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Auto Dealers are Stifling the Free Market

By  |  February 23, 2017, 01:55pm  |  @razshafer


The Economy is Changing

There can be no doubt. From Uber to AirBnB; revolutionizing the way we get from point A to B or find a place to stay. It’s awesome! Consumer costs are dropping, entrepreneurship is growing and outdated regulations are being challenged.

But not everybody is happy. The Taxi Unions hate ride-sharing and Hoteliers despise short-term rentals. It all comes down to the fact that competition is coming at them from areas that they know they’re vulnerable. I’m sure the buggy-whip makers were ticked at Mr. Ford, he just didn’t have a union or trade organization to lobby elected officials!

Tesla is Breaking the Mold

In the same way that Taxi unions and Hoteliers are pushing back against their new-grown competition, Auto-dealers are fighting a pitched battle to snuff out those who dare challenge their comfortable, guaranteed market.

Enter, Tesla Inc.

From day-one, Tesla has challenged the historical norm of a 3 tier auto-sales structure. The old way meant that an auto-maker built the vehicle, an auto-dealer served as the middle man and then sold it to the end user. Tesla has pioneered the new way: direct to the consumer.

Across the nation they’ve been letting consumers design and buy their cars online for several years and have sold hundreds of thousands via that medium. As they’re growing and their market grows, they’re opening hundreds of locations across the country where potential customers can test drive cars, get educated on the vehicles and design their new ride.

Bad State Laws Are Holding Back Innovation

The problem is that several states have it written in law that auto-manufacturers may not sell directly to an end user. It’s illegal for they to bypass the middle man, the auto-dealer.

This out-dated model protects auto-dealers at the expense of the consumer, but no other way could have been imagined before the internet. As we see in so many market sectors today, new technology is disrupting century-old ways of doing things. Why should car sales be any different? Why should my car options be limited to what a dealer has in stock? If I want to go walk into a Apple-like store, design a car and pay for it and have it shipped to me upon completion, I should be able to.

But bad laws say I can’t. It’s time for that to change and in states like Texas, we’re trying to make that happen.

Conservative leaders and organizations, from The Heritage Foundation to Glen Beck, Young Conservatives of Texas to Americans for Prosperity, are all calling for these laws to be changed. Rick Perry, Newt Gingrich and the Republican Party of Texas have also given their support.

It’s time that these outdated laws and burdensome regulations be lifted!

No, You Don’t Have to Believe in Man-Made Global Warming to Love Tesla

It’s no secret that Elon Musk, Tesla’s founder, believes that a change to carbon-neutral transportation is critical to the globe’s survival. He’s got a ton of love from environmentalists that are convinced man is the worst parasite ever to walk the face of the earth. Does that mean I shouldn’t like his cars or be able to buy one in a Texas store? Hell no.

The fact is that Musk has done with Tesla what so many have thought impossible. They’ve actually put private money on the line and developed increasingly impressive cars at consistently more affordable prices. He’s invested in a truly global system of charging stations and has transformed the idea of owning an electric car from a fad to an easily attainable reality.

7 Reasons Why The Traditional Model Doesn’t Work For Tesla

Tesla has laid out  7 reasons that they need to be able to sell direct to consumers, and shouldn’t be legally forced to use the current dealer system. Not only do they believe that they can provide a cheaper, better experience for customers via this route, they also don’t believe that the existing auto-dealer system can be relied upon to effectively market and sell their revolutionary cars…and I think their reasons have merit.

  1. Meet the Customer: Tesla isn’t just trying to change the way we look at cars, they’re trying to change the way we shop for them. Rather than attracting people to large lots of vehicles, they want to meet potential buyers where they are. Their stores focus on areas with lots of organic traffic, especially foot traffic. Because they’re trying to bring electric cars into the main stream, they know that they need to educate consumers not just on the car itself but the very idea of electric cars in general. They’re making a move similar to when Apple began opening it’s own stores. Each facility is as much an educational center as it is a sales floor
  2. Zero Inventory: When you think about car dealerships, the immediate scene that comes to mind is an endless sea of depreciating inventory. Auto-dealers live and die by the number of cars they have in stock. If they don’t have what you want right now, you can go down the street and buy it from someone else. Tesla, on the other hand, literally lets you custom design your car online or at their store. It’s then built to your exact specifications and shipped to you as soon as it’s ready!
  3. Buyer Education: Customers that walk into traditional auto-dealerships are primarily interested in getting the lowest price. That’s about all they care about. For Tesla, however, the education process is much more extensive. Because that educational process is longer and their product so revolutionary, it means that the salesman has to be prepared to spend much more time with each customer. If Tesla was forced to sell through traditional dealership chains, it is very easy to believe that their sales would be marginalized because salesmen wouldn’t want to spend the time (in some cases hours) that Tesla believes their customers deserve.
  4. Revolutionary Business Model: Traditional auto-dealers don’t make much money on the sale of the actual car. Financing, services and upgrades are where their money is made. I know it’s weird, but Tesla actually makes their money from…selling cars! The lower maintenance costs of the Tesla electric cars means that traditional dealers wouldn’t be able to make as much post-sale revenue and further provides disincentives to selling what Tesla brings to market.
  5. Advertise Differently: Like Apple, Tesla is very particular about it’s advertising. They know their product and customers better than any dealer and want to retain control over that, rather than putting advertising into the hands of a local dealership.
  6. Dealers Wont Sell Them: Because Tesla is able to so broadly sell cars directly to consumers, existing dealers wouldn’t be able to mark up the prices enough to make selling them worthwhile! Why pay more for a car when I can drive across the border and buy it without a dealer markup, in a state that allows direct sales?
  7. Conflict of Interest: Tesla believes in replacing gas-powered cars. Their revolutionary technology and peerless design has gone a long way towards making electric cars main-stream. Add to that the increasing mass-affordability of the Model 3, at $35,000, and it’s increasingly easy to see how they can do that. It’s unreasonable to believe that dealerships would put as much effort behind selling Tesla’s electric cars as they do gas-powered vehicles on which they make more money, both up front and in post-sale revenue.

No Special Carve-Outs

Tesla is lowering prices and innovating in ways never before imagined, but they aren’t asking for special treatment. They’re just asking that they be allowed to do something different. Most of the legislation they’re supporting, in states like Texas, asks for all manufacturers to be able to sell direct to consumers. They want an even playing field, which is exactly what conservatives stand for.

By opening up direct sales to all manufacturers, it’s possible that their high costs relating to inventory and distribution costs could be cut significantly. This directly benefits consumers and auto-makers but dealers feel threatened by this move.

Time for a Change

We live in an absolutely fascinating time with unprecedented opportunity for technology to impact our economy and daily lives. Yet too many industries are using government power and lobbying dollars to slow and halt that innovation at every turn. I get it, they’re scared. But government shouldn’t be a tool that powerful industries use to crush competition. The playing field should be level and government shouldn’t be picking who wins and loses. Thats a choice that should be left to you and me, as consumers.

Whatever you think about global warming or Musk’s ethos, he’s made some damned good cars and using government regulation to keep them off the street is in no way conservative.