New Jersey Bans Tesla "Dealerships" What say you?

[mueron]

On one hand I do think it is unfair that Tesla wasn't operating under the same franchise dealership laws as a vehicle manufacturer and deal but on the other hand as the article headline states the car buying process "sucks". Hard to say...a lot of car salesman's livelihood's are at stake if the model were to change but it does seem hypocritical for the administration in NJ to not let the free market do it's thing.

http://www.wired.com/business/2014/03/tesla-banned-ensure-process-buying-car-keeps-sucking/

[Tugg Speedman]

Tony Stark Elon Musk speals

http://www.teslamotors.com/blog/people-new-jersey

March 14, 2014   
To the People of New Jersey
By Elon Musk, Chairman, Product Architect & CEO



On Tuesday, under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the Governor, ended your right to purchase vehicles at a manufacturer store within the state. Governor Christie had promised that this would be put to a vote of the elected state legislature, which is the appropriate way to change the law. When it became apparent to the auto dealer lobby that this approach would not succeed, they cut a backroom deal with the Governor to circumvent the legislative process and pass a regulation that is fundamentally contrary to the intent of the law.

It is worth examining the history of these laws to understand why they exist, as the auto dealer franchise laws were originally put in place for a just cause and are now being twisted to an unjust purpose. Many decades ago, the incumbent auto manufacturers sold franchises to generate capital and gain a salesforce. The franchisees then further invested a lot of their money and time in building up the dealerships. That’s a fair deal and it should not be broken. However, some of the big auto companies later engaged in pressure tactics to get the franchisees to sell their dealerships back at a low price. The franchisees rightly sought protection from their state legislatures, which resulted in the laws on the books today throughout the United States (these laws are not present anywhere else in the world).

The intent was simply to prevent a fair and longstanding deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear. In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.

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.

An even bigger conflict of interest with auto dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.

Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars. I resolved that we would endeavor never to do such a thing at Tesla, as described in the Tesla service blog post I wrote last year.

Why Did They Claim That This Change Was Necessary?

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.

There are other ways to assess the premise that auto dealers take better care of customers than Tesla does. Consumer Reports conducts an annual survey of 1.1 million subscribers, which factors in quality, reliability and consumer satisfaction. The Tesla Model S was the top overall pick of any vehicle in the world, scoring 99 out of 100. This is the highest score any car has ever received. By comparison, in the industry report card, Ford, which sells their cars through franchise dealers, received a score of 50. BMW, which makes competing premium sedans, received a score of 66.

Consumers across the country have also voiced their opinion on the sales model they prefer. In North Carolina, a Triangle Business Journal poll found that 97 percent of people polled said Tesla should be allowed to sell cars directly. A poll by the Austin Business Journal showed that 86 percent of respondents were in favor of direct sales, and in a Los Angeles Times poll 99 percent of respondents came to the same conclusion. These aren’t polls that we commissioned and there are many more like them. We have not seen a single poll that didn’t result in an overwhelming majority saying they preferred the direct model to the traditional dealer model. Democracy is supposed to reflect the will of the people. When a politician acts in a manner so radically opposed to the will of the people who elected him, the only explanation is that there are other factors at play.

Going Forward

Some reassurances are also in order. Until at least April 1, everything is business as usual for Tesla in New Jersey. It should also be noted that this regulation deals only with sales, so our service centers will not be affected. Our stores will transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our Manhattan store just over the river in Chelsea or our King of Prussia store near Philadelphia.

Most importantly, even after April 1, you will still be able to order vehicles from New Jersey for delivery in New Jersey on our TeslaMotors.com website.

We are evaluating judicial remedies to correct the situation. Also, if you believe that your right to buy direct at a Tesla store should be restored, please contact your state senator & assemblyman: www.njleg.state.nj.us/districts/districtnumbers.asp.

Finally, we would like to thank the many people who showed up in Trenton on Tuesday to support Tesla and speak out against the MVC’s back-door tactics in passing this regulation change without public consultation or due process. It was an amazing response at very short notice and much appreciated.

Elon

[brandx]

Christie lying and making deals behind people's backs. I don't believe it.

What will it be next? Oil companies making large "contributions to politicians to lock out electric car manufacturers?

Mercy me, I just can't believe these things happen!

Free marketers only care about the Free Market when it is their market.

[ChicosBailBonds]

Maybe they all need to read the constitution, the one created 400 years ago, to get grounded again in our principles.


http://www.thedailybeast.com/articles/2014/03/13/the-constitution-is-400-years-old-and-more-pearls-from-sheila-jackson-lee.html

[brandx]

Sounds like Sheila.

I think her and Sarah should write a book together (assuming they know enough words to fill a whole book).

Could be a fascinating look at history 

[ChicosBailBonds]

Sarah looking Kreskin like as she said Russia could invade Ukraine a few years ago and got laughed at heartily by the MSM boobs....until.....

[Tugg Speedman]

Paul Graham @paulg   Banning Tesla is an index of the corruptness of state governments as banning Uber is of city governments. http://bloom.bg/N4eoEz

http://paulgraham.com/

[ChicosBailBonds]

I would guess there are anywhere to 20 to 30 Teslas in our parking structure when I arrive in the morning.  It's the "status" symbol out here.  No thanks, I'll keep my pickup truck and feed the plants the carbon they need to survive.   Plus I never get tired of hearing the Tesla stories when it bricks the battery and the owner has to pay about $35K to $40K to replace the entire battery.  Makes me laugh with a little twinkle in the eye.   Now, Tesla backs the battery with a warranty, but not back in 2012 and early 2013. 

[Tugg Speedman]

I would guess there are anywhere to 20 to 30 Teslas in our parking structure when I arrive in the morning.  It's the "status" symbol out here.  No thanks, I'll keep my pickup truck and feed the plants the carbon they need to survive.   Plus I never get tired of hearing the Tesla stories when it bricks the battery and the owner has to pay about $35K to $40K to replace the entire battery.  Makes me laugh with a little twinkle in the eye.   Now, Tesla backs the battery with a warranty, but not back in 2012 and early 2013. 

They are the status symbol for the 1% everywhere.  And it's because they are an incredible car.  Unlike anything I have ever driven.

[tower912]

When someone works out a system that combines the portable battery concept of the home power drill with the interchangeability of returning and exchanging propane cylinders, all with enough power in the suitcase-sized battery that gets put into a slot under the hood of the car to take the car the next 250 miles, electric cars will become truly mainstream.   I applaud Elon Musk for his efforts.    The next generation of the electric cars will tell the tale.

[ChicosBailBonds]

They are the status symbol for the 1% everywhere.  And it's because they are an incredible car.  Unlike anything I have ever driven.

Not the 1%....I know people that have them that aren't anywhere near the 1%.  Too many people today choose stupidity.  I can go into the poorer areas of town out here and the house is in tatters, but inside is a LCD, PS4, everyone has an iPhone 5 and there is a Cadillac in the driveway along with the 12 people living in the home. 

The decision making among people is alarming. 

You can get a Tesla out here for about $70K.  Yup, a lot of money, but you would be surprised the number of people that are no where close to the 1% driving stuff like that around....especially out here in LaLa land.  It's beyond ridiculous. 

[ChicosBailBonds]

When someone works out a system that combines the portable battery concept of the home power drill with the interchangeability of returning and exchanging propane cylinders, all with enough power in the suitcase-sized battery that gets put into a slot under the hood of the car to take the car the next 250 miles, electric cars will become truly mainstream.   I applaud Elon Musk for his efforts.    The next generation of the electric cars will tell the tale.

Agree, but the great underbelly that no one wants to talk about is still what to do with all of these batteries when it comes time to pay the piper and they need to be dealt with.  It's simply moving one "environmental fix" to an environmental problem in another category. 

[Tugg Speedman]

When someone works out a system that combines the portable battery concept of the home power drill with the interchangeability of returning and exchanging propane cylinders, all with enough power in the suitcase-sized battery that gets put into a slot under the hood of the car to take the car the next 250 miles, electric cars will become truly mainstream.   I applaud Elon Musk for his efforts.    The next generation of the electric cars will tell the tale.

Wall Street is gone beyond "applauding" Musk.  They are betting he will change the auto industry like no one since Henry Ford.

Tesla will make 35,000 to 40,000 cars this year and is valued at $28.5 billion (about $700,000 car)

GM will make 2.2 million cars this year and is valued at $58 billion (about $2,500 car)

Or to say it differently, if GM had Tesla's valuation, it would be about $16 trillion.

Why is Wall Street giving Tesla such an astronomical valuation?  Because it thinks Musk/Tesla is going to "redefine" the auto industry.  In 10 years cars, the way they are sold, and the concept of a "warranty" are going to radically change.  (EVERYTHING, including flat tires, are repaired for free for eight years under the Tesla warranty.  Musk does not believe you should "pay" if their product breaks, for whatever reason, so the cost of operation is $0 for eight years.)  Wall Street thinks Telsa will lead that change and Ford/GM/Chrysler/Nissan/Toyota will get killed in the process.

Wall Street is following the Apple/iPhone model.  Apple's valuation is now around $400 billion (most expensive company in the US).  It supporters would argue that its valuation includes Nokia, Palm and Rimm/Blackberry as Apple drove all these companies out of business, essentially transferring their worth to Apple.

Earlier this month Tesla announced they are building a $5 billion "gigafactory."

http://www.economist.com/blogs/schumpeter/2014/03/teslas-gigafactory

Due to start production in 2020, the giant factory will be the world’s largest battery-making facility, producing, at its peak, 500,000 lithium-ion packs, more than the entire world’s capacity today. That should be more than enough for Tesla’s car production; the excess will probably supply not only some of its carmaking competitors but also such power sources as backups for neighbourhood grids and cellphone towers.

Oh, and the factory will employ a minimum amount of people, it will as automated as possible.

Get ready for an electric Firetruck, you might have one in your future.  Musk thinks he can also build an electric jetliner too.

[tower912]

Get ready for an electric Firetruck, you might have one in your future.  Musk thinks he can also build an electric jetliner too.

I've been riding around in fire trucks for 24 years.   If he can build one that works better than the ones we have, and believe me, that is a pretty low bar, for a competitive price, I am all for it.   It's tricky though.  My experience with fire trucks says that every time they come up with something electric to replace something mechanical  (transmissions, pumps, aerial's, foam mixers) it takes at least until the second generation for the electrical version to be as reliable as the mechanical version. 
So, if Mr. Musk can build a fire truck hardy enough to stand up to the demands of flowing 1500 gpm of H20 out of 3 outlets simultaneously at different pressures, with an aerial strong enough to handle 600 lbs of firefighter, equipment, and water at the end of 100 ft of ladder, that doesn't break down whether it is in a Phoenix summer or in an the upper Midwest winter,  AND, and this is the big one, can have enough battery power to do this for hours on end with no recharge at the average large commercial fire,  congratulations.    And there will be buyers.   
I won't say he can't, because that would just be a dare to him, but that should be a long term goal at best and he should stick to cars and rockets.   

[Tugg Speedman]

Consumer reports has given the Tesla its highest rating EVER.  100 years of gasoline power cars and no car has scored as high as the first viable electric car.

Why?  Because an electric car has far less parts than a gasoline powered car.  No tune-ups, no transmission no radiator, no hose, no belts. no alternator etc. etc.  So far fewer parts to break.  The car is a hotspot and it gets upgrades and patches exactly like a smart phone.  Many of the fixes come in automatically when the car is not being used and reboots itself.  That is why they will cover everything under an 8 year warranty, the cost of repair is far less than a gasoline powered car so "they can."

True story, Model S had a flat, called the Chicago showroom, it was a Saturday so transferred to CA headquarters.  They sent an enterprise rental within 30 minutes.  The enterprise guy waited for the flatbed.  The Tesla was taken to the Chicago showroom Monday morning, the flat was fixed. The Telsa was delivered to the office and they took the rental back to Enterprise.  Did not have to leave the office or pay a penny.  Was out a few phone calls and the 30 minutes waiting for Enterprise.  Again, this was the level of service they give on a flat that was the driver's fault.  No "legacy" car marker will ever do this, and probably laugh at this story.  This is why the world will pass them buy.

Tower, an electric fire engine does not exist,  But if/when it does, the electric version will have far fewer parts giving it less opportunity to break.  That is the advantage it will have over mechanical version.  And yes, it will be the second or third version that will be a fire engine.  Version 1 will be a commercial application used in non-life threatening situations.
,

[tower912]

I'm a fan of Elon Musk and Tesla.   He hasn't built a car I can afford yet, but when he finally does, I will look seriously at it.   I'm just skeptical about the fire engine/truck. 

[4everwarriors]

Couldn't drive that sucker in MKE. Just aren't any recharge ports. 'Bout the only one I've seen is at the Kohl's Dept. store parkin' lot in Bayshore. WTF?

[Tugg Speedman]

Couldn't drive that sucker in MKE. Just aren't any recharge ports. 'Bout the only one I've seen is at the Kohl's Dept. store parkin' lot in Bayshore. WTF?

Has a 250 to 300 mile range.  Can set up a charger in your garage and start everyday with a "full tank."  That is more than enough to do whatever you need around town.  Not very good for long driving trips, but how many times is that an issue?  Rent a gas powered car for those few times.

[ChicosBailBonds]

What are you doing with all of the batteries?

[tower912]

Storing them in the caves with all of the nuclear waste we haven't found a solution for?

[Tugg Speedman]

What are you doing with all of the batteries?

What do you mean?  It has one large fuel cell, it has no batteries (there is a difference)

[ChicosBailBonds]

What do you mean?  It has one large fuel cell, it has no batteries (there is a difference)

Berg....the fuel cells deteriorate  and have to be disposed of.  What is the plan for these?  Look, I'm not against this stuff...I have solar panels on my roof.  I get it.  The problem, however, is that too many people think this is magic pixie dust and is "clean"...BS, it isn't clean.  You're just shifting the burden onto something else.  I can make the same argument that nuclear is "clean", but we know there are ramifications with spent fuel rods, etc. 

By the way, it will be a cold day in hell when I get on an airplane that is 100% electric.  Not a chance.  One of my employees has a Nissan Leaf, and every day she has to go to the garage and hope one of the 20 charging stations opens up so she can juice it enough to get home...100 miles total range.  I realize this is early days, but it still makes me chuckle.  Then the outrage by the electric car guys here that the company was going to make them use credit card to charge their cars....you would have thought they were actually asked to pay for their fuel like the rest of us...oh wait, they were.  LOL

[keefe]

What do you mean?  It has one large fuel cell, it has no batteries (there is a difference)

Oh to be so naïve. We test drove a Hydrogen-enriched CNG vehicle this afternoon. 84 MPGGE. Not only is the fuel cost less than 72% of gasoline powered ICEs but we are seeing a demonstrated 90% reduction in the emission of NOx, SOx, CO, and CO2. Still lots of work to do but the future is not in fuel cells.

Anyone who thinks Tesla is the answer must think nuclear waste is nothing to be concerned about. 

[Tugg Speedman]

Ferdinand Porsche (yes that guy) was building electric cars in the late 19th century.  He was using a gasoline powered engine to charge the battery.  Yes the hybrid is over 100 years old.

In fact most early automobiles (pre-1900) were electric.  That is the most efficient and easiest way to build a transportation vehicle.  It still is.  Problem was the energy storage device, the battery or fuel cell.  It was too big and heavy to be practical.  So they grudgingly switched to the internal combustion engine.

Now comes along Musk and he invented a car like no other.  As I noted above, Tesla makes 40,000 cars and it is worth half as much as GM which makes 2.2. million cars.  The bet is Musk can figure out how to make a Model S for 40k instead of 100k.  If he can do that, legacy car owners are toast.  Wall Street is betting he can.

Owning a Tesla, for me, has noting to do with "saving the environment."  Instead it is literally the next generation of transportation vehicle.  In so many ways it is unlike any other car on the market.  It is the future of transportation.  And earlier adopters understand they are paying a lot for something that will experience growing pains.  Same as any early adopter in any technology.

Side note, see my comment about Xerox Parc in the Bill Gates post.  GM/Ford/Chrysler are/were incapable of creating the Telsa.  They are too married to a flawed business model that people like Musk understand and will eventually take their customers away from them.

The future is creative entrepreneurs not Luddite manufactures taking government money to create digital coops.

Lastly, What is different about Telsa than GM Volt, Nissan Leaf, Fisker and the rest of the electric car makers that failed?  Why did Telsa not only survive but revolutionize the car?

Answer, they took no Government money.  It was created entirely by capitalist with risk capital.  Government money is a cancer that kills everything in its wake, like the Digital Coop will learn.

[Benny B]

To the extent that "revolutionize" implies a leadership change in the auto industry, I'm not sure that Tesla is going to do that... but there are going to be big changes that Tesla brings about in a revolutionary sort of way.

Barring a discovery on the scale of cold fusion, there are certain applications that require much more energy than any car-sized battery can theoretically supply (a fire truck, for instance, might be able to move on an electric drivetrain, but the pumps are going to require petroleum power). 

The gasoline-powered car is going to be around for the next 50 years, at least globally.  I would venture to guess that 20 years from now, 60-80% of all autos in the US will have an alternative fuel supply of some sort (i.e. electric or hybrid), but full electric autos like Tesla won't make up more than half of those alternative fuel cars.