It’s really all about not killing the goose that laid the golden egg. Franchise auto dealers know they are in a fight for survival as the automotive market shifts gears around them. It’s ironic that dealer franchise laws were originally intended to protect dealers from powerful auto manufacturers. If you owned a Chevy, Ford, or Chrysler dealership, you could wake up one morning to find another one next door or across the street. The big boys in Detroit handed out franchises to whoever they liked — and punished those they didn’t.
History Of Dealer Franchise Laws
Today, franchise dealers are the tail that wags the door. Thanks in large part to dealer franchise laws, they have grown more powerful than the companies that build the cars. In a way, it’s fairly ridiculous. Home Depot doesn’t need a license from the state to sell building materials. Apple doesn’t need a license to sell computer products. Joe Six Pack can open a shoe store if he thinks it makes good business sense to do so without asking permission from any franchising board.
But selling automobiles? Uh, uh, brother. You need a franchise license for that. No tickee, no washee. End of story. As much as the dealer associations paint themselves as Sir Galahads bringing untold benefits to the community (they sponsor a lot of Little League teams, for instance), dealer franchise laws are really as anti-competitive as you can get. They protect those who hold licenses and keep other competitors from getting started in business.
Tesla Charts A New Course
Tesla, as it often does, sees things differently. It prefers to sell its cars online and at company-owned stores where highly trained representatives educate members of the public about driving an electric car. Tesla is well aware of the horror stories about dealers who refuse to take electric cars seriously. They hide them out on the back lot. If a customer comes in to ask about one, the sales staff are told to switch them to a conventional car with an internal combustion engine, one that will need lots of maintenance and repairs over the years. For many dealers, the profit is in the service department, not the sales floor. Selling cars that won’t spend any time in “the shop” is a losing proposition for them. Tesla saw all of those issues even before it started selling cars, which is why it went a different route.
Here at CleanTechnica, we have heard all the stories. People who wanted to take a test drive only to find none of the electric cars in stock have been charged up. Sales staff with no clue how an electric car operates or why it makes sense to own one. One sales manager angrily insisted to a customer that the car he was asking about did NOT have a battery in it and asked him to leave the store!
Tesla is currently barred from selling cars in several states, and can only have a limited number of stores in several other states. Michigan, Texas, West Virginia, New Mexico, Connecticut, and 5 others refuse to allow Tesla to sell cars within their borders unless Tesla does so through a franchise dealer. Tesla has been fighting to change the law in those states with some success. Recently, it won battles in Arizona, Missouri, and Indiana. Now it is focusing its attention on Wisconsin and Nebraska.
Republicans Push Tesla Bill In Wisconsin
In Wisconsin, a group of Republican lawmakers have introduced bills that would grant Tesla and other manufacturers of electric automobiles an exemption from the state’s franchise dealer law. In case you missed it, Wisconsin is the poster child for aggressive gerrymandering laws designed by computers to guarantee Republicans will retain political control of the state until the Second Coming or the Great Flood, whichever comes first. The fact that the bills are being promoted by Republicans is huge.
“It’s really a culture shift,” Tesla attorney Jonathan Chang told Wisconsin lawmakers on January 30. “Franchise dealers aren’t able to sell these cars. Dealers aren’t willing to invest that time. We’re not here to overturn the franchise system. It sells internal combustion engines well. But the law shouldn’t be used to block new companies from entering the free market.”
The hearing was packed with Tesla supporters eager to tell the legislators why they want Tesla to be able to sell its cars in Wisconsin. Phil Levin from Madison said he will have to make a 300 mile round trip to Chicago to pick up his new Tesla Model 3 when the time comes. “I just wish it was something we could buy in our home state,” he said. “It’s a shame we have dozens of dealerships with Japanese and German cars in our state, but we ban high-tech cars manufactured right here in America.”
Republican Chris Kapenga, the chief sponsor of the bill in the Wisconsin senate, told his colleagues their fears of electric vehicles crowding out traditional gas-powered engines are overstated. “The facts are we have a Fortune 500 company who wants to do business here. The principle of free market and government is what we’re debating here.”
But Bill Sepic, president of the Wisconsin Automobile and Truck Dealers Association, strongly disagreed. Allowing Tesla to get a foot in the door could mark the beginning of the end for franchise dealers. “This bill is not about free enterprise,” he said. “This bill isn’t about access. We’re not prohibiting ownership. Are we even prohibiting the lawful sale of these vehicles? This bill isn’t about jobs or economic development, either. It’s a job killer.” Then he got to his real point. “Is it worth destroying a thriving, dependable industry?” he asked.
Nebraska In The Spotlight
Nebraska is also considering a bill that would allow Tesla to sell its cars within the state. Franchise dealers in Nebraska predictably object strongly to the proposed legislation. Who wants some outsider to pick his pocket? They point out that if an exception is created for one electric car manufacturer, the major car companies will simply set up new divisions (Volkswagen has already done so with its I.D. division and Mercedes has followed with its EQ brand) and start selling their electric cars direct to the public the way Tesla does.
The real question is, except for the established dealers and their heirs who would like nothing better than to never work a day in their lives, would that be such a bad thing?
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