New Jersey Bans Tesla "Dealerships" What say you?

[buckchuckler]

Aren't manufacturer owned dealerships already illegal in every state?  That is why GM, Ford, Chrysler, Toyota etc all have dealer networks.  At least that was my impression of the situation. 

[ChicosBailBonds]

Aren't manufacturer owned dealerships already illegal in every state?  That is why GM, Ford, Chrysler, Toyota etc all have dealer networks.  At least that was my impression of the situation. 

Correct.  That's what this is all about.  They were required to have dealers many years ago, for some good reasons and not so good reasons. 

[Tugg Speedman]

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.

You should short Telsa, if you're right, you will make a lot of money

[Tugg Speedman]

Aren't manufacturer owned dealerships already illegal in every state?  That is why GM, Ford, Chrysler, Toyota etc all have dealer networks.  At least that was my impression of the situation. 

Yes, Telsa has argued they no longer serve a purpose and in fact are a monopoly that is anti-competitive.  See Musk blog post near the top of this post.

[buckchuckler]

Correct.  That's what this is all about.  They were required to have dealers many years ago, for some good reasons and not so good reasons. 

Ok, thanks.  So why is it a big deal that Tesla can't have them?  Is it just because Tesla makes people feel special in that apple sort of way?  Seems like they shouldn't be able to if none of the other manufacturers can. 

[Tugg Speedman]

Ok, thanks.  So why is it a big deal that Tesla can't have them?  Is it just because Tesla makes people feel special in that apple sort of way?  Seems like they shouldn't be able to if none of the other manufacturers can. 

see the second post above, Musk explains his position.

[buckchuckler]

see the second post above, Musk explains his position.

I guess that's all well and good and he should certainly want the mfr stores.   But unless the laws change, it doesn't seem like he has a leg to stand on.  

He cites other new manufactures that failed, is it possible that it had nothing to do with the dealer network and everything to do with those cars sucking or being overpriced or both?

It seems to me that dealers would love to sell cars that make them money.  Regardless of service requirements.  If they can make money on a one time sale of a Telsa, they'd back it.  If they make more on a one time sale of a Tesla than they do on a s550, they'd prefer to sell the Tesla.

Dealers don't care if a car is gas or electric.  They care if they make money.  

[Tugg Speedman]

I guess that's all well and good and he should certainly want the mfr stores.   But unless the laws change, it doesn't seem like he has a leg to stand on.  

He cites other new manufactures that failed, is it possible that it had nothing to do with the dealer network and everything to do with those cars sucking or being overpriced or both?

It seems to me that dealers would love to sell cars that make them money.  Regardless of service requirements.  If they can make money on a one time sale of a Telsa, they'd back it.  If they make more on a one time sale of a Tesla than they do on a s550, they'd prefer to sell the Tesla.

Dealers don't care if a car is gas or electric.  They care if they make money.  

You're making his point.  Why do you needlessly need to add thousands of dollars to the price of a car.  Why not cut the dealers out and make your product cheaper.

Yes, the dealers have the law on their side, but tesla is arguing that it creates an anti competitive monopoly that rips consumers.  I think tesla is correct and 45 states agree with Telsa.

Te law is being changed, as it should.

[jesmu84]

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.

are you claiming Tesla/Musk are not recipients of any government subsidies or initiatives?

[ChicosBailBonds]

You're making his point.  Why do you needlessly need to add thousands of dollars to the price of a car.  Why not cut the dealers out and make your product cheaper.

Yes, the dealers have the law on their side, but tesla is arguing that it creates an anti competitive monopoly that rips consumers.  I think tesla is correct and 45 states agree with Telsa.

Te law is being changed, as it should.

The reverse is also argued.  One of the reasons dealerships are created is to promote competition.  If I'm at the Honda dealer and I don't like what I'm being sold, I can walk across the street and buy a Toyota or go to the Honda dealership in the next town over.  They have to compete to get my business.  One of the arguments against selling direct by the auto MFGs is that they will collude together to keep prices artificially higher because there are only a few of them, not hundreds of dealerships with many willing to go rogue for those sales.

[buckchuckler]

You're making his point.  Why do you needlessly need to add thousands of dollars to the price of a car.  Why not cut the dealers out and make your product cheaper.

Yes, the dealers have the law on their side, but tesla is arguing that it creates an anti competitive monopoly that rips consumers.  I think tesla is correct and 45 states agree with Telsa.

Te law is being changed, as it should.

Well, I just think it is stupid to point to corruption or whatever when it is just what the law is.  If it gets changed fine, but I sure don't think Tesla should get any special consideration over any other manufacturer. 

[buckchuckler]

The reverse is also argued.  One of the reasons dealerships are created is to promote competition.  If I'm at the Honda dealer and I don't like what I'm being sold, I can walk across the street and buy a Toyota or go to the Honda dealership in the next town over.  They have to compete to get my business.  One of the arguments against selling direct by the auto MFGs is that they will collude together to keep prices artificially higher because there are only a few of them, not hundreds of dealerships with many willing to go rogue for those sales.

That certainly seems to make some sense. 

[ChicosBailBonds]

That certainly seems to make some sense. 

Yup. 

In the future, if you want a Tesla, you can buy it from them at their price.  Now, one can say the cost of eliminating the middleman will be used as savings.  The question is, will it really?  Time will tell.

[Tugg Speedman]

Yup. 

In the future, if you want a Tesla, you can buy it from them at their price.  Now, one can say the cost of eliminating the middleman will be used as savings.  The question is, will it really?  Time will tell.

The internet has been so disruptive because it all about eliminating the middle man.  In every case elimination the middle man has been a cost savings for the consumer.

Why all of a sudden is getting rid of dealers a bad thing?

[ChicosBailBonds]

The internet has been so disruptive because it all about eliminating the middle man.  In every case elimination the middle man has been a cost savings for the consumer.

Why all of a sudden is getting rid of dealers a bad thing?

That is not the case....look at the TRUE cost of music downloads as an example.  Look at the lawsuits against Amazon currently.  Etc, etc. 

The role those dealers play in car sales is a cost that MFG doesn't bare.  All those costs will now shift to the MFG.  People are still going to want to test drive a car.  Inventory on a lot...who pays for that now?  The MFG.  What about the sales guys they now have to employ to answer questions?  MFG now.  Etc, etc.

You're shifting costs from the dealer to the MFG.  How much "savings" is really to be had. How vested in the customer experience will the MFG be if they know they have basically a monopoly now for their cars and they are the only place to get them?  ETc, etc.  All these things have to be answered and accounted for. 

It's not nearly as simple as you are making it out to be. 

[Tugg Speedman]

I guess that's all well and good and he should certainly want the mfr stores.   But unless the laws change, it doesn't seem like he has a leg to stand on.  

He cites other new manufactures that failed, is it possible that it had nothing to do with the dealer network and everything to do with those cars sucking or being overpriced or both?

It seems to me that dealers would love to sell cars that make them money.  Regardless of service requirements.  If they can make money on a one time sale of a Telsa, they'd back it.  If they make more on a one time sale of a Tesla than they do on a s550, they'd prefer to sell the Tesla.

Dealers don't care if a car is gas or electric.  They care if they make money.  

Wrong, the vast majority of a dealers revenue is on service, not sales.  They know car repairmen are incompetent and thieves.  They know were are afraid of them so we take our car to the dealer so they can over-charge us (but for that over-charge they will fix it properly).  

Now comes Musk and proves a 8 year warranty that will fix EVERYTHING that breaks, even if you break it (see my flat tire example).  So the dealers make zero on the service after the sale, killing their bread and butter.  Further, Musk will not take their typical rip-off rate they charge back to the manufacturer to fix warranty items.

I think Muck is correct.  A long-time ago the dealer network served a purpose.  It no longer does, and it now has to go.

Finally if the dealer network added valued like you imply, they shouldn't care about Musk.  They are fighting him tooth and nail because they know he has a better model and he will drive them out of business.  So they hand politicians bags of money to protect their monopoly so they can continue to rip-off consumers and keep themselves rich.

[Tugg Speedman]

That is not the case....look at the TRUE cost of music downloads as an example.  Look at the lawsuits against Amazon currently.  Etc, etc. 

The role those dealers play in car sales is a cost that MFG doesn't bare.  All those costs will now shift to the MFG.  People are still going to want to test drive a car.  Inventory on a lot...who pays for that now?  The MFG.  What about the sales guys they now have to employ to answer questions?  MFG now.  Etc, etc.

You're shifting costs from the dealer to the MFG.  How much "savings" is really to be had. How vested in the customer experience will the MFG be if they know they have basically a monopoly now for their cars and they are the only place to get them?  ETc, etc.  All these things have to be answered and accounted for. 

It's not nearly as simple as you are making it out to be. 

So people are irrational, they like paying more for music?

MFG will have "showrooms" that will do what you want.  Telsa has showrooms.  What the showrooms do not have is sleazy car salesman trying to rip you off.

[Spotcheck Billy]

Yup. 

In the future, if you want a Tesla, you can buy it from them at their price.  Now, one can say the cost of eliminating the middleman will be used as savings.  The question is, will it really?  Time will tell.

Maybe a look to the Internet-Direct (ID) approach that's working wonders in the audio market. Take subwoofers for example, the best bang for John Q. Public's $$$ is buying ID. The build quality from a half dozen manufacturers kicks a@@ on any models you can buy at a brick and mortar home theater dealer. The ID manufacturer's warranty can't be beat and almost always includes a 90 day free home trial.

[ChicosBailBonds]

So people are irrational, they like paying more for music?

MFG will have "showrooms" that will do what you want.  Telsa has showrooms.  What the showrooms do not have is sleazy car salesman trying to rip you off.

Irrational, no.  It's just not a one size fits all solution.  It's like your comment the other day about DVDs....the world is changing, but nearly as fast as you think it is.   I've brought up HBO here many times.  There are many folks that think HBO should sell direct yesterday...why don't they?  Many reasons, and a big one is cost.  HBO doesn't have to employ 20,000 customer service agents, they don't have to spend massive amounts on marketing, nor do they need engineers, etc to handle the technical issues.  All those come with HUGE costs, but the people think "cut out the middleman"...it's that easy.  Well, no, its not that easy. 

There are consequences to all those actions.

On your TESLA example, yes they have showrooms.  The more showrooms they build that a dealer isn't building costs whom?  TESLA, not the dealer.  Ultimately, what then will happen to the cost of goods that TESLA has to incur?  They are going up....those showrooms aren't free, nor are the employees that work in them.  So you are shifting the expenses of the dealer to the OEM.  OK...you might even save a few bucks doing it...I want to see how much and is it worth it in the end.  That's all I'm saying.

We're not talking about order speakers or a piece of software here.  Where once you would go to Best Buy to do that, now you can go to Best Buy, get the knowledge, check it out, and then go home and order it online.  Very different market in this case.

[Tugg Speedman]

Five years about DVD sales was $11 billion.  2013 was $8 billion

Car dealers will see a similar fate.

[Spotcheck Billy]

We're not talking about order speakers or a piece of software here.  Where once you would go to Best Buy to do that, now you can go to Best Buy, get the knowledge, check it out, and then go home and order it online.  Very different market in this case.

That would be like going to a Ford dealership to check out a Ford and then buying a Tesla online. The ID products cannot be seen at a Best Buy etc. FWIW, we're not talking about your $150 home-theater-in-a-box, these can be anywhere from $750-$10,000.

[ChicosBailBonds]

Five years about DVD sales was $11 billion.  2013 was $8 billion

Car dealers will see a similar fate.

I've never argued things aren't going in that direction, but to put more perspective on this, that $8billion still dwarfs digital downloads and every other form...absolutely crushes it.  Then there is the next reality, to use your DVD example.  The average cost of that DVD in a store is what compared to the average price of that digital download?  I'll let you answer, but if you don't know the answer I'll reveal it later....just want you to do a little digging.  I think you'll ask yourself the question....where's the savings after you do that exercise.

[ChicosBailBonds]

That would be like going to a Ford dealership to check out a Ford and then buying a Tesla online. The ID products cannot be seen at a Best Buy etc. FWIW, we're not talking about your $150 home-theater-in-a-box, these can be anywhere from $750-$10,000.

What percentage of sales are done this way?  I'm guessing compared to the overall market, it is still very much in the minority....at least for now.  Happy to be proven wrong, it is not a segment I work in, but in other forms of entertainment and even hard goods, that hasn't been the case....yet.

[Spotcheck Billy]

It's definitely a small share of the market, makers like HSU, Power Sound Audio and the others while doing 100% of their business ID probably sell a fraction of the Polks and Definitive Techs etc.

[Tugg Speedman]

I've never argued things aren't going in that direction, but to put more perspective on this, that $8billion still dwarfs digital downloads and every other form...absolutely crushes it.  Then there is the next reality, to use your DVD example.  The average cost of that DVD in a store is what compared to the average price of that digital download?  I'll let you answer, but if you don't know the answer I'll reveal it later....just want you to do a little digging.  I think you'll ask yourself the question....where's the savings after you do that exercise.

Yes and no

Digital downloads measured by units dwarfs DVD by a factor of nearly 10.  So no digital is far larger than DVD measured in units.  (as a side note, what is the world's biggest TV network, which is orders of magnitude larger than its competitors?  YouTube)

DVD revenues dwarf downloads.  Is that because 1) people still like to buy things they watch over and over like Children's movies and/or 2) people are stupid and will pay $19.95 for something that costs a few pennies or is free on the internet? (see the "untucked" thread.  Some think it is a good idea to charge $19.99 for a DVD when it available for free on the net.)