Should government tell you where you can shop for a Tesla?
Tesla's direct-to-consumer sales model is not popular among automobile dealers, but the electric car maker seems to have friends at the Federal Trade Commission.
“For decades, local laws in many states have required consumers to purchase their cars solely from local, independent auto dealers,” write Andy Gavil, Debbie Feinstein, and Marty Gaynor in an FTC blog post. “Removing these regulatory impediments may be essential to allow consumers access to new ways of shopping that have become available in many other industries.”
The FTC staffers (who are speaking for themselves in the post, not the organization) note that in the infancy of the automotive industry, states established laws protecting typically small local dealers from abuses by major national automotive manufacturers. Now, however, they write, “Instead of 'protecting,' these state laws became 'protectionist,' perpetuating one way of selling cars—the independent car dealer. Such blanket bans are an anomaly in the broader economy, where most manufacturers compete to respond to consumer needs by choosing from among direct sales to consumers, reliance on independent dealers, or some combination of the two.”
Tesla's Elon Musk commented on the topic in a blog post last month after New Jersey prohibited the purchase of an automobile from a manufacturer's store within the state. Tesla wanted to avoid dealers, Musk wrote, because dealers make virtually all of their revenue from the sale and service of gasoline vehicles, and electric vehicles require much less service than gasoline ones. Further, he wrote, it's a principle within Tesla not to make service a profit center.
The rationale given for the New Jersey regulation change that requires auto companies to sell through dealers, Musk wrote, is that it ensures “consumer protection.” He added, “If you believe this, Gov. Christie has a bridge closure he wants to sell you!”