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One group that has been fighting tooth and nail against Tesla and their direct sales model is the National Automobile Dealers Association. With Tesla filing a federal lawsuit against the state of Michigan over a law banning direct sales, NADA Chairman Jeff Carlson has made some comments as to why Tesla's direct sales model is bad. The Detroit Free Press reports that Carlson said the direct sales model is bad for consumers because it would lead to higher prices. Competition between dealers is a good thing for consumers. In a study commissioned by NADA and done by Phoenix Center for Advanced Legal and Economic Public Policy Studies, competition between dealers lead to an average of $700 in price reduction. "Every state has to look to their consumer and decide what’s best for them. Either they can continue to support the franchised dealers' discount of up to $700 ... or, the choice for the policy makers is they can offer the consumer a vertically integrated model that prices vehicles at retail," said Carlson. "The public policy makers are going to go to the consumers and say which (model) do you want? The discounted product? Or the product at retail?" Carlson also pointed out a memo that Tesla CEO Elon Musk sent out to all employees saying that they need to abide by the company's “no negotiation and no discount policy.” It should be noted that policy that Carlson used as an example only pertains to new vehicles. Vehicles that were used as floor models, test drives, or were damaged in transit are allowed to be discounted. We're to jump in here now and bring a little editorial. Carlson's argument of using price to say why the franchise model is better is ok. But there is another part that either Carlson forgot or neglected to mention - service. There is a reason why people don't like to go to dealerships. They don't feel like they are being treated as a person, more of a number for this month. You see in various ways from dealer markups on popular models, pushing rust proofing or extended warranties during the sales process, and we're only scratching the surface. Yes, Tesla may be a more expensive option. But at least you don't feel that you're being pressured to buy something. Before someone jumps in and says 'not all dealerships are like this' or some variation of it, we know. The problem is those dealers are so few. It's basically trying to find a strand of hay in a bushel of needles. Source: Detroit Free Press, Automotive News (Subscription Required) -
One group that has been fighting tooth and nail against Tesla and their direct sales model is the National Automobile Dealers Association. With Tesla filing a federal lawsuit against the state of Michigan over a law banning direct sales, NADA Chairman Jeff Carlson has made some comments as to why Tesla's direct sales model is bad. The Detroit Free Press reports that Carlson said the direct sales model is bad for consumers because it would lead to higher prices. Competition between dealers is a good thing for consumers. In a study commissioned by NADA and done by Phoenix Center for Advanced Legal and Economic Public Policy Studies, competition between dealers lead to an average of $700 in price reduction. "Every state has to look to their consumer and decide what’s best for them. Either they can continue to support the franchised dealers' discount of up to $700 ... or, the choice for the policy makers is they can offer the consumer a vertically integrated model that prices vehicles at retail," said Carlson. "The public policy makers are going to go to the consumers and say which (model) do you want? The discounted product? Or the product at retail?" Carlson also pointed out a memo that Tesla CEO Elon Musk sent out to all employees saying that they need to abide by the company's “no negotiation and no discount policy.” It should be noted that policy that Carlson used as an example only pertains to new vehicles. Vehicles that were used as floor models, test drives, or were damaged in transit are allowed to be discounted. We're to jump in here now and bring a little editorial. Carlson's argument of using price to say why the franchise model is better is ok. But there is another part that either Carlson forgot or neglected to mention - service. There is a reason why people don't like to go to dealerships. They don't feel like they are being treated as a person, more of a number for this month. You see in various ways from dealer markups on popular models, pushing rust proofing or extended warranties during the sales process, and we're only scratching the surface. Yes, Tesla may be a more expensive option. But at least you don't feel that you're being pressured to buy something. Before someone jumps in and says 'not all dealerships are like this' or some variation of it, we know. The problem is those dealers are so few. It's basically trying to find a strand of hay in a bushel of needles. Source: Detroit Free Press, Automotive News (Subscription Required) View full article
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Tesla Takes the State of Michigan To Court Over Direct Sales Ban
William Maley posted an article in Tesla
It was going to happen sooner or later, but Tesla is taking the state of Michigan to federal court over its ban on direct sales to consumers. According to the suit, Tesla is seeking “to vindicate its rights under the United States Constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla-owned facilities in the State of Michigan”. This suit comes after the Michigan's Secretary of State office denied Tesla a dealership license earlier in the month. “The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles. Tesla has told the department it does not have one, and cannot comply with that requirement,” said Michigan Department of State Communications Director Gisgie Dávila Gendreau in an email to The Detroit News at the time. The law in question was signed back in 2014 by current Governor Rick Snyder which made it illegal for an auto manufacturer to sell vehicles directly to consumers. The law also prohibits a manufacturer from performing service on their vehicles. “For the last two years, Tesla has pursued legislation in Michigan that is fair to everyone and that would benefit Michigan consumers. Giving auto dealers a monopoly on car sales benefits them, but harms consumers,” said a Tesla spokeswoman to Automotive News in a statement. The lawsuit names Synder, attorney General Bill Schuette, and Michigan Secretary of State Ruth Johnson as defendants. Tesla has also requested for a jury trial. Tesla is seeking a permanent injunction to prevent officials in the state to enforce the relevant part of the law. This would force the state to give Tesla a dealer license. We'll be watching closely to see if Tesla can make any headway. Source: Automotive News (Subscription Required), The Detroit News -
It was going to happen sooner or later, but Tesla is taking the state of Michigan to federal court over its ban on direct sales to consumers. According to the suit, Tesla is seeking “to vindicate its rights under the United States Constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla-owned facilities in the State of Michigan”. This suit comes after the Michigan's Secretary of State office denied Tesla a dealership license earlier in the month. “The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles. Tesla has told the department it does not have one, and cannot comply with that requirement,” said Michigan Department of State Communications Director Gisgie Dávila Gendreau in an email to The Detroit News at the time. The law in question was signed back in 2014 by current Governor Rick Snyder which made it illegal for an auto manufacturer to sell vehicles directly to consumers. The law also prohibits a manufacturer from performing service on their vehicles. “For the last two years, Tesla has pursued legislation in Michigan that is fair to everyone and that would benefit Michigan consumers. Giving auto dealers a monopoly on car sales benefits them, but harms consumers,” said a Tesla spokeswoman to Automotive News in a statement. The lawsuit names Synder, attorney General Bill Schuette, and Michigan Secretary of State Ruth Johnson as defendants. Tesla has also requested for a jury trial. Tesla is seeking a permanent injunction to prevent officials in the state to enforce the relevant part of the law. This would force the state to give Tesla a dealer license. We'll be watching closely to see if Tesla can make any headway. Source: Automotive News (Subscription Required), The Detroit News View full article
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In news that will likely not shock anyone, Michigan's Secretary of State office has official denied Tesla a dealership license to sell vehicles in the state. The ruling issued last week follows a hearing earlier this month to review Michigan's initial motion to deny Tesla's request for a license, submitted last November. “The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles. Tesla has told the department it does not have one, and cannot comply with that requirement,” said Michigan Department of State Communications Director Gisgie Dávila Gendreau in an email to The Detroit News. This is due to a state law signed in 2014 which states, “a vehicle manufacturer shall not … sell any new motor vehicle directly to a retail customer other than through franchised dealers.” Tesla has been fighting tooth and nail to sell their vehicles in Michigan for a few years now by lobbying and applying for a license. As Automotive News notes, Michigan is the most populated state that doesn't have a Tesla gallery or store. "At the urging of local car dealers and GM, Michigan law was changed two years ago to prevent Michigan consumers from buying cars from a Tesla store within the state. As part of the process of challenging the legality of that law, Tesla applied for a license in Michigan. Tesla will continue to take steps to defend the rights of Michigan consumers," Tesla said in a statement to Automotive News. Now people outside of Tesla have been trying to change the law. As we reported back in February, a 22-year launched a petition to repeal this law. Also, Rep. Aaron Miller, R-Sturgis introduced a bill into the state's legislature to allow companies like Tesla to do direct sales. But as The Detroit News reports, the bill has sat stagnant. “The discussion’s not over but for this session I think we’ve reached that point of no progress. I think the clock is going to run out on us,” said Miller. Now it should be stated that anyone from Michigan who wants to order a Tesla can do so from the company's website. You'll have to pickup your vehicle outside of the state however, the closest ones being in Ohio. Where does Tesla go next? That is anyone's guess at the moment. But as Tesla's general counsel Todd Maron said back in May, the company would either go to court or the legislation to make the change. Our hunch is Tesla will be going for the former. Source: Automotive News (Subscription Required), The Detroit News View full article
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In news that will likely not shock anyone, Michigan's Secretary of State office has official denied Tesla a dealership license to sell vehicles in the state. The ruling issued last week follows a hearing earlier this month to review Michigan's initial motion to deny Tesla's request for a license, submitted last November. “The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles. Tesla has told the department it does not have one, and cannot comply with that requirement,” said Michigan Department of State Communications Director Gisgie Dávila Gendreau in an email to The Detroit News. This is due to a state law signed in 2014 which states, “a vehicle manufacturer shall not … sell any new motor vehicle directly to a retail customer other than through franchised dealers.” Tesla has been fighting tooth and nail to sell their vehicles in Michigan for a few years now by lobbying and applying for a license. As Automotive News notes, Michigan is the most populated state that doesn't have a Tesla gallery or store. "At the urging of local car dealers and GM, Michigan law was changed two years ago to prevent Michigan consumers from buying cars from a Tesla store within the state. As part of the process of challenging the legality of that law, Tesla applied for a license in Michigan. Tesla will continue to take steps to defend the rights of Michigan consumers," Tesla said in a statement to Automotive News. Now people outside of Tesla have been trying to change the law. As we reported back in February, a 22-year launched a petition to repeal this law. Also, Rep. Aaron Miller, R-Sturgis introduced a bill into the state's legislature to allow companies like Tesla to do direct sales. But as The Detroit News reports, the bill has sat stagnant. “The discussion’s not over but for this session I think we’ve reached that point of no progress. I think the clock is going to run out on us,” said Miller. Now it should be stated that anyone from Michigan who wants to order a Tesla can do so from the company's website. You'll have to pickup your vehicle outside of the state however, the closest ones being in Ohio. Where does Tesla go next? That is anyone's guess at the moment. But as Tesla's general counsel Todd Maron said back in May, the company would either go to court or the legislation to make the change. Our hunch is Tesla will be going for the former. Source: Automotive News (Subscription Required), The Detroit News -
Tesla has been fighting tooth and nail to sell their vehicles direct to consumers in the U.S. But six states - Arizona, Connecticut, Michigan, Texas, Utah, and West Virginia - have banned direct sales. Tesla is trying to change this with a combination of new legislation, applying for dealer licenses, and other items. However, Tesla is ready to take this issue to federal court with an interesting legal argument. The Wall Street Journal reports that Tesla's legal staff has been looking into a 2013 federal appeals court ruling in New Orleans dealing with coffins. What?! The case dealt with the St. Joseph Abbey in Louisiana trying to sell monk-made coffins to help alleviate a shortage due to Hurricane Katrina. But the state had laws that restricted coffin sales to those who were licensed by the Louisiana Board of Funeral Directors. The court sided with the abbey saying they could sell the coffins without having a funeral directors license. “It is widely accepted that laws that have a protectionist motivation or effect are not proper. Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table,” said Todd Maron, Tesla’s chief counsel. But could this argument work? Northwestern University law professor John McGinnis says it could. Using this case could shine a spotlight on how laws affect the sale of certain items such as cars. “Until now, these decisions have been in niche areas of the economy. With Tesla behind it, it would go into something as economically important as the structure of the industry for retailing cars,” said McGinnis. The timing is what intrigues us the most. Tomorrow night, Tesla will be revealing the Model 3 - their mass-market car. Reservations for this new model will also open. Source: The Wall Street Journal (Subscription Required) View full article
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Tesla has been fighting tooth and nail to sell their vehicles direct to consumers in the U.S. But six states - Arizona, Connecticut, Michigan, Texas, Utah, and West Virginia - have banned direct sales. Tesla is trying to change this with a combination of new legislation, applying for dealer licenses, and other items. However, Tesla is ready to take this issue to federal court with an interesting legal argument. The Wall Street Journal reports that Tesla's legal staff has been looking into a 2013 federal appeals court ruling in New Orleans dealing with coffins. What?! The case dealt with the St. Joseph Abbey in Louisiana trying to sell monk-made coffins to help alleviate a shortage due to Hurricane Katrina. But the state had laws that restricted coffin sales to those who were licensed by the Louisiana Board of Funeral Directors. The court sided with the abbey saying they could sell the coffins without having a funeral directors license. “It is widely accepted that laws that have a protectionist motivation or effect are not proper. Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table,” said Todd Maron, Tesla’s chief counsel. But could this argument work? Northwestern University law professor John McGinnis says it could. Using this case could shine a spotlight on how laws affect the sale of certain items such as cars. “Until now, these decisions have been in niche areas of the economy. With Tesla behind it, it would go into something as economically important as the structure of the industry for retailing cars,” said McGinnis. The timing is what intrigues us the most. Tomorrow night, Tesla will be revealing the Model 3 - their mass-market car. Reservations for this new model will also open. Source: The Wall Street Journal (Subscription Required) -
Tesla has been fighting in various states to allow for direct sales of their vehicles. The most contentious being the state of Michigan which enacted a law in October 2014 banning automakers from selling vehicles directly to consumers. Tesla has been working hard to try and change the law by offering test drives and education to legislators, to no avail. Even the Federal Trade Commission has called on the state to rethink this law. But Michigan is sticking to its guns. So Tesla decided to do the unexpected, apply for a Michigan dealer license. The Detroit News reports the California electric vehicle builder submitted applications in November to the Michigan Secretary of State Office for a dealer license. Recently, Tesla sent in follow-up information to the office. Secretary of State spokesman Fred Woodham tells the News that Tesla is applying for a 'Class A' dealership license, which allows it to sell new and used vehicles. The license requires the dealer to have a “repair facility as part of their business or have an established relationship with a licensed repair facility.” Woodham went on to explain the office is currently reviewing the paperwork and will have a decision in the next month or so. It is unclear who submitted the documents to the Secretary of State. Michigan Information & Research Service Inc., a news service based in Michigan's capital - Lansing - first reported the story. The service said Tesla could contract anyone - aside from itself - to set up a dealer. Tesla could even send a former employee to open a dealer where “in which it mandates the dealership look, act and do business exactly as the Tesla-run stores.” A Tesla spokesman tells AutoblogGreen, "As recently amended, current Michigan law prohibits Tesla from being able to license its own sales and service operations in the state. Submission of the application is intended to seek the Secretary of State's confirmation of this prohibition. Once confirmed, Tesla will review any options available to the Company to overturn this anti-consumer law." Along with Tesla's application, a 22-year old graduate of the University of Michigan has launched a petition to repeal the direct sales ban. Mick Yuille has formed a ballot committee called Eliminate (i) to force the Michigan legislature to act. If they don't, his proposal will go on the ballot for the people to decide. Yuille needs 252,000 signatures by June 1st for this happen. Source: The Detroit News, AutoblogGreen, Crain's Detroit Business View full article
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Tesla Decides Its Time To Apply For A Dealer License In Michigan
William Maley posted an article in Tesla
Tesla has been fighting in various states to allow for direct sales of their vehicles. The most contentious being the state of Michigan which enacted a law in October 2014 banning automakers from selling vehicles directly to consumers. Tesla has been working hard to try and change the law by offering test drives and education to legislators, to no avail. Even the Federal Trade Commission has called on the state to rethink this law. But Michigan is sticking to its guns. So Tesla decided to do the unexpected, apply for a Michigan dealer license. The Detroit News reports the California electric vehicle builder submitted applications in November to the Michigan Secretary of State Office for a dealer license. Recently, Tesla sent in follow-up information to the office. Secretary of State spokesman Fred Woodham tells the News that Tesla is applying for a 'Class A' dealership license, which allows it to sell new and used vehicles. The license requires the dealer to have a “repair facility as part of their business or have an established relationship with a licensed repair facility.” Woodham went on to explain the office is currently reviewing the paperwork and will have a decision in the next month or so. It is unclear who submitted the documents to the Secretary of State. Michigan Information & Research Service Inc., a news service based in Michigan's capital - Lansing - first reported the story. The service said Tesla could contract anyone - aside from itself - to set up a dealer. Tesla could even send a former employee to open a dealer where “in which it mandates the dealership look, act and do business exactly as the Tesla-run stores.” A Tesla spokesman tells AutoblogGreen, "As recently amended, current Michigan law prohibits Tesla from being able to license its own sales and service operations in the state. Submission of the application is intended to seek the Secretary of State's confirmation of this prohibition. Once confirmed, Tesla will review any options available to the Company to overturn this anti-consumer law." Along with Tesla's application, a 22-year old graduate of the University of Michigan has launched a petition to repeal the direct sales ban. Mick Yuille has formed a ballot committee called Eliminate (i) to force the Michigan legislature to act. If they don't, his proposal will go on the ballot for the people to decide. Yuille needs 252,000 signatures by June 1st for this happen. Source: The Detroit News, AutoblogGreen, Crain's Detroit Business -
The current laws and regulations concerning how vehicles are sold are, to put it mildly, a complete mess thanks to states having different versions. Experts can't seem to agree whether the current rules are good or bad. One thing that they can agree on is buying a vehicle is an unpleasant experience due to the current regulations. The Federal Trade Commission held a workshop yesterday as a possible first step to unravel the mess. The big topic that was covered was in the workshop was direct sales with a variety of people on either side of the argument to make their case. For Direct Sales: Tesla Motors is leading the charge for doing direct sales to consumers. Todd Maron, Tesla Motor's lawyer argued the traditional model doesn't work for the company as their electric vehicles compete with gas vehicles and dealers would likely not push electric vehicles since they are dependent on sales of gas vehicles. Maron went on to say Tesla doesn't offer “insurance products and add-ons” or require regular service work. But the key point Maron said Tesla needs a different store design and location. “Our stores are small and in high foot-traffic areas such as shopping malls. When new technology comes out, consumers don’t go to it. You need to bring the technology to consumers,” said Maron. Fiona Scott Morton, a professor at Yale University said the FTC should allow "vertical integration" (another way of saying direct sales from automakers) to improve the buying experience. For the Franchise System: Those standing up for the current system of franchised dealers say intrabrand competition gives consumers a fair price on a vehicle. Automotive analyst Maryann Keller said the direct sales model doesn't offer any savings to consumers. Peter Welch, the president of the National Automobile Dealers Association said dealership laws help American consumers and only a few states have banned direct sales. “Empirical research has demonstrated that intense competition among franchised dealers lowers new-car prices by hundreds of dollars. But the benefits to consumers don’t end there -- they extend to service, warranty work, recalls, and the hundreds of millions of dollars that’s invested in local communities,” Welch went on to say. “Independent dealers add an extra layer of credibility in the auto industry. Imagine how much more difficult the General Motors and Chrysler bankruptcies would have been to resolve had the manufacturers had to bear the high costs of the distribution system, too,” said Paul Norman, a partner at Boardman & Clark law firm. What Happens Next? For the time being, the FTC is taking public comment on direct sales and franchise system till March 4th. After that, we might have an idea of what will happen next. Source: Automotive News (Subscription Required), Autoblog, FTC Comment Form View full article
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The current laws and regulations concerning how vehicles are sold are, to put it mildly, a complete mess thanks to states having different versions. Experts can't seem to agree whether the current rules are good or bad. One thing that they can agree on is buying a vehicle is an unpleasant experience due to the current regulations. The Federal Trade Commission held a workshop yesterday as a possible first step to unravel the mess. The big topic that was covered was in the workshop was direct sales with a variety of people on either side of the argument to make their case. For Direct Sales: Tesla Motors is leading the charge for doing direct sales to consumers. Todd Maron, Tesla Motor's lawyer argued the traditional model doesn't work for the company as their electric vehicles compete with gas vehicles and dealers would likely not push electric vehicles since they are dependent on sales of gas vehicles. Maron went on to say Tesla doesn't offer “insurance products and add-ons” or require regular service work. But the key point Maron said Tesla needs a different store design and location. “Our stores are small and in high foot-traffic areas such as shopping malls. When new technology comes out, consumers don’t go to it. You need to bring the technology to consumers,” said Maron. Fiona Scott Morton, a professor at Yale University said the FTC should allow "vertical integration" (another way of saying direct sales from automakers) to improve the buying experience. For the Franchise System: Those standing up for the current system of franchised dealers say intrabrand competition gives consumers a fair price on a vehicle. Automotive analyst Maryann Keller said the direct sales model doesn't offer any savings to consumers. Peter Welch, the president of the National Automobile Dealers Association said dealership laws help American consumers and only a few states have banned direct sales. “Empirical research has demonstrated that intense competition among franchised dealers lowers new-car prices by hundreds of dollars. But the benefits to consumers don’t end there -- they extend to service, warranty work, recalls, and the hundreds of millions of dollars that’s invested in local communities,” Welch went on to say. “Independent dealers add an extra layer of credibility in the auto industry. Imagine how much more difficult the General Motors and Chrysler bankruptcies would have been to resolve had the manufacturers had to bear the high costs of the distribution system, too,” said Paul Norman, a partner at Boardman & Clark law firm. What Happens Next? For the time being, the FTC is taking public comment on direct sales and franchise system till March 4th. After that, we might have an idea of what will happen next. Source: Automotive News (Subscription Required), Autoblog, FTC Comment Form -
Bloomberg is reporting that NJ caught Tesla by surprise when it moved to block direct sales of cars to the public forcing Tesla to consider what to do with their two auto stores in the most densely populated state in the nation. Tesla says that the company has been talking to NJ Government. The governor has said Tesla needs to work with the state's political system to change existing laws. Either way, Tesla is in a long fight as more states pass tougher direct sales laws for auto sales to protect their current franchise network of dealers. Texas just passed some of the strictest laws around. Full Story: http://www.bloomberg.com/news/2014-03-11/tesla-stores-may-be-closed-after-n-j-blocks-direct-sales.html
