Tesla's Next Auto-Dealer Battleground State: Georgia

cartechboy (2660665) writes [Elon] Musk and Tesla's biggest hurdle in the U.S. has been bypassing conventional dealerships and selling directly to customers. This concept is something that's illegal in many states thanks to a nationwide patchwork of decades-old franchise laws. Tesla's latest battle is taking place in Georgia where dealers allege that the start-up company is in violation of the state's franchise laws. Not surprisingly, Tesla's fighting back. To sell cars in Georgia, Tesla had to agree to sell fewer than 150 vehicles directly to consumers in the state. Last week the Georgia Automobile Dealers Association complained that Tesla sold 173 vehicles. Tesla hasn't publicly commented on how many vehicles it has sold in Georgia. We've seen time and time again how this story ends, and the writing is clearly on the wall for this case. Another bit of writing on the wall, though, as reported by the L.A. Times, is that recent electric car sales in the U.S. have been stagnant.

Comments

Franchise laws = Racket laws

[Anonymous Coward]

There is no way in hell those franchise laws were put in place for the benefit of you and me. They were put in place merely to protect a lucrative profit stream for special interests.

Re:Franchise laws = Racket laws

[Quince alPillan]

If you only read the laws themselves, you wouldn't think that. In theory, the laws are there to give you better service through a dealership because the evil large corporation gives you poor service at a steep price. They're there to prevent a monopoly on service so that you're not required to go to a Ford Garage so that a Ford Mechanic can fix your car with Ford Parts and price gouge the hell out of you.

In practice, they still do it and with the kickbacks and other ties to the parent company, they might as well be the same thing. The dealer ends up being the middle man that takes his cut and raises the price by thousands of dollars. The laws have effectively enshrined the dealership business model and Tesla threatens that.

Re:Franchise laws = Racket laws

[alexander_686]

It is a bit more subtle than that. Back in the 20s there were over a dozen auto manufactures and many repair shops, so that was not an issue. The issue was one of unbalanced power. The manufactures could bully the franchisors by forcing them to buy more cars than they could sell, yank their franchise after they had built up the brand and sell it somebody else, drive up franchise fees after the initial 10 year contract was over.etc.

A free market only works when there is a free exchange between 2 parties. The laws were supposed to, and did, redress this balance of power. Of course, what was true 100 years – or even 25 years does not necessarily apply today or to Tesla. The NADA today is about defending locally entrenched business interests and the status quo.

Re:Franchise laws = Racket laws

[bigpat]

Originally they were not bad laws, back when there was only 1 or 2 car manufacturers who did not really have to compete, and when there were not many mechanic shops. Now the laws are really just a way to pay middlemen who pay lawmakers.

I think that is probably backwards. These laws would obviously tend to help larger car companies exclude competition. Like many issues of regulatory capture I would deduce that these state franchise laws were actually bought and paid for by big companies like GM, Ford and Chrysler in order to ensure that all those smaller car companies that didn't have robust dealership networks would either be forced out of business or forced to sell out to the big three. It took some serious capital investment and many years to set up dealer networks for Toyota, Honda and other foreign car companies. But they had the backing of their respective countries and large consumer base at home to leverage. Make no mistake these laws may have been passed at the behest of the local dealers, but those dealers were working from the same game plan as the big three.

Ah, how heartwarming...

[fuzzyfuzzyfungus]

Do 'States' Rights' have any applications that aren't kind of embarrassing?

Re:Ah, how heartwarming...

[i kan reed]

Yes!

Some of them were outright morally repugnant, like slavery.

Re:Ah, how heartwarming...

[GodInHell]

Pot legalization.

Stagnant electric car sales

[guruevi]

The reason they're stagnant is because there is only one brand worth buying them from is Tesla.

Toyota/Honda has a decent lineup in the upper range with their plugin hybrids but if I'm going to plunk down 50k, it might as well be a Tesla or I can get a gas powered car with identical economy for half that price from better brands.

Perhaps one of the Germans will start entering the market with a better option but the Chevy Volt is crap, Ford and Fiat publicly state they rather don't do it, Fisker was legislated out of business, the rest of them are simply putting in a model because they have to and it shows; it's the same frame as a gas powered car with some batteries slapped into it.

Stagnancy bogus. Math is hard.

[Jodka]

from the summary:

"...as reported by the L.A. Times, is that recent electric car sales in the U.S. have been stagnant"

from the LA Times:

"Sales of electric drive vehicles are stuck at about 3.6% of all new car sales for 2014"

"And that's during an otherwise robust sales season. Total figures for August were higher than any time in the last decade."

So the absolute number of electric car sales is increasing but their market share is not. The reporter, one "Charles Fleming," seems not to comprehend that a fixed percentage of an increasing value is itself an increasing value. "Stagnant," is the wrong term to describe an increase in sales. Math is hard.

Let's keep big government out of business

[gurps_npc]

By making sure that small government totally blocks business!

That's how it's supposed to work, right?

Re:Small government

[Gim Tom]

Isn't Georgia one of those "small government" red-states? How's that working out?

Oh, yea... And we are also one of the most corrupt states too! The Attorney General was fined this week for withholding evidence in an ethics case that might have implicated the Governor.

Re:They are stagnant

[GodInHell]

One of the other articles on the L.A. times is reporting that "U.S. auto sales surge in August to month's highest level in years" so - it's lies, damn lies and statistics time. Electric car sales fell 0.1% as a proportion of total car sales during a period that included the car sales at the "highest level in years."

Consider also that Tesla is still on back-order status and they are gearing up to release two new models of cars. Other than the Tesla, only Nissan has a pure electric generally available on the market - the Leaf - which sold over 120,000 cars last year. See, Wikipedia. Ford's focus is also out there, but only in select markets.

Shorter: there's only one mass-market electric car on the market. The Tesla Model S, while definitely a beautiful car, doesn't have the production volume to compete in a market share battle - that's not Tesla's bag - yet. The "stagnation" story is more of the knee-jerk car guy rejection of electrics that has been bouncing around in the media for 30 years now.

Re:What is the Tesla strategy?

[hansoloaf]

Because: 1) Dealers sell more than one brand. They will steer the buyers towards other brands if the buyer is hesitant about Tesla. Dealers don't care about one brand loyalty - just want to sell as many as possible in a month. 2) Dealers will definitely try to sell more gas cars as they break down more frequently and the $$$ for dealers is the service dept. They barely make a profit in the sales dept. 3) Tesla has a specific idea on how to do customer experience. Dealers are the worst in this category. Tesla wants to avoid this.

Re:Small government

[thaylin]

Democrats from 1872-1950s are the current republicans, founded by southern democrats of the time who disliked the north democrats policy to not fight, but accept the decision.

Comment from Tesla

[JamieKitson]

Tesla *has* publicly commented on how many vehicles it has sold in Georgia, it says that the 150 maximum is for a calendar year, while the 173 figure is for October to June and it hasn't hit the 150 mark for 2014.

http://www.autonews.com/articl...

Re:They are stagnant

[MMC Monster]

In other words, electric car sales are stagnant because of a supply problem, not a demand one. They can't produce more cars and they essentially are sold out months in advance.

As a proud owner of a Tesla (6 months and 15K miles so far), I can't imagine buying a non-electric car in the future. I live on the east coast and the supercharger network is built out around me well enough that I don't have any range anxiety at all.

Several friends are looking to see how I do this winter before putting money down themselves. A couple others already put down a ridiculous amount to be on the list to buy a Tesla Model X when it finally hits production.

Dealers should be concerned. If the big auto manufacturers go the Tesla way, dealers won't be making much in service contracts in the future.

Re:They are stagnant

[Xenolith0]

Other than the Tesla, only Nissan has a pure electric generally available on the market

That's not entirely true, currently available full EVs include the:

• Tesla Model S
• Mitsubishi i-MiEV
• Nissan Leaf
• BMW i3
• Ford Focus Electric
• Volkswagen e-Up!

That's not an exhaustive, but those are commonly available to buy today in the US.

NOT stagnant

[zwede]

Tesla had a 2 month backlog (time from order to delivery of a car) of 2 months early this year. In the spring it grew to 3 months. Early summer they upped production to address this, but backlog grew to 4 months. Tesla is building more cars than ever, yet the wait keeps increasing.

"Stagnant" my ass.

All this for a car that was introduced almost 2 years ago and has had virtually no updates during this time. Shows how far ahead of other manufacturers they were.

Re:They are stagnant

[AaronW]

I agree with you. I'm also the owner of a Tesla (18 months, 19K miles). Tesla is constrained by batteries. They can't make them fast enough. There's also a huge demand for the model X with thousands of pre-orders yet it is sight unseen. This is from a company that does no advertizing other than their showrooms.