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Monday, July 28, 2014



Column: Lawmakers shouldn't advocate for dealerships





Like electricity, successful businesses take the path of least resistance. For Tesla Motors, the premium electric car company, this means bypassing dealerships and selling their vehicles directly to consumers. Sure enough, dealerships across the country are up in arms over Tesla’s dealings and have resorted to taking legal action to shut down their business model.

Automobile dealerships are now an antiquated retail model backed by state legislation drafted decades ago. When communication and interaction wasn’t nearly instantaneous, dealers served as a necessary service provider for car owners. Today, their middleman service is unnecessary. We have the ability to consult directly with the carmaker instead of meddling with a dealership, but rather than let the dealerships fail as casualties of capitalism, politics have kept them buoyant. Tesla now threatens their artificial success, and dealership owners are scrambling to save their business before the threat of other carmakers following in Tesla’s path materializes.

Legal action taken includes lawsuits arguing that Tesla has violated state auto franchise laws, the same laws drafted decades ago that are now ostensibly obsolete. The dealers’ association claims the legislation against direct sales are a necessary fixture for ensuring price competition. Without them, they argue, the consumer’s bank account would suffer.

Obviously dealers compete against each other, but they’ve got to make a profit somewhere. Eliminating their mouth to feed should result in lower prices, similar to the wholesale prices that retailers enjoy. What consumers really want is true competition, not the artificial competition supported by state auto franchising laws.

In the meantime, we can’t enjoy our capitalist market when prehistoric market needs are backed by similarly tired legislation. Jobs will be lost, but that’s the price of progress.

For the record, Tesla isn’t eliminating any existing dealers, but they’ll have real reason to worry when other carmakers adapt. Sidestepping independent franchisees is a precedent all consumers should support. It’s logical and pragmatic, and a promising adaptation to the market and technological environment.

Then again, the dealerships could adapt accordingly, too. Perhaps their current role is diminishing, but that doesn’t mean they can’t find a new niche. Instead of relying on cherry-picked arguments or lawmakers to nurse them, dealerships should be improving their new role as expert customer service.



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