In comments at the Automotive Press Association on Wednesday, Jeff Carlson, chairman of the National Automobile Dealers Association, stated that consumers would much prefer to do business at traditional auto dealerships than to do business with Tesla’s retail model. Carlson’s statements were based upon the idea that dealerships often “discount” their prices and allow haggling, and that this somehow results in vehicles being cheaper when bought through middleman dealerships than when bought through a vertically integrated model which removes the middleman entirely. He cited a study which concluded that intra-brand competition from nearby auto dealers can result in decreased prices for new car shoppers.
Of course, there have also been studies showing that Carlson’s belief about consumers’ preferences is quite off-base. Polling data collected by Gallup for over 40 years ranks professions by the public perception of their honesty. The most recent data available, from December 2015, puts car salesmen near the bottom of the list, ahead of only “lobbyists” and tied with “members of Congress” and “telemarketers” with only 8% of the country considering car salesmen as above average in honesty and ethics.
Tesla first applied for a car dealership and repair license in Michigan over 6 months ago. The automaker reapplied again 3 months ago and the license still hasn’t been approved and the application is at a standstill at the Secretary of State’s Office.
The company appears to be at an impasse, Detroit News reports:
“In the most recent development, the Secretary of State’s Office put the automaker’s applications for dealership and service facilities at a standstill by requesting two weeks ago that the applicant submit proof it is a franchised dealer. If it doesn’t, the state will not rule on Tesla’s applications.”
The word “franchise” is the problem here. The application was made by the company and the state is aware of it. While a new bill that would allow Tesla to own a car dealership in the state has been proposed, the company didn’t have a good experience with the legislative process in Michigan before and it is now considering to bring the matter to the courts.
Tesla is asking owners and enthusiasts to help block a “GM-backed” bill to ban direct sales in Indiana
Tensions between US automakers GM and Tesla are now at an all time high. GM took a few swipes at Tesla at the unveiling of the 200 mile range Chevy Bolt earlier this year. The automaker published a promotional picture of the new all-electric car in front of Tesla’s headquarters in Palo Alto and CEO Mary Barra made the following comment during the CES launch:
“Unlike some EV customers, Bolt EV customers never have to worry about driving to another state to buy, service or support their vehicles.”
She is clearly making reference to the fact that Tesla is somehow still blocked from selling vehicles in certain states due to laws banning direct sales from manufacturers which force them to go through third-party dealerships. These laws are often from the 1950s when the US automakers would exert monopolistic control over the dealer relationships. Tesla General Counsel Todd Maron went before the FTC to argue against these direct sales bans and directly called out Barra for her comment (see picture above), which becomes more relevant than ever now that we learn that GM has authored a new bill to ban direct sales in Indiana.
In October 2014, Michigan Governor Rick Snyder signed a bill, which was initiated by the Michigan Automobile Dealers Association, to “clarify” an existing law banning automakers from owning or operating car dealerships in the state, ultimately forcing them to go through a third-party franchise model.
The new bill effectively banned Tesla from selling cars in the state due to the company’s direct sales model. Today we learn that despite the ban, Tesla applied for a dealership license in Michigan.
Last month Tesla’s plan for a showroom and service center in San Antonio was denied approval by the city zoning commission over concerns that Tesla’s battery packs could potentially contaminate the local water supply. The commission denied the proposal despite the recommendation of San Antonio Water System (SAWS) which approved Tesla’s project.