oh, just like the US auto manufacturers should have just gone out of business instead of being bailed out?

Yes. Exactly. That is how the free market works.

So you feel it would have been preferable that the auto companies go bankrupt, get liquidated, then have their suppliers go bankrupt and liquidate?