Boots & Sabers

The blogging will continue until morale improves...


Everything but tech support.

2013, 02 Nov 17

Dealers Push Back on Tesla Law

Uh huh.

JANESVILLE—Tesla seeks a change to state law that would allow it to open its own stores and service centers in Wisconsin, but it could face pushback by some traditional auto dealers.


He said the law could circumvent what he considers healthy competition by dealers under a current law structure that he said ultimately benefits consumers.

“The purpose of the laws on the books, it’s well known. If you have multiple (local or regional) representatives — in this case, dealers — it produces competition. That’s good for the consumer. If it’s a factory-direct sale, you have one source, and there is no other source of competition,” Clapper said.

The rule change could cut licensed dealerships from the equation and offer “no advocate between the consumer and the manufacturer,” he said.

I completely understand why the dealers would push back on this change in law. After all, this is their business model and they don’t want to see it changed. But their arguments don’t hold water.

The root of their argument is that dealers provide value by introducing competition into the market for consumers. This was true 50 years ago when there were only really three manufacturers in the market (Ford, GM, & Chrysler). Now there are not only dozens of manufacturers, but consumers can literally shop for care all over the country via the internet. In fact, I’m willing to bet that most dealers would admit that many of their customers walk into the showroom already knowing a lot about the vehicle and how much they are willing to pay. Their argument is no longer valid in our modern economy.

Dealers do provide value and I’d think that many consumers would still prefer to buy through a dealer where they can have a relationship and great service. But some consumers would rather buy direct from the manufacturer, and that’s OK. Just like some people buy their computers and phones over the internet and some still like to go to Best Buy or Wal Mart to get them.

Lawmakers should resist the urge to keep forcing an unnatural market condition just to appease the automobile dealers.



2013, 02 November 2017


  1. steveegg

    You forgot American Motors.  It smacks of the same protectionism as the three-tier liquor scheme, which is why Vos and company won’t change it.

  2. dad29

    Let’s make a deal……*cough*

    Tesla can sell anything it wants, any way it wants, when they are no longer taking Federal moneys, whether through “tax credits” for their car-buyers OR through their thinly-veiled tit-sucking in “energy” areas.

    Annnnnnnnnnnd the Good News Is that the car-buyer tax credit is going away with tax reform, so all Musk has to do is stop taking money for his “energy” scams.

    Oh, and one more thing:  he has to learn how to actually build a car.

  3. steveegg

    Has GM and FiatChrysler paid back the feds yet for their bailouts?  I know the UAW got tens of billions of dollars for driving both into the government’s hands (and GM into theirs).

  4. dad29

    Nah, there’s no payback, although in the case of GM the remaining ‘payback’ is small.    Frankly, I don’t give a rat’s patoot if Tesla wins this battle.

    But there could be interesting consequences.  First off:  if Tesla gets it, all the rest of the mfgrs will be chasing it–and they will get it.  Fine.  Except for one question:  who’s going to hold the inventory for people to look at, test-drive, etc.?  Dealers won’t.  Do you seriously think that the manufacturers WILL have that on their books?  In the case of GM, that’s about 80 days’ (turn) inventory nationally–or an average of 100 vehicles/dealership.  That’s a LOT of inventory $$ to slap onto GM’s books.

    Since there’s no inventory, if you order one out, it will be a 6-10 week wait or longer if the car is manufactured overseas (not Mexico or Canada!! OVERSEAS!)  And of course, when it arrives, someone has to ‘set it up’ and make sure that all the parts are attached.  Now there’s no dealer.  Who’s going to do that?  The buyer?  A GM/Ford/Xler “central yard”?  And what if the thing comes in with the wrong build?

    That’s without getting into trucks.  The combinations on truck-builds are staggering, which means that virtually every one will either have to come from SOMEBODY’S inventory (????) or be custom-built.

    Now then:  if your car or truck implodes and you have to have a new one right NOW–who you gonna call?

    Like I say:  personally, I don’t give a damn.  But it ain’t as simple as some folks think it is.

  5. steveegg

    It’s going to be a brave new world, but not quite as bad as that.  Factory outlet stores are going to be part of the future, as well as fewer options on cars.

  6. dad29

    Factory outlet stores, eh?

    I saw an item this AM which posits that dealers add 6-9% to the cost of a car.  It was from Holder’s justice department, but never mind that…

    What you maintain, then, is that “factory outlet stores” will NOT add 6-9% to the cost of vehicles.  The land, the building, the personnel, and the carrying costs of the inventory will fall into line with the magic dirt theory:  since   this is a FACTORY store, not a DEALERSHIP, the ‘added costs’ will be far less?  How much less?  Have a guess?  Only 5-8%?  4-7%?  Can’t be zero, ya’know.  Will the “factory store” have a repair facility?  Think those space and capital-equipment requirements will be cheaper?

    Oh, by the way, managing those costs downward will necessarily mean reducing the number of outlets–and likely hours of operation, too.   Instead of 20 Ford stores in the metro area, there might be only 5.  That’s livable in a metro area.  But not so in the weeds, where there will simply be NO car-store for 50-75 miles from your farm.  Too bad.  Suck it up, buttercup.

    Oh–and whatchagonnadoo with that trade-in?  Sell it to a used-car dealer who has ZERO incentive to buy up on your piece of junk in order to move a new one into your yard?  Heh.  Good luck with that.  I’m sure he’ll pay you an extra $1,000.00 just because he loves you.

    It will be a Brave New World, wherein you can shake hands with the Bad Old One.  Except it might be worse.

  7. steveegg

    Have the Nike Factory Outlet stores stopped the various sporting goods stores from selling Nike goods?  Have the Apple stores stopped the phone companies or Best Buy from selling Apple products?  Heck, I can’t think of a single company that went from selling at traditional third-party outlets to just selling at their own outlets.

    As for “cost savings”, there might be a bit with one less layer.  More likely, however, it will be illusory as instead of having franchisees handle the costs of running the dealerships, the car companies will be taking on those exact same costs.  I rather doubt that the facilities, employees, taxes or transportation costs will cost any less.

    Besides, merely eliminating the requirement that car manufacturers must first sell to a third-party dealer before a car can be sold to an individual does not mean that car manufacturers must sell directly, much less exclusively, to individuals.

  8. dad29

    Correct:  there will be no “cost savings” if dealers are eliminated.  Also correct:  “factory outlet” stores do not automatically eliminate other retailers from selling identical goods.

    But “factory outlet” shoe- or coat- stores do not take trade-ins, do they?  Add the costs of that facet of the business and you have NO incentive for a manufacturer to sell direct.  None.

    So changing the law will allow “direct,” but unless there’s a massive shift in capital dollars–for reasons yet to be seen–there will be no change in the business model.

    On the other hand, it will be a lot of fun to watch the glitterati who purchase a Tesla follow the tow-truck to Chicago and wait there for fix-it service to be applied.  Ask the MD in Franklin, WI, about that–or his lawyer, the Lemon Law king.


  9. billphoto

    Sounds a lot like the Tavern League and their pals strangle hold on alcohol distribution in Wisconsin.  Considering the $$ involved, I would not plan on a trip to the “auto outlet” store anytime soon but I would bet on some very successful fund raising for many in our Legislature.

  10. dad29

    Again–no dog in this fight….

    Steve brings up an interesting idea.  I think the dealers ought to sit back and say, OK–license Tesla!!

    The guy cannot deliver the cars because he cannot MAKE the cars, but….even if GM Ford Xler (et al) decide to sell direct, so what?

    The only potential downside for the dealers is if the manufacturers decide to sell at a loss (as does Amazon, by the way:  about 20% loss/item shipped.)  Not likely that any manufacturer will do that for long.   And of course, if they are selling at a loss, a dealer can purchase the car and hold it for re-sale–which they already do, very well.

Pin It on Pinterest