State legislators are unfairly protecting panjandrum automobile dealers http://timesfreepress.com/news/2013/jul/10/horse-and-buggy-laws-dictate-how-you-buy-a/ Personal Finance: Horse and buggy laws dictate how you buy a car by Chris Hopkins July 10th, 2013
Electric car maker Tesla Motors is fighting a somewhat quixotic battle with state governments over the right to sell cars direct to the public. This may seem surprising in the age of Internet shopping, but the U.S. auto industry still operates under rules laid down a hundred years ago. You can buy direct at the Apple Store, order corrective lenses at 1-800-Contacts, book a flight on Southwest Airlines, and fritter away your retirement savings with any number of discount brokers for $8 per trade. But you can't buy a new car without going through a franchised dealer, even if you don't need a test drive. The system of franchised auto dealerships traces back to the early 20th century. Since that time, quite a few things have changed. But how you buy a car is essentially unchanged since your grandparents bought their Model T. Most states have laws requiring auto manufacturers to sell their products through franchised dealers. While the roots of this archaic system can be traced to the days of Henry Ford, the Internet age clearly renders this arrangement anachronistic and costly to consumers. And few buyers fully appreciate the additional cost imposed by this de-facto oligopoly. A recent study by the U.S. Department of Justice estimates that consumers pay 6 percent to 9 percent more for a new vehicle thanks to state protection of dealers. Furthermore, the system perpetuates a distribution model that many consumers find distasteful but to which they have no alternative. The same Justice Department paper cites a survey indicating that half of new car buyers would prefer to purchase directly from the manufacturer to avoid the dealership experience even if they did not save any money. So just how is it that a system that so obviously disadvantages consumers is mandated by law? It turns out that on average, 20 percent of state sales tax revenues come from auto dealers; hence lawmakers have a strong incentive to protect the status quo. And dealers represent a ready source of campaign cash to politicians, contributing roughly $3.2 million in 2012 according to NPR. Enter Tesla Motors. The maker of high-end electric cars has elected to eschew the dealership model and sell direct to consumers. And it has run into a buzz saw of opposition from entrenched interests. Upstarts like Tesla threaten to cut the states out of tax dollars, and local panjandrums are not taking the threat lying down. Texas, presumably a bastion of free enterprise, has refused to allow Tesla to establish its own company-owned dealerships in the state, as has Virginia. The North Carolina state Senate passed legislation making it a crime to buy any car direct from the manufacturer (although the state House defeated the bill). It is richly ironic that Tesla itself is a creature of government largess. It would not exist without numerous loans, mandates and tax credits from the U.S. government and would not be economically viable on its own. But the roadblocks Tesla has faced illuminate the antiquated state-mandated cartel that controls car sales and costs consumers and taxpayers some serious cash. Christopher A. Hopkins, CFA, is a vice president at Barnett & Co. [©2013, Chattanooga Publishing] http://kpbj.com/business_daily/2013-07-10/tesla_fans_petition_to_allow_direct_sales_of_electric_vehicles Tesla fans petition to allow direct sales of electric vehicles July 10, 2013 @ 12:05am | Catherine Green A petition to the White House to allow Tesla Motors to sell its electric vehicles straight to consumers throughout the U.S. has surpassed the 100,000-signature threshold it needed to prompt a response from the Obama administration. “States should not be allowed to prevent Tesla Motors from selling cars directly to customers,” the petition, created June 5 by a user in Stow, Mass., reads. The petition system on the White House’s website requires petitioners to collect 100,000 signatures within 30 days before the administration will officially acknowledge them. “The state legislators are trying to unfairly protect automobile dealers in their states from competition,” fans of the luxury car brand wrote. “Tesla is providing competition, which is good for consumers.” Dealer associations in several states have countered that argument, saying it’s the franchise dealership system that encourages competition and protects customers. “Consumers do better with multiple sellers and multiple retailers in a given market,” a spokesman for the National Automobile Dealers Association (NADA) said. “If all the stores that sell Ford vehicles were owned by Ford, for example, what incentive would there be for any of the stores to sell a vehicle for less than manufacturer-suggested retail price?” Tesla recently faced a series of legislative battles with dealer associations in New York, North Carolina, Massachusetts and Minnesota. Groups in each state challenged the carmaker’s refusal to abide by traditional sales models, sidestepping franchise dealerships to sell straight to its customers online, by telephone or, in some states, inside Tesla stores. Tesla supported legislation to allow direct sales in Texas, where employees in showroom “galleries” are not permitted to offer test drives, take orders or discuss the price of the Model S, but that bill was shelved in June. Tesla is also trying to get approved for a license in Virginia. Tesla declined to offer formal comment on the petition, but Shanna Hendriks, a spokeswoman for the Palo Alto, Calif.-based carmaker, said it wasn’t because of indifference. “We’re thrilled,” Hendriks said by phone last week. “The groundswell of support that came with (the petition) is really impressive. The ball is in the White House’s court.” But the NADA said the federal government shouldn’t have a hand in how individual states handle auto sales. “The states have decided that it is in the public interest to require a local presence for the sale, distribution and servicing of the automobile, which is a necessity of modern life,” the NADA spokesman said. “All auto manufacturers should be required to play by the same rules.” Kirk Brown, managing director of electric-car advocacy group Plug In America, said support evidenced by the petition was important. “It underscores that we need to continue clearing obstacles in the path for electric transportation, and that there is a large and growing market developing for these game-changing electric vehicles,” Brown said. “A new and improved transportation sector is indeed here. Now we need to continue nurturing it.” Jay Friedland, Plug In America’s legislative director, said auto dealer associations at state and local levels are likely to be formidable foes because of their political sway. He noted that car sales contribute a substantial amount of state sales taxes, which might add to the dealers’ case. But he also cited a 2005 Supreme Court ruling that prohibited restrictions in Michigan and New York on sales by out-of-state wineries. Friedland said interstate commerce probably would play a role in any developments in Tesla’s case, but “all politics are local. It would be an interesting challenge to get a bill through Congress. But things like that have been done before, so there is a possibility.” [© Wet Apple Media 2000-2013] For all EVLN posts use: http://electric-vehicle-discussion-list.413529.n4.nabble.com/template/NamlServlet.jtp?macro=search_page&node=413529&query=evln&sort=date {brucedp.150m.com} -- View this message in context: http://electric-vehicle-discussion-list.413529.n4.nabble.com/Tesla-Petition-Results-tp4664080p4664142.html Sent from the Electric Vehicle Discussion List mailing list archive at Nabble.com. _______________________________________________ UNSUBSCRIBE: http://www.evdl.org/help/index.html#usub http://lists.evdl.org/listinfo.cgi/ev-evdl.org For EV drag racing discussion, please use NEDRA (http://groups.yahoo.com/group/NEDRA)
