Opinion: As Auto Dealerships Profit, Politricks Mingle

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As dealerships associations, surging profits, and politricks mingle, a theory has emerged. However, it’s just a theory of mine, but I’d like to explore it and share it here.

It seems as if there have been a number of proposed anti-EV bills being put forth in many states, ranging from West Virginia to Oklahoma, while efforts to open states that are currently closed, including Georgia and Connecticut, face challenges — even as Rivian is looking to invest $5 billion in a manufacturing facility in Georgia and Connecticut’s EV owners have pushed for years to open the state. 

Now, what I’m about to point out is just a theory — consider it speculation on my part. I’m going to explore this theory and a few of the legislative proposals that are going through or have gone through various state governments this year.

My Theory: Surging Profits Means Dealerships Have More Money To Lobby State Governments

Dealerships across the nation are seeing a surge in profits. And as these profits surge, they are flush with even more money than usual to spend on lobbying in state legislatures to try to block direct sales from Tesla, Rivian, Lucid, and other automakers that would like to sell directly to their customers.

Dealerships are having a surge in record profits due to vehicle shortages and, of course, record markups. Kelly Blue Book cited a report from the National Automobile Dealers Association (NADA) noting that net profit before tax for the average new car dealerships during the first 9 months of last year was up 128.2% compared with the same period for 2020 — not 28.2% but 128.2%. The article goes on to point out that the semiconductor chip shortage is leading to new car shortages and, in turn, has led to soaring prices for both new and used cars throughout the last year.

Data from Edmunds shows that the average transaction price for a new vehicle rose to $728 above MSRP in January 2022, which is up from $2,152 below MSRP in January 2021. In January 2020, that number was $2,648 below MSRP. Jessica Caldwell, Edmunds’ executive director of insights, said,

“The fact that an overwhelming majority of consumers are paying above sticker price would have been unthinkable even just a year ago. This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want, but there’s also a vast population of individuals who are being forced to do so simply because they need transportation and have no other choice.”

NADA expects even greater profits for this year. NADA chief economist Patrick Manzi said:

“The major theme for new-vehicle sales in 2021 was constrained inventory. The coronavirus pandemic and resulting microchip shortage and production cuts significantly constrained new car and truck inventory at dealerships across the country. Constraints further led to suppressed new-vehicle sales, as well as used-vehicle inventory shortages and increased vehicle prices.”

We know dealership associations across the nation will go pretty far to protect their business model.  Whether it’s attacking me on Twitter publicly or suing a city to stop Tesla from providing service to its customers, I think that dealers will continue to push their agendas within state governments.

Perhaps one can consider this a double down on protectionism instead of evolving with the market. This hurts car buyers and EV owners. I reached out to James Chen, Rivian’s vice president of policy, for a comment and he said:

“Franchised dealers’ attempts to use the legislature in several states to be the sole source for access to the automotive market and new transportation technology violates basic tenants of consumer rights and the free-market. This anti-consumer overreach cannot be allowed, and Rivian will continue to work with the public and policymakers to ensure consumer choice.”

We interviewed Chen about this topic last year. (See below.) Unfortunately, things have only gotten worse since then.

A Glance At Several Anti-EV Bills From 2022

West Virginia

I have written about this briefly. In February 2022, House Bill 4560 was introduced in West Virginia. If signed into law, it would restrict over-the-air (OTA) software updates along with online vehicle sales. If a buyer wanted to purchase a software upgrade, they would have to go to the dealership. …

Oklahoma

In Oklahoma, the state legislature passed a bill through committee. The bill would force Tesla to shut down its existing stores and service centers in the state. Oklahoma already doesn’t allow direct sales of EVs. However, the new legislation would make it hard for automakers that only manufacture EVs to even operate in the state.

An anonymous source at one auto manufacturer told me that interpreters of the bill have said that it is so restrictive that it could even prevent retailers such as Walmart from selling wiper blades or other basic car products.

What’s worse, they told me, is that the bill also gives dealers legal standing to sue other businesses that they think are violating these laws without having to face any false accusations if they lose the case.

Perhaps this is Oklahoma’s way of telling Tesla that it’s mad at Elon Musk for choosing Austin over it. Or perhaps dealerships are emboldened by their surge in profits. Or, perhaps it’s a mix of both.

Teslarati noted that the author of this bill, Representative Mike Dobrinski, was none other than the owner/dealer of Dobrinsky Chevrolet, Inc. Before then, Dobrinski was the owner/dealer of Dobrinski of Kingfisher, Inc. According to Teslarati, Tesla owners went down to the capital to talk with Rep. Dobrinski about HB 3994, which he claimed was a way to protect Tesla owners in Oklahoma.

According to Oklahoma News 4, Dobrinski only introduced the bill because he wanted to force Tesla, General Motors, and Ford into a conversation that they haven’t been willing to have — as a sort of means of attention. But Dobrinski said that the bill’s real goal was to protect local dealerships. The state’s dealer associations have rejected offers to compromise.

Mississippi

Currently, Mississippi allows direct sales and has a Tesla service center. However, there is an active effort to change that while preventing not just Tesla but also Rivian and Lucid from opening retail locations. Rivian’s VP of public policy, James Chen, addressed this topic on Mississippi talk radio.

Connecticut

I’ve extensively covered the saga in Connecticut with the dealer associations there. I’ve interviewed Connecticut State Senator Will Haskell, who actually is an advocate for EV freedom and allowing his constituents to purchase them in the state, whereas the average dealership in the state only sold 1.3 EVs in 2020.

In recent news, a poll put forth by the Hartford Business Journal shows that Tesla owners want Connecticut to allow direct sales of EVs.

Dealership Profits & The Rise In Anti-EV Bills

Again, this is just a theory, but is it really a stretch to think that dealerships are feeling emboldened by their surges in profit? I have a feeling that we will see more of these anti-EV and anti-Tesla state legislation being proposed in the coming year.