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Tesla Sues Michigan Over Sales Ban (usatoday.com)
An anonymous reader quotes a report from USA Today: Electric automaker Tesla Motors filed a lawsuit Thursday against Michigan state officials, escalating its multi-year battle to sell vehicles directly to consumers. Tesla's action comes less than a week after Michigan Secretary of State Ruth Johnson effectively rejected the automaker's application for dealership and service facilities by asking for proof that Tesla is a franchised dealer. Tesla, unlike other automakers, sells its cars directly to consumers through company-owned stores in other states. "Tesla Motors brings this lawsuit to vindicate its rights under the United States constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla owned facilities in the State of Michigan," the automaker said in its complaint in federal court. The California automaker named Johnson, Michigan Gov. Rick Snyder and Attorney General Bill Schuette as defendants. Tesla submitted an application for a dealership license in fall 2015 with a plan to open a retail gallery in Grand Rapids, Mich. In a Sept. 7 hearing, a panel of administrative law examiners heard arguments. Last Thursday, they rejected the license for Tesla. "The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles," Johnson said in a statement. Tesla wants to sell its high-end battery-powered cars directly to consumers without a franchised dealer, much like Apple sells its products. The automaker's lawsuit asks a federal judge to declare that the state violated the due process and equal protection clauses of the Fourteenth Amendment and the constitution's commerce clause. Snyder signed a law in October, 2014, that prohibited Tesla from selling cars directly to consumers by requiring all automakers to sell through a network of franchised dealers.
I am cheering for Tesla to disrupt dealership system, as these dealerships are substantial and unnecessary added expense and hassle. They are there to sell you electronic rust modules and turbinator options that you don't want and rip you off on oil change "service" packages. Manufacturers should be able to sell directly to customers.
you don't think mfg'ers do that already? all it does it cut the middle man out... who also raise the price.
This law was inacted because Henry Ford was a 'douche' back in the day and they wanted to stop it from happening. BUT unlike then the industry has a lot more players all with competitive products. If a company wants to sell direct they should be allowed to. That is how it works with - for example - mattress.
these old laws were in place for a reason... allows the manufacturer to set the price.
The old laws are from a different age. If any one manufacturer tries to do that now, global competition will be all too happy to undercut and capture their market share. If, for example, Ford and Chevy collude to jack up prices on pickup trucks, within production cycle you will have Toyota and Nissan capturing their market share.
these old laws were in place for a reason.
Old laws? Did you read the article or just skim the summary?
Snyder signed a law in October, 2014, that prohibited Tesla from selling cars directly to consumers by requiring all automakers to sell through a network of franchised dealers.
In terms of legislation, since when is 2014 considered "old"? They introduced this law right before Tesla planned to open an outlet and blocked them from competing with the local dealerships. That stinks
these old laws were in place for a reason.
Actually, they are in place for several reasons:
1. Greed
2. Cronyism
3. Corruption
skipping the dealer allows the manufacturer to set the price
Saturn used fixed prices, despite using dealerships, so this seems like a bogus argument. Dealerships are just another layer of inefficiency, adding delay and expense.
My state, California, allows direct sales by manufacturers. How do people in Michigan benefit by having fewer choices than I have?
It's funny, I clicked through thinking nobody could be stupid enough to defend the laws written by auto dealers to prop up auto dealers' businesses.
And then dknj showed up.
Do you have ESP?
People need to stop voting for asshats like the MI governor. They should be allowed to do business. The fossil fuel industry is intent on dragging us into the abyss and their minions need to be kicked to the curb.
skipping the dealer allows the manufacturer to set the price. and they would never fix the price with a defacto monopoly, right?
Haha, what? You're whining about a manufacturer selling their product for whatever price they want to sell it at? Tesla "fixing the price" on their own products that they make and sell themselves, that's funny. How does a single company "fix" the price? They don't "fix" the price, they set the price, that's the price, anyone can buy it at that price. You might as well whine about McDonald's "fixing" the price on a Big Mac because they cost the same anywhere you buy them.
Tesla doesn't have a monopoly on electric cars, and they don't have a monopoly on cars. If they want to set the price of their cars at $100,000, fine, they won't get a ton of sales but if they make a profit then why do you care? If they want to compete with other car manufacturers then they can lower the price, or they can design another model which costs less to produce so that they can reach a bigger market and still make a profit. Guess what Tesla decided to do with the Model 3. Go ahead, guess.
Tesla doesn't have a monopoly on anything except Tesla cars, and you don't have some right to buy a Tesla car for $10k if they don't want to sell them for that much. Don't bitch and moan about old laws that were bought and paid for that shouldn't exist any more. The car market at this point is too big and has too many competitors for price fixing, because if that happens there is a major opportunity and incentive for one of those many competitors to undercut everyone else and make huge sales.
"Our two-party system is like a bowl of shit looking at itself in a mirror." - Lewis Black
Adam Ruins Everything - The Real Reason Car Dealerships Are the Worst.
Summarising the vid: dealerships have pressured/lobbied Congress (in the US) to pass franchise laws. Which make it so you can only sell new cars if you're a car dealership. And there are dealership "territories" so it's illegal to open a new one in another dealership's territory. So car manufacturers in most (all?) states can't sell directly to customers.
(Though I'm not quite sure how Tesla has been able to sell cars directly to customers in states other than Michigan.)
They're really just repair shops who've applied with an auto manufacturer to become a local monopolist middle-man for a brand of automobiles and associated parts. They make the bulk of their money on repair work (in-warranty from the manufacturer and out-of-warranty on highly marked-up fees charged to consumers).
As far as I'm concerned, the sooner we move to a world where all cars can be purchased online direct, the better.
I for one believe in the rights Tesla is fighting to uphold.
Gulf States Toyota put undercoat on all cars. And way overcharged for it. The dealers were not allowed to buy anywhere else, and Toyota was banned by law from interfering with the dealers. They got in their position of power due to the insane laws, and are now one of the forces against change.
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I must say that my experience with Tesla is the polar opposite of my experience with a local dealership. In both cases I had to wait 6 months to get the car I wanted. With the dealership I ended up with my 3rd choice of color and they kept pushing me to take a white car either missing options I wanted or with extra options I did not want. When I picked up my car they tried to sell me a bunch of stuff I didn't want. After I got the car they would frequently try and push extra service the car didn't need or didn't bother trying to find a very common problem the car had. Then just after the 3-year 36K warranty the HID headlights started burning out, another well-known problem with the car I bought. Despite the fact that I had a 7 year, 100K warranty and that the headlight bulbs were well under the rated lifetime they wanted to charge me $200/bulb ($50 on Ebay) plus a ton of labor. I have since sold the car to my father and the center display touchscreen stopped working. The dealership wants $5K to replace it, much of that for labor. The touch screen costs a fraction of that and I found a youtube video where a woman shows how to replace it in around 20 minutes with simple hand tools.
With my Tesla I got exactly what I wanted. Up until they made my car I could pick and choose what options I wanted through the web site with it immediately updating the price. This is unlike a dealership where I'd have to wait until they got something in inventory or found a car elsewhere with my requirements. With Tesla, most cars are made to order so there's no inventory sitting on dealer's lots other than test drive vehicles and loaner cars. The people running the showrooms do not earn commissions and there were no high-pressure sales tactics. They were there to show the car. I would say most people there were simply looking and probably not going to buy one but they treated everyone I saw there with the same respect they did me.
For loaner cars, which are always fairly new and usually with many bells and whistles there's always the option of trading in your car for the loaner car.
Tesla has always treated me well when it comes to service. My car had a number of issues, mostly rattles and other noises since my car was one of their early cars. They learned a lot and made a lot of improvements since I got mine.
Last spring I got a hole in the sidewall of my tire out in the middle of nowhere and the closest tire center was 62 miles away. I called Tesla which has free towing for up to 50 miles. They sent out a tow truck and put it on a flatbed to the tire center I selected after calling around between Tirerack and the tire centers and asked the tow truck driver how much I had to pay to make up the difference. He said Tesla covered it even though it was over their limit. Tesla also called me back to make sure everything was OK. The biggest hassle was the fact that I have low profile performance tires that aren't commonly stocked.
They have always gone above and beyond with service and when I have had to pay for it like when I broke a clip on my car they did not gouge me parts or for fixing it unlike the Toyota dealership.
Another time I had a blow-out and bent rim due to San Jose's poor excuse for a road at 3am. I called them up and they sent out a tow truck with a replacement wheel and tire until I could come back at my convenience and have them replace it (I bought tire and rim insurance through Tesla).
The last time I had service done on my car they dropped my car off where I work and picked up the loaner.
Elon has stated on numerous occasions that they do not want to make a profit off of service. This is the exact opposite of how dealerships work. Most dealerships don't make much money selling cars. They make their money through financing and service. If there's any complaint I have about service it's that if it isn't something that needs to be taken care of immediately that there's often a wait since they seem to have problems keeping up with demand. Since I also use the service center at the factory, it is also busy helping prep new cars so certain times are particularly bad like the end of the quarter.
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This is a YouTube video from Adam Ruins Everything on "The Real Reason Car Dealerships Are the Worst", starting at 0:50 (https://youtu.be/uMWmYJOa-BM?t=50s) telling why you can't just go into a store and buy a variety of cars or order them online on Amazon, for example, then (and this is the point) at 1:18 (https://youtu.be/uMWmYJOa-BM?t=1m18s) goes into the FRANCHISE LAWS the car dealerships got passed. If I can't post with these links, you can look up the same video on YouTube easily with "adam ruins car dealerships". Hopefully, this sheds some light on the subject :-)
Car dealerships will lose in Federal court because it's harder to bribe the Feds.
Car dealerships are generally the most consistent donors to local politicians, and thus are pretty much insulated from adverse laws at the local and state level. They haven't been as active at the Federal level, but if Tesla wins expect that to change...a lot.
Dealers are slow to pick up on the negative effects of self-driving cars, but once they do they'll also start their Federal lobbying campaign.
You don't understand what business in society means, it isn't an academic exercise where you can wank off to Ayn Rand. Business routinely involves every single character fault in every actor, conflicting interests where those with most effective advertising "win", etc. and regulation is the only tool to combat it for the public.
Ignorant geeks with at best 1-2 "econ" courses under their belt, combined with the common but still rabid libertarian rabble will deny the validity of your comments. However, imagined conspiracy and "upstart" philosophy doesn't change the reality of how things actually work. See here for information. The law is entirely designed to enforce standards. This lawsuit is just Musk pouting that his "upstart" position doesn't already work everywhere, and wanting to sell in MI subjects him to some regulations on the state of vehicles being sold.
The law can set standards for performance without dictating the business model used to meet those standards.
It's funny, I clicked through thinking nobody could be stupid enough to defend the laws written by auto dealers to prop up auto dealers' businesses.
It's clear GP doesn't know the real history behind auto dealers and franchise laws. In case others don't -- car dealers came into existence a LONG time ago (early 1900s), back when a number of factors existed that no longer apply now. There were no highways back then; manufacturers needed somebody local to coordinate distribution. Communication was more difficult in case there would be problems with a direct sale. And there were only a few major auto manufacturers, so there was concern about monopolistic behavior (whereas individual dealerships could both inform manufacturers of local market costs and potentially compete with each other to ensure low prices). Today, distribution and communication are easy, there are quite a few domestic and foreign manufacturers competing, and one can see list prices for cars on the internet instantly from across the country, so the value of local competition is greatly diminished.
But perhaps the greatest reason for dealerships back in the early days was maintenance. Cars were relatively new machines and needed very frequent maintenance compared to today. Few independent mechanics had the expertise in the early days, so manufacturers needed people throughout their sales area to provide service. Nowadays, many cars can run for years only needing a periodic oil change, and dealer shops are largely known for being overpriced (often many times the cost independent shops) and often no more competent than the average independent shop.
This explains why dealerships existed. Why they were granted special legal status often had to do with wars with manufacturers, e.g., during the Great Depression when manufacturers continued churning out cars and effectively forced dealers to take inventory they didn't want.... basically under threat that the manufacturer could "cut them out" if they really wanted to sell cars more directly. So dealers banded together and got laws passed to protect themselves from abuses by manufacturers.
That's really why we have a lot of these laws -- they weren't meant to protect consumers. They were dealerships trying to protect themselves against manufacturers back in the day. Nowadays, there's little justification for dealers anymore, so they're just trying to protect their own businesses from going extinct.
Oh, and GP's worried about price-fixing from manufacturers? Seriously? In a day when you can instantly see the price of a car anywhere in the country? If you allowed the possibility of direct sales, most manufacturers probably wouldn't want to destroy their dealer network, since there are all sorts of kickback schemes going on there, the value of maintenance contracts, etc., plus local presence creates more publicity.
Anyhow, the thing is -- monopolistic concerns mostly become an issue if there are few choices. There are lots of car manufacturers, lots of models, and even lots of used cars. Consumers have a LOT of choices. If manufacturers suddenly start jacking up prices, fewer consumers will buy. Maybe they'll switch models or even brands entirely. That's how the market works. I can't possibly see how propping up the car dealership franchises will lead to lower retail prices these days. They were a necessary part of distribution back in the day, but nowadays they're just a middleman who adds a LOT of overhead to the whole transaction and tries to sell you service you don't want (since that's where they can actually make more money).
If by "compelling reasons" you mean a strongly entrenched and well funded lobby of dealers who already own the politicians then yes, there are indeed compelling reasons. Did you ever wonder why dealerships are so often inherited? The story of how dealerships got their near monopoly status enforced by law is quite interesting.
Haha, what? You're whining about a manufacturer selling their product for whatever price they want to sell it at? Tesla "fixing the price" on their own products that they make and sell themselves, that's funny. How does a single company "fix" the price? They don't "fix" the price, they set the price, that's the price, anyone can buy it at that price. You might as well whine about McDonald's "fixing" the price on a Big Mac because they cost the same anywhere you buy them.
A good example, 80% are franchises and 20% centrally owned but you'd never know the difference. The franchising agreement controls pretty much everything, so would a dealership contract. Some people still hasn't figured out what car dealerships was all about. In the before time, before the Internet and all that the car manufacturer would need a retail store, effectively a dealership since nobody would order a car by mail order or over the phone. But instead of that belonging to a big car company that took all the profits back to their corporate HQ, laws were passed to make that a local business that would keep it part of the local economy. It's a bit of a protectionist racket, but the local customers may have wanted it. Today though you don't need a retail store, because you can do it online. The car manufacturers want to cut out the middle man, the middle men want to stay. It's become a protection racket for e-tail vs retail instead of local vs big business.
Live today, because you never know what tomorrow brings
Did you see the part about not every right being enumerated?
When our name is on the back of your car, we're behind you all the way!
Being allowed to sell something isn't a right, it's a privilege. One that Tesla doesn't have.
Why doesn't tesla have the right yet McDonalds, Apple, Slazenger and a jillion other companies do? Oh yes, because dealers lobbied enough to get it enshrined into law that no one else is allowed to sell cars, especially not the people who make them. You HAVE to use the middleman who does nothing but make your product more expensive and they have no incentive to make a better service or compete on price because legally they have no competition. Just imagine you could buy a car at walmart or on amazon or from anyone who decides to open a car shop. How would that be bad for anyone except the entrenched car dealerships? Americans claim to be all about the free market but they stifle it at every opportunity.
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The real motive is protecting the car dealerships from competition and protecting their legacy business model.
Also, protection of Sales Tax revenues, which are huge..... Car sales are one of the largest sources of Sales Tax.
If prices go down, then that means lower tax revenue for legislators to fund their programs.
I'd like to open a dealership and sell brand new houses, but builders refuse to let others sell their products.
Having a company refuse to sell their products to dealers isn't unheard of if you look at other industries.
Personally, I'd like the Apple system. You can buy direct from Tesla OR from a dealer, just like how you can buy Apple products directly from Apple or from a "dealer" (ex. Best Buy). But thanks to the current laws, if Tesla started letting dealers sell their cars, then they'd never be allowed to sell directly to customers in certain states. The whole reason that they are allowed to is because they currently don't have any dealers there selling Teslas.
These laws are silly. Just like how it would be silly to make laws to stop Apple from selling products directly to customers and only go through stores like Best Buy.
"Hello Mr Jones, I see you are interested in a Model S P90D in red with XXX options. Just so happens our rental facility next door we have one for a 1-hour rental with the 1st hour free. It also happens that we just got in this rental and you will be the first one driving it! Once you get back from your rental you can buy this car through our Used Rentals Program, just like Hertz, Budget, etc, for $1 under new MSRP!"
Wait you didn't rtfa they have the right to sell just not to the consumer, only to a third party who will then mark up and resell it to the consumer. They do this under some misguided notion that this extra cost of a middle man somehow protects the consumer and local economy.
that's the only thing memorable in that entire rant.
I don't think you understand what he is saying.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
In Michigan it's not easy to become a dealership (not a franchise -- they can't sell cars).
You first have to join the dealer trade association. Then you have to apply to become a franchise with the state. The Secretary of State decides your initial market area that you are allowed to cover. If you don't belong to the dealer trade association, you immediately are not given a territory, and most likely won't be approved by the State. In order to get your dealership license, you also have to have a setup for service, dollars spent, setup with the SOS for tab registration, etc. Essentially you have to dump a ton of money into the location right away -- in essence a huge barrier to entry for anybody starting up.
Most mcdonalds are franchised yes but some are directly operated by them. That's besides the point though. They're not legally forbidden from doing it. There's no law that says fast food companies MUST operate through franchises.
Wanna buy a shirt?
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