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New Jersey legalizes direct Tesla sales

blog.caranddriver.com

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Re: New Jersey legalizes direct Tesla sales

#51

Post by clarkmoody »

msandford wrote: post #29
surge wrote: post #27

Earlier quoted context omitted.

Right, these laws made sense 50-60 years ago, but now all the dealerships are established and Tesla as a new unproven company that has a comparative low volume of sales can't simply get dealerships to sell their cars plus it may violate agreements with competing car companies that they also sale. In this case there is no established Tesla franchises that would lose, and Tesla can't simply just get dealers to start se…

It would probably make sense to rewrite the laws to somehow say that car manufacturers can't compete with existing dealer franchises within a certain mile/population radius and can't revoke dealer franchises simply to open up new territory for themselves. But to say that no auto manufacturer can operate direct sales is silly since there are now new car companies being formed.

The only thing that makes economic sense is to remove all of these dealership-protection laws from the books and allow the free market to organize itself in the most efficient way possible. If that means that auto manufacturers continue to use dealerships, fine. But that model shouldn't be forced upon any good/service by legislation.

Re: New Jersey legalizes direct Tesla sales

#52

Post by libria »

rayiner wrote: post #32
shiggerino wrote: post #2

What prompted this law in the first place? Can someone from the US shed some light on this? I just don't understand how you can ban selling what you manufacture to whomever you like outside of a planned economy.

The regulatory capture argument someone made below is hard to square with the history: http://www.americanbar.org/publications/franchise_lawyer/201... . At first, cars were sold directly to consumers by manufacturers, and independent dealerships were rare. It's really hard to explain using a regulatory capture or lobbying model how car manufacturers, huge incredibly profitable companies at the time, lost their bid to…

> States didn't like how much money was flowing from their economies to Detroit, and by making direct consumer sales illegal they gave a lot of leverage to franchises, which are local businesses.

That seems to make sense. What's different about Palo Alto, CA that they're ok with money flowing directly there? Is it because dealerships have become unnecessary middlemen putting more $ on the cost before it reaches consumer hands?

Re: New Jersey legalizes direct Tesla sales

#54

Post by rayiner »

libria wrote: post #52
rayiner wrote: post #32

Earlier quoted context omitted.

The regulatory capture argument someone made below is hard to square with the history: http://www.americanbar.org/publications/franchise_lawyer/201... . At first, cars were sold directly to consumers by manufacturers, and independent dealerships were rare. It's really hard to explain using a regulatory capture or lobbying model how car manufacturers, huge incredibly profitable companies at the time, lost their bid to…

> States didn't like how much money was flowing from their economies to Detroit, and by making direct consumer sales illegal they gave a lot of leverage to franchises, which are local businesses. That seems to make sense. What's different about Palo Alto, CA that they're ok with money flowing directly there? Is it because dealerships have become unnecessary middlemen putting more $ on the cost before it reaches consu…

Palo Alto isn't different.[1] Getting rid of these laws will cost NJ jobs, while making products slightly cheaper for everyone else. In a state like NJ, that's a tough pill to swallow no matter what.

[1] In fact, I imagine lots of state legislators hate Palo Alto for making middle class jobs in their states obsolete while creating a few high paying jobs in California and diverting the difference to shareholders in New York. We're talking about a state hollowed out by deindustrialization, where the promise of better jobs to replace the ones lost was made decades ago, and still has yet to materialize.

Re: New Jersey legalizes direct Tesla sales

#55

Post by DougBTX »

mr_luc wrote: post #45
rayiner wrote: post #32

Earlier quoted context omitted.

The regulatory capture argument someone made below is hard to square with the history: http://www.americanbar.org/publications/franchise_lawyer/201... . At first, cars were sold directly to consumers by manufacturers, and independent dealerships were rare. It's really hard to explain using a regulatory capture or lobbying model how car manufacturers, huge incredibly profitable companies at the time, lost their bid to…

Sure, they didn't originate with regulatory capture. But the actions to prevent Tesla from selling direct now, today, have definitely been the result of regulatory capture. The original interventions created a kind of local businessman, who knew he owed his existence to these local regulations. And now that these laws have been made unnecessary due to the availability of both information and exposure -- and incontrov…

> regulatory capture

There doesn't seem to be much disagreement about the facts, just the definition of "regulatory capture".

The idea which "regulatory capture" describes is when regulations fail to do what they are intended to do, when instead of restricting they empower.

But the regulations have not "failed", they are still restricting manufacturers and empowering dealers, so this isn't "regulatory capture", just bog-standard monopoly-granting.

Re: New Jersey legalizes direct Tesla sales

#56

Post by Shivetya »

ghaff wrote: post #7
shiggerino wrote: post #2

What prompted this law in the first place? Can someone from the US shed some light on this? I just don't understand how you can ban selling what you manufacture to whomever you like outside of a planned economy.

Basically, franchises arose because auto [Edit: manufacturers] didn't originally want to establish a broad set of factory stores. States then generally passed laws over time to keep manufacturers from coming in and competing with the franchisees because they'd have various advantages in doing so. (And it probably didn't hurt that the dealers by then were often well-established local businesses.) There's also been som…

they allowed factories to produce cars the full calendar year which substantially reduced costs and risks. eventually the manufacturers got to the position where they did have the capital and brand identity to compete and those dealers had to be protected.

i never understand why people are so anti-dealership. yes there are stories about bad ones but to be honest just how would anyone expect these places to be in business if they were consistently bad.

long term, without a dealership model if you have a problem with your tesla your likely up the creek unless they agree with you. there have been some well publicized cases where it took getting media involved to get cars bought back or fixed. dealerships want to preserve their customers as many sell more than one brand, manufactures can easily write off one consumer.

Re: New Jersey legalizes direct Tesla sales

#57

Post by nfoz »

Will_Do wrote: post #4
shiggerino wrote: post #2

What prompted this law in the first place? Can someone from the US shed some light on this? I just don't understand how you can ban selling what you manufacture to whomever you like outside of a planned economy.

They're amazingly common in the U.S. The idea is that car manufacturers would be able to undercut dealerships on prices and thus bankrupt the dealerships[1]. So it's just classic protectionism. The question why the law should protect entities that everyone hates is the baffling part. [1] http://www.justice.gov/atr/public/eag/246374.htm

I don't know the background. Doesn't this same problem exist with any store? I could buy a laptop from BestBuy, or I could go straight to the manufacturer e.g. Dell. I've always been annoyed when I can't just buy things from the manufacturer and have to go through some intermediary.

I'm not sure about "everyone hates dealers", but having never purchased a car, I have no idea why a car store is different from a computer store. What's special about dealerships?

Re: New Jersey legalizes direct Tesla sales

#58

Post by winter_blue »

rayiner wrote: post #42
MollyR wrote: post #40

Earlier quoted context omitted.

That was very insightful. In reference to local car dealers part. So states were mainly only interested in the money, but then justified it under the guise of consumer protections. Is that fair to say ? Or did states really care about consumer protections ? And in the pursuit of truthiness, and not creating a false dichotomy, are both those wrong ?

To get legislation like this passed, you build a coalition. So the consumer protection angle isn't just a guise so much as it is an angle to get the support of consumer-minded legislators. As for whether these justifications are wrong--it's hard to say. From a jobs point of view, it's probably still not a win for NJ for those dealerships to shut down and have NJ money flow over the internet directly to California. Th…

Actually, no extra money will flow from NJ to California.

Consumers will pay less for their cars, and the extra $1000-$2000 dealerships make on each car, will remain in the consumer's pocket. This is better on the whole.

Dealerships are market inefficiencies, as they create no real value or "wealth"[1]. They give nothing to consumers in return for the $1-$2k extra that consumers pay for each car.

[1] As defined by Paul Graham in: http://paulgraham.com/wealth.html

Re: New Jersey legalizes direct Tesla sales

#59

Post by rayiner »

winter_blue wrote: post #58
rayiner wrote: post #42

Earlier quoted context omitted.

To get legislation like this passed, you build a coalition. So the consumer protection angle isn't just a guise so much as it is an angle to get the support of consumer-minded legislators. As for whether these justifications are wrong--it's hard to say. From a jobs point of view, it's probably still not a win for NJ for those dealerships to shut down and have NJ money flow over the internet directly to California. Th…

Actually, no extra money will flow from NJ to California. Consumers will pay less for their cars, and the extra $1000-$2000 dealerships make on each car, will remain in the consumer's pocket. This is better on the whole. Dealerships are market inefficiencies, as they create no real value or "wealth"[1]. They give nothing to consumers in return for the $1-$2k extra that consumers pay for each car. [1] As defined by Pa…

Eliminating an economic inefficiency (the middle-man) creates a surplus. Where that surplus flows, whether to the consumer or the producer or split between both, depends on the market.

Re: New Jersey legalizes direct Tesla sales

#60

Post by GFK_of_xmaspast »

amalcon wrote: post #14
wheaties wrote: post #3

Earlier quoted context omitted.

Oh, it's easy. It's through things like regulatory capture, funding campaigns and thus having direct access to congressional workers, having people appointed to regulatory bodies that are partial to your stance and/or other means of influencing non-elected officials. Basically, if you can't beat them through normal market means, pass laws so they can't beat you. Sounds cynical but take note, back when cars were first…

Your explanation doesn't really make sense. Consider: who would benefit most from the removal of these laws? The obvious answer is the General Motors Corporation. They could own their own dealerships, getting better control of customer experience and a bigger cut of the profits. It's not like they're short on capital such that they would be forced to franchise anyway. As the largest automaker in the world for most of…

I think the ban on self-service fueling is a great idea and I wish more states (beyond Oregon) would do it.
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