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.
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 Most troubling, they prevent needed changes to the outdated “dealership only” purchasing business model.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
For the fate of the sons of men and the fate of beasts is the same; as one dies, so dies the other. They all have the same breath, and man has no advantage over the beasts; for all is vanity. - Ecclesiastes 3:19