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Published on March 9th, 2013 | by James Ayre

10

Auto Dealers Say Tesla Opening Stores In Minnesota Is “Not Fair”



Tesla Motors has been facing some opposition from The Minnesota Automobile Dealers Association (MADA) with regards to its plan to begin opening retail stores in Minnesota. MADA recently introduced a law which would make it illegal for carmakers to operate dealerships within the state, shortly after they became aware of the California-based electric-vehicle company’s plans.

Tesla Dealership

Current law prohibits carmakers from directly competing against dealers who sell the same make of car. The proposed law would be an expansion upon this.

Tesla’s current plans are to open a retail store “at the Mall of America in Bloomington, MN, as well as a service center in Edina, about 10 miles southwest of Minneapolis,” AutoblogGreen reports. As Tesla’s Diarmuid O’Connell told Automotive News, the company is just “trying to preserve our ability to operate.” MADA’s Executive Vice President, Scott Lambert, has been quoted as saying that the possibility of dealers having to compete with automakers on the retail front was simply “not fair.”

Not fair? Damn, that’s a convincing argument.

From the looks of it, this is simply about the local auto dealers being worried that Tesla is going to outcompete them, by offering a better product and service, and cut into their business.

Tesla won a legal victory in a similar situation back in January, when the Massachusetts state auto dealer’s association was trying something similar. The judge involved in that case threw out the auto dealers lawsuit based on the dealers’ “lack of standing and failure to state a claim.” The auto dealers association there has appealed the decision.

Update: Some good comments from readers seemed worth highlighting, so I’m pasting them here as an addendum (for those of you who never make it down to the comments section). The first one is from Jack Burgess, and the second is from Ross Chandler.

Jack Burgess: In 48 States there are antiquated franchise laws that forbid or severely restrict automakers from selling vehicles directly to the public. In other words, when you want to buy a new vehicle, you must go through a dealership and PAY SEVERAL HUNDRED DOLLARS MORE than you might otherwise!

These franchise laws are long overdue for repeal. Many of them were written over 100 years ago and are completely out of step with a modern market. At this point, they are protectionist and just plain anti-competitive. Most troubling, they prevent needed changes to the outdated “dealership only” purchasing business model. Dealership businesses that typically exalt the free-market system and decry government regulations are using these franchise laws to protect an ancient, restrictive business model that was created before television, cell phones, the Internet, and e-commerce. They inject a middleman into a process that doesn’t require one, ultimately raising the costs of our vehicle purchases and limiting our selection of products.

Why are the dealerships and their mouthpiece, the National Automobile Dealers Association (NADA), in such a frenzy to shut the Tesla stores down? Why are they lobbying in Colorado for even more restrictive franchise laws specifically aimed at Tesla?

The simple answer is that NADA and the dealerships are using political influence to protect themselves from any sort of free-market competition that may threaten their 100+ year old business model. Anyone who believes in free-market capitalism should be appalled.

In a Fox News article [link in comment below the post], the NADA chairman, William Underriner, was quoted as saying that NADA “has ‘a whole mess of lawyers in Washington’ who work on state franchise laws.” This is CRONY-CAPITALISM AT ITS WORST, where a powerful group of businesses and their political lobbyists influence legislation for the benefit of a well-connected few at the expense of the rest of us.

Any dealership that truly adds value to the process of buying a new vehicle or in servicing those vehicles should have no need for the protection of a franchise law. It is painfully obvious that customers in a modern free market should have the choice of how they purchase their vehicles, be it at a dealership, from a direct manufacturer store, through the Internet, or however else.

Ross Chandler: Very few tears are going to be shed over dealers having to compete harder.

Image Credit: Tesla Motors

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About the Author

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.



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  • http://www.facebook.com/stan.stein.31 Stan Stein

    Nada says they have “a whole mess of people working on franchise laws” ? Tell us, nada, exactly what is the “work” you are doing? Having a meeting now and then? Having lunch with a franchise owner once and a while? Paying a polling company to take a worthless poll for a few unqualified opinions? There is no work…if there was, and it was actual work, with results….this article wouldn’t be an article…..the issue would be cut and dried.
    If the mfg. wants to offer full retail services….parts, repair, etc….and it didn’t violate any existing agreements with anyone…..it shouldn’t NEED any legislation….there was no anti trust issue……other industries do this same thing….apple has apple stores, but you can buy their products from independent dealers,
    As far as adding “several hundred dollars” …..a window sticker is a window sticker…..only dealer prep and locally installed/applied items are added to the sticker price. The only debate here is cutting out local or regional companies from getting to sell these cars themselves…..but the auto industry has been doing that for years from one dealer’s territory to another’s…..”Just a short trip over the bridge to ……where the prices are lower and the trade in values are higher” Oh please, gimme a break

  • windbourne

    What is interesting is that it is the republicans who work hard to kill off Tesla (as well as SpaceX), while preaching for private industry. Yet, it is the republicans that back the outmoded forced dealer nightmare.

    • http://zacharyshahan.com/ Zachary Shahan

      it is very interesting.

      and, basically, interesting how far hypocrisy can go without people realizing it.

      • windbourne

        There is a lot of that by both parties.
        Compare the Space Launch System vs. private space. The SLS is pushed by most of the top republicans (basically, the neo-cons). Worse, they are working hard to kill off new private space.

  • Jack Burgess

    In 48 States there are antiquated franchise laws that forbid or severely restrict automakers from selling vehicles directly to the public. In other words, when you want to buy a new vehicle, you must go through a dealership and PAY SEVERAL HUNDRED DOLLARS MORE than you might otherwise!

    These franchise laws are long overdue for repeal. Many of them were written over 100 years ago and are completely out of step with a modern market. At this point, they are protectionist and just plain anti-competitive. Most troubling, they prevent needed changes to the outdated “dealership only” purchasing business model. Dealership businesses that typically exalt the free-market system and decry government regulations are using these franchise laws to protect an ancient, restrictive business model that was created before television, cell phones, the Internet, and e-commerce. They inject a middleman into a process that doesn’t require one, ultimately raising the costs of our vehicle purchases and limiting our selection of products.

    Why are the dealerships and their mouthpiece, the National Automobile Dealers Association (NADA), in such a frenzy to shut the Tesla stores down? Why are they lobbying in Colorado for even more restrictive franchise laws specifically aimed at Tesla?

    The simple answer is that NADA and the dealerships are using political influence to protect themselves from any sort of free-market competition that may threaten their 100+ year old business model. Anyone who believes in free-market capitalism should be appalled.

    In a Fox News article (http://www.foxnews.com/leisure/2012/10/27/is-tesla-selling-its-cars-illegally/), the NADA chairman, William Underriner, was quoted as saying that NADA “has ‘a whole mess of lawyers in Washington’ who work on state franchise laws.” This is CRONY-CAPITALISM AT ITS WORST, where a powerful group of businesses and their political lobbyists influence legislation for the benefit of a well-connected few at the expense of the rest of us.

    Any dealership that truly adds value to the process of buying a new vehicle or in servicing those vehicles should have no need for the protection of a franchise law. It is painfully obvious that customers in a modern free market should have the choice of how they purchase their vehicles, be it at a dealership, from a direct manufacturer store, through the Internet, or however else.

    • http://zacharyshahan.com/ Zachary Shahan

      Completely agree. Think I’m going to go ahead and throw this into the article. As well as the short one-liner Ross added. :D

    • http://twitter.com/aligatorhardt aligatorhardt

      Well said, Jack. Government should not be forcing subsidizing profit margins on non essential services, nor should they be blocking technology that improves our air quality for all.

  • Ross Chandler

    Very few tears are going to be shed over dealers having to compete harder.

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