Elon Musk Addresses New Jersey's Tesla Store Ban

An anonymous reader writes "On Tuesday, we discussed news that New Jersey is trying to ban Tesla stores, which would force the company to sell through car dealerships instead. Now, Elon Musk has prepared a response: 'The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what's easy and it is game over for the new company. The evidence is clear: when has an American startup auto company ever succeeded by selling through auto dealers? The last successful American car company was Chrysler, which was founded almost a century ago, and even they went bankrupt a few years ago, along with General Motors. Since the founding of Chrysler, there have been dozens of failures, Tucker and DeLorean being simply the most well-known. In recent years, electric car startups, such as Fisker, Coda, and many others, attempted to use auto dealers and all failed.'"

Comments

Bada boom bada bing

[ackthpt]

They'll make you an offer you can't refuse.

Chris Christy isn't the only one with machinations.

Re:Bada boom bada bing

[Anonymous Coward]

Can I stick my rock-hard, 15-inch, throbbing cock up your ass?

In my experience, most dealership negotiations start with this very question...

Re:Bada boom bada bing

[bill_mcgonigle]

They'll make you an offer you can't refuse.

Chris Christy isn't the only one with machinations.

What, you don't think it's coincidence that the NJ State Flag has a severed horse's head at the top, do you?

Re:Bada boom bada bing

[K. S. Kyosuke]

You can, but beware, my donkey kicks like a mule.

Re:Bada boom bada bing

[hey!]

Damn straight. They're out to fuck you blind.

Dealers try to mystify and generally complicate the process of buying a car by offering to arrange financing, making you a trade-in "deal" and obfuscating the true cost of the car. Fortunately you can get a detailed break down of the dealer's costs (including factory to dealer incentives) from Consumer Reports. Then you arrange financing elsewhere (or pay cash), sell your existing car yourself, decide on how much markup you'll pay, and resolve not to buy any additional services or warranties through the dealer. If you do those things you won't be walking into the dealership like a lamb to slaughter. They might as well try to fuck the Rock of Gibraltar. Some of them will try, but you just walk out the door and find a dealership that will sell you a car on your terms.

The last car I bought I walked into the dealer; the salesman saw I had the printouts and said, "I'm not stupid. How much are you going to pay?" I named a price 5% over the dealer's true cost. I could have opened with 3%, but I appreciated not having to go through the whole ridiculous ritual. It was a reasonable offer and the salesman immediately accepted. Half an hour later we finished up the paperwork; I dropped off a cashier's check the following day and drove my car off the day after that. It was all low-key and civilized, and by executing the deal quickly the dealership earned a fair paycheck for a couple hours of work.

This is the way buying a car should be: you tell the dealer which model you want, hand over a check and drive off. Letting the dealer do anything else "for you" is asking to be screwed over. Despite what the salesman claims, there is nothing the dealer can do to make your life simpler, except maybe fetching your plates from the motor vehicle registry. Do everything else yourself, including determining the price you'll pay for the car.

Car dealerships

[Anonymous Coward]

Car dealerships are an anachronism. They offer no real added value. If it weren't for state laws protecting them, they would have been gone years ago - especially with the creation of the Internet.

The sales people are a nuisance, the parts section is to be avoided at all cost - and it really pisses me off when there are parts that are dealer only on rare occasions.

Warranty work? That could be streamlined too by having a tech of your choice do it.

I was hoping the Elon would take his billions and his cult of personality and crush the industry, but I guess that was a dream. I have the same dream for the elimination of Real Estate agents- another pointless middleman that just adds unnecessary costs to the consumer.

Re:Car dealerships

[Anonymous Coward]

very true

Having just bought a new car 2 days ago and having to deal with their shenanigans. Even using the internet cant help in some instances as they still weasel in their own fees.

The example in my scenario. Used truecar and kbb to find lowest possible price for a new car that was paid, truecar has participating dealerships and one accepted to sell at that price. I go in, get that price and my trade-in evaluated. However starting with the very first piece of paper they brought me I was lied to since they have no more negotiating power when agreeing to an internet price. They showed me on paper the price of the new car, my trade-in value, and right next to that the monthly payment amount at the agreed upon interest rate. However unbeknownst to me not having a car loan calculator on hand was that while the rest of the numbers were right the monthly payment price had 1500$ packed in to it that was listed nowhere. So from the beginning they led me to believe that the first monthly price shown was only car-tradein+taxes. Get to the end and they mysteriously managed to make some fees somewhere disappear in order to include a useless maintenance agreement for this magical 1500$.

In the end told them to remove the agreement, which at first they said would increase dealer fees 1500$, to which I said no because what would be the difference in me leaving with this packed into my loan and coming back within the 90 day cancellation period and getting a 1500$ refund, then no agreement and no extra fees. So eventually they had to back down and just remove it all together

So even in the internet age they keep trying to come up schemes to get their extra profit in there

Re:Car dealerships

[Anonymous Coward]

Err... I think Elon is *trying* to crush the industry. What more do you expect him to do? The company is expanding, is making a profit, he's got the supercharger network thing going, retroactively increasing the warrantee to cover things that aren't really Tesla's fault, wrangling with the NTSB over the "Recall" that wasn't and about a perfect safety score that *under reports* the car's safety performance, taking on state legislatures about this dealership thing... That sounds to me very much like someone in the process of breaking the industry.

Shooting themselves in the foot

[twotacocombo]

New Jersey isn't very large, and nobody is forcing Tesla to sell there. I'm sure a neighboring state would love to allow a showroom near it's border to collect all that tax revenue that NJ clearly has enough of, right?

Re:Shooting themselves in the foot

[Anonymous Coward]

If you want to register a vehicle that you've purchased out of state in NJ, you have to pay sales tax on it, unless it was previously registered at your former address in the state where it was purchased. So basically, if you live in NJ and want a Tesla, you have to pay sales tax (and possibly registration fees) in the state you purchase it, and then pay sales tax AGAIN in order to register it in NJ.

Re:Shooting themselves in the foot

[FreeUser]

If you want to register a vehicle that you've purchased out of state in NJ, you have to pay sales tax on it, unless it was previously registered at your former address in the state where it was purchased. So basically, if you live in NJ and want a Tesla, you have to pay sales tax (and possibly registration fees) in the state you purchase it, and then pay sales tax AGAIN in order to register it in NJ.

That's true in most states. I got lucky in that I'd bought my car ~7 months before moving from New York City to Chicago...had I bought it 2 months later, I would have been stuck with sales tax in both states.

That said, as egregious as this is, it is nothing compared to the bullshit New York City and New York State inflict upon their residents. When I moved out of the state, I had to pay a punitive tax for having the audacity of leaving New York state. I kid you not. At around $3k, it's enough to hurt, but just under the amount that would make a lawsuit overturning this doubtlessly unconsitituional tax financially worthwile. That said, after this experience I will never willingly live in New York state again.

Re:Shooting themselves in the foot

[kramerd]

Actually, just like any out of state purchase, just tell the dealer you are going to register in another state, and they will give you a temporary tag instead of making you get one in the state you purchase. Then, you get 30 days to register in your state (and pay the sales taxes and registration fees). This usually helps negotiate a lower price on the car itself (in my experience anyway), because there is much less paperwork for the dealership to bother with.

Re:Shooting themselves in the foot

[whoever57]

Sure I saw some stuff, but then *wham* I ran into something that will affect me eventually. It's HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT OF 2008, section 301 that says that if you emigrate FROM the US you have to pay capital gains tax on your possessions.

Did you see the exclusion of the first $600,000 in section 3?

Re:Shooting themselves in the foot

[slew]

NY isn't the only state with a so-called exit tax.

One way that states apply an virtual exit tax is change the tax exemption status instead of pro-rating it. For example with property tax, such that if you leave the state, you end up paying a higher rate (e.g., lose the primary residence exemption on your property tax bill) vs if you moved within the same state you could pro-rate your exemption between 2 properties.

Another way is to have a separate rate for a transfer tax for non-residents (meaning it applies if you die or move). California was proposing this.

Another way is to blatantly add a surcharge (I think Yonkers has something like this)

Even if there isn't any actual tax liability, if you move out of the state, they will often chase you around claiming part of your income was derived from the state and you owe taxes on that amount. Say if you file your tax return from 2010-2012 in NY, then in 2013 you move say to Nevada and file a 2013 part year tax return for NY thinking you are in the clear for NY. Later in 2014 you only file federal taxes in Nevada, sometime in 2015 NY discovers that you never filed a NY state tax return for 2014, but the Feds got a 2014 return for you. They immediately send you a notice in the mail, that they have noted on your 2014 Federal Return that you had $X amount of adjusted gross income, and since you didn't file a NY tax return they "estimate" that $Y was earned in NY and as a out-of-state residence you should pay taxes on this amount (one theory they use is non-deductibility of state income tax for non-residents) . You can either fight this shake-down and show that none of the income was earned in NY, or just pay $Y.

Re:so much for a "free" market

[Dak_Peoples]

“We need to talk about the fact that we are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.” -Chris Christie

Re:so much for a "free" market

[pezpunk]

In New Jersey, you still aren't even allowed to pump your own gas, due to a successful lobby by gas station owners ... in 1949. it's all "full service". never underestimate the power of crappy special interest lobbies in New Jersey.

Dealership model is so broken.

[damacus]

Imagine if you wanted an Apple computer you had to buy it through Best Buy or Radio Shack, and dealing with their personnel. The companies that do business this way are maddening. Elsewhere, companies like Cisco choose not to sell directly to buyers, making them go through a partner or reseller. This may have been an acceptable model years ago, but these days it's tedious and I think people expect more; they don't want to deal with a third party whose interests are not wholly aligned with their own. At least when you're talking about tech vendors, you can opt to deal with someone else who does business differently. Government enforcement of a given model is quite wrong-headed and needs to be stopped. It smacks of protectionism to me.

Re:Dealership model is so broken.

[Anonymous Coward]

Obsolescence? They're trying to avoid obsolescence by getting a law passed that forces people to pretend it's still 1965 forever?

That doesn't work, it's just a way to pour government money (ie your tax money) down the drain.

Nothing is forever. Today's car dealers are not the inheritors of a century's old tradition, the motor car was only popularised last century, it's like television. At the start of the 20th century there were no broadcast TV networks, and at the start of the 22nd century there will be no broadcast TV networks, the idea that we're going to have to protect something just because it's been around a few decades is craziness.

The grand-parent gave an example of Cisco. I have a funny story about that. Cisco wanted my university to test some of their new gear, as part of an EU project. The idea was that the university would fit the Computer Science building with Cisco gear, and the CS department would use the new features in a "live fire" environment with everything a CS department does, instead of just a few boring accountants or something trying it out somewhere. OK, sounds good. We'll write the cheque, you send the hardware. Nope. Can't do that, Cisco doesn't deal direct with customers. We have to call a Cisco dealer, and get them to quote for the gear. Try that, the dealers all say they can't get the gear. Back to Cisco. Cisco says they'll have a word. Dealers come back, wow, sorry, yes, you can have that new gear after all. Here's our quote. The quote is outrageous. We can't pay that, we're publicly funded. Back to Cisco. Cisco says they'll have another word. Dealers come back with a new price. We say "No" again, and go back to Cisco. "OK" says Cisco, "How much can you afford to pay, and then we'll ask a dealer to work out their cut, and we'll discount the price to them until they can quote that price". So we have to tell Cisco how much we want to pay, then Cisco knocks off the dealer's margin, and tells the dealer they'll discount to that price, and then the dealer quotes us back our original price.

All of this costs Cisco a whole bunch of money, and for what? For the pretence that Cisco isn't directly selling hardware, even though in fact they controlled the entire transaction. It's stupid and it should go away - not be encouraged by the government.

Zing!

[Bigbutt]

The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.

Ow, that's gotta hurt!

[John]

Re:so much for a "free" market

[MightyYar]

And yet the gas is cheaper than in next-door PA, where you have to get out in the cold. If you end up in NJ frequently, you even time your gas purchases for when you are on the Jersey side.

Re:Saturn

[Ralph Wiggam]

Saturn was never a "startup". It was always a subsidiary/brand of GM.

Already a White House Petition for this

[Anonymous Coward]

There's already a White House Petition for this. If this reaches it's target this will be the second time a pro Tesla petition has reached 100k plus signatures - https://petitions.whitehouse.gov/petition/inform-new-jersey-markets-should-be-free-tesla-motors-and-everyone/ptHTHYMP

Re:In Soviet USA

[BasilBrush]

It's not "every Tesla", it's "every EV". The feds are not picking a company here. They are kick-starting a new technology, regardless who makes it.

The traditional car companies get exactly the same subsidy.

http://www.fueleconomy.gov/feg...

It appears there's no additional sales tax.

[MAXOMENOS]

According to the New Jersey MVC (PDF), if you purchased a vehicle in another state and paid sales tax on the vehicle, you provide MVC with the receipt. If you paid 7% or more sales tax in the other state, you pay no sales tax to New Jersey. If you paid less than 7%, you pay the difference to New Jersey. In practical terms, if the purchaser buys in the states neighboring New Jersey, there is no additional cost — New York State sales tax is 4%, Pennsylvania sales tax is 6%.

For example: Alice, who lives in Atlantic City, buys a Tesla in middle-of-nowhere Pennsylvania (6% rate) for $60,000. Alice pays Pennsylvania sales tax on that vehicle in the amount of $3600. If she had purchased the vehicle in New Jersey, she would have to pay $4200 in sales tax. So when registers her vehicle with the MVC, she'll owe the difference ($600), plus title fee ($60) and registration fee ($59 assuming it weighs under 3,500 pounds, see here), and possibly, if Christie is really an a-hole, a 0.4% Luxury Surcharge ($240). Keep in mind, if she purchased the vehicle in New Jersey, she'd pay the same sales tax, but all of it would go to New Jersey. If she purchased the vehicle in New York (4% sales tax), she would pay $2400 in tax to New York and $1800 in tax to New Jersey.

But, I could be missing something. If so, please let me know.

Re:Open their own dealerships

[Anonymous Coward]

It is illegal for a car company to open its own dealerships. That is the point of the law, they are required to have a middleman.

Tesla could make a deal with John Smith to sell him cars wholesale, and have John Smith re-sell them to the public at a huge markup with hidden fees and sketchy high pressure sales tactics... That's what normal car companies do. Lots of people hate that system. I intend to buy a Tesla for my next car, because I've hated ever interaction I've ever had with a normal dealership -- even though Teslas are out of what I consider my normal price range for a car, even though the range limit is kind of a bummer, even though I don't really want an electric car, I'll accept those downsides just to avoid dealing with the scumbags that run car dealers around here. Apparently Elon Musk agrees that there's some kind of market value in selling to people liike me, which is why he is trying direct-to-customer sales.

Is it wrong that I'm smiling?

[MillionthMonkey]

You can't be serious, making an insinuation like that on a good man.

Governor Christie is just concerned about the changes in traffic patterns that would be triggered by allowing electric cars to enter the state's vehicle markets unimpeded. Christie has a vision for the future of New Jersey and it is deeply important to him that municipal leaders across the state share his enthusiasm and goals. Enforcement along these lines would be impeded. Specifically, if the governor were to block off lanes to a bridge within a mayor's district, and everyone was driving electric cars, the smog wouldn't be as good for intimidating or disciplining the mayor. Clearly the traffic issues need more study.

Re:In Soviet USA

[BasilBrush]

Since Tesla only sells EVs, it is correct to say "every Tesla".

It's pedantically correct, but disingenuous. The honest thing to say is "every EV".

Tesla any less dependent on federal aid.

And there you go beyond what you can prove. At the price Teslas are selling, an extra $7.5K would be very unlikely kill their market.

And if you didn't mean that, but simply that they receive federal aid, again ALL car companies that sell EVs do.

Re:Lack OF Qualified Complainent

[lgw]

Car dealerships are usually multi-brand. They're happy to see a new brand as long as they can profit from it. This is a big FU to dealership owners from Tesla, saying "we don't need you to sell our cars". And Tesla is right of course: they don't.

Never underestimate the political power at the state level of car dealership owners. They have name recognition and a marketing budget that dwarfs any state senator, and everyone in state government sees this. As an elected official, you don't pick a political fight with someone who already has his name and face across half the billboards in a major city, and spends more on ads every week than you did on your entire campaign.

Re:States Committing Citizenicide

[twotacocombo]

California and New York have lost probably near 1.5 million people over the last 15 years.

Uh, no. California's population has grown at a fairly steady rate for the past 100+ years. 1.5 million may have moved out of state, but far more have moved in to replace them.

Re:Yes!

[slew]

There's a BBC doc somewhere about the factories in China that make the "real" branded sunglasses. It's a bunch of Chinese workers in a nondescript white room operating injection molding machines. Some guy calls out "Switch!" in Cantonese, the workers swap out the dies, and it's Guccis for the next two hours.

It's actually not hard to see why this is the case. What you see as many retail brands is really just a few companies...

Luxottica (which also owns Lens Crafters), Marchon (owned by VSP), and Safilo, plus a few smaller companies...

I think together the top three make up over 70% of the market.

Re:so much for a "free" market

[Anonymous Coward]

It's not so cut and dry. The difference in price of gasoline in these two states matches up almost perfectly with the difference in state tax rate. Take out the taxes and gas costs the same (which would still suggest that NJ customers don't really pay any extra for full service). NJ charges about 14 cents per gallon while PA charges 40. The current difference in sale price is 28 cents.

Tax rates: http://www.iftach.org/taxmatrix3/choose_tableq2.php
Average prices: http://www.gasbuddy.com/GB_Price_List.aspx

Re:It's a conspiracy?

[cbhacking]

LOL!

Let's see... Well, the obvious counterpoint to your argument is that PayPal *did* succeed. I happen to hate what it's become (all the abuses of banks, plus a few others, but even less regulation), but back when Musk was starting it up the idea was pretty revolutionary. Even further back, though, there's his startup Zip2, which was sold for over $340 million back in 99.

Since then, his *three* companies (people always forget SolarCity...) all seem to be doing fine. SpaceX has huge contracts, Tesla can't manufacture fast enough to keep up with demand, and SolarCity is one of the top installers of photovoltaic panels in the USA. Sure, they *could* fail, but so could IBM or Google or Coca-Cola. None of them are *likely* to, though. In fact, in the last decade Tesla is just about the only US-based car company that hasn't gone bankrupt...

As for whether the NJ law is aimed at Tesla, you'd have to be a worse nutjob than you claim Musk is to not see it. Let's see, a proposed bill that prohibits a car sales model which happens to be used by exactly one company in the world, right as that company is getting hugely successful? Yeah, there's no evidence at all that this is aimed squarely at Tesla... </SARCASM>

Re:so much for a "free" market

[AlphaWolf_HK]

How is it a free market when the law doesn't allow it to be? A free market would be Tesla being allowed to sell how they choose instead of being forced to go through third parties. A free market would be being allowed to pump your own gas instead of being forced to pay some tard to do it and then expecting a tip for something you may have preferred to do yourself instead of just sitting in your car doing nothing at all.

Re:so much for a "free" market

[Anonymous Coward]

God damn! Have you considered invading someone?