5 ms·
Exactly... I hear people say that it was a good idea at some point in time, and I still don't understand it. Why did they need the law to protect them from comp
by jsight 5y ago
Exactly... I hear people say that it was a good idea at some point in time, and I still don't understand it. Why did they need the law to protect them from competition back then?
Undoubtedly being protected from competitors is good for someone, but it is rarely the consumer that benefits. Its hard to see how car dealers could be the exception.
- JumpCrisscross 5y ago> Why did they need the law to protect them from competition back then? It kept more profits in the states with dealerships versus car manufacturers.
- spywaregorilla 5y agoHow?
- telotortium 5y agoCar dealership owners are among the richest people in many rural and blue-collar towns in the USA. While you can conceivably tax the profits of company-owned stores on the state level, dealership owners may spend their profits in their local area (building their houses, purchasing local entertainments, visiting local stores, etc.), rather than having the profits go to Detroit and being spent there.
- willcipriano 5y agoThey are also generally speaking the largest political donors in rural and suburban areas.
- renewedrebecca 5y agoBingo.
- telotortium 5y agoThere is no law of the universe saying both noble and base motivations can't be true simultaneously :)
- spywaregorilla 5y agoI don't see how a law restricting new dealers aids that goal?
- adolph 5y agoThat reasoning doesn't make sense to me. Am I missing something? Let's say non-manufacturer revenue over a car's TCO is X. The largest portion of X will be spent on non-local goods and local labor regardless of who takes the profit, which has to be low enough to prevent stronger 3rd party service. It isn't like all cars would be shipped back to the factory for service.
- HWR_14 5y agoThe car manufacturer can undercut a dealership, because they have fewer costs. At the time these laws were written, having a dealership was vital to get timely repairs. In Tesla's case, timely repairs might still be an issue - you cannot get a general mechanic to work on them. Therefore, it was designed to ensure sales were locked into a repair system.
- jsight 5y agoElectrified garage and Gruber don't exist? Tesla will even sell access to service manuals and most parts afaict. High voltage parts are a little different, but I expect that even that will change as demand grows and training becomes more readily available. Right now there are some real safety concerns there.
- SteveGerencser 5y agoEarly on 'dealers' would set up shop and build up the market for a particular car brand. In many cases the manufacturers would see which markets were 'best' and then setup their own sales floor directly competing with the car dealers. They could easily undercut the dealers and drive them out of business. The law was designed to protect the dealers from the manufacturers. We are seeing it more and more now in many markets and niches as manufactures are cutting out dealers that built the markets and selling 'direct to consumer'. The difference is that most manufacturers saw what happened to the car companies and are trying to carefully avoid having the same thing happen to them.
- ericmay 5y agoYea but this works, what, once? And now the manufacturer has to deal with the things the dealer was doing like customer service, hiring sales staff, training technicians, etc. “Oh don’t open a Chevy dealership, in 6 months they’ll come in and undercut you”. And then there it is. Either you don’t open a dealership (fine) or the manufacturer builds a reputation for not undercutting dealers (also fine). IMO the law was protecting special interests from the start. This is an example of poorly regulating capitalism.
- PostThisTooFast 5y agoYes, I would think this as well. If your company is known for dicking over your dealers, then no one will open up a dealership for you. Then again, Apple dicks its partners over and hasn't suffered much.
- HelixEndeavor 5y agoNot really comparable in situation nor scale. There are Apple stores but they don't really compete with the big box stores that sell Apple products. Though I would be interested in seeing data on where most Apple products are purchased from.
- megablast 5y agoNo. They wait a few years, dealerships are everywhere, then move in and take the most profitable regions.
- somerandomqaguy 5y agoThis is just what I read off of the internet, but IIRC at the time the reasoning was in part because opening any is business is somewhat risky. Thing was that by allowing dealers to open the business first, manufacturers could entirely offload that risk of opening a location that wasn't profitable, and watch the orders from the dealers. Anywhere that sold well, just open up your own store and undercut the dealer until he goes out of business and then return prices to what the dealer was originally selling for. Putting in laws was meant to put a stop to that practice. Like I said, it's just something I vaguely recall reading on the internet so take it for what it's worth.
- mint2 5y agoInteresting, what you describe as the motivation of the law sounds suspiciously familiar to what Amazon does to 3rd party businesses.
- HelixEndeavor 5y agoAmazon needs regulation, severely, before it becomes a genuine monopoly. It's already at the stage of effective monopoly, but competition still exists, technically. It won't be long before they're driven under or bought out too though. But I wouldn't bet on it, since Amazon already has all the people capable of doing anything in their pockets anyways.
- tshaddox 5y agoIf the dealership entrepreneurs were savvy enough to predict this then why wouldn’t they simply not open dealerships?
- beambot 5y agoBecause regulatory capture created viable, local small businesses for decades...
- HelixEndeavor 5y agoThat sounds like a very interesting hypothetical. Was there any legitimate basis for this fear though? Was this a tactic that was ever provably executed by a manufacturer? Or was it just a made-up scenario by dealerships to push these laws that massively benefit them?
- lmm 5y agoThey needed the law to create competition - otherwise the natural state of things would be a monopoly for the manufacturer. The conditions under which competition is good for consumers (a free market) generally only happen under careful regulation.
- p1necone 5y agoI don't know about this argument. There's already competition for the manufacturer in the form of other car companies. More middlemen on top of that seems unnecessary.
- ed_elliott_asc 5y agoIn the uk we don’t have this law and manufacturers don’t have a monopoly - We have a system of dealerships, so I think you can have a system without careful regulation?
- lmm 5y agoThe UK doesn't really have dealerships competing with each other (there will generally only be one x dealer in each town, and while the manufacturers do compete with each other to a certain extent, nearby dealers tend to be targeting different segments - in contrast to e.g. banks or supermarkets where you often get two very similar direct competitors right next to each other), and you absolutely do get charged monopoly rents as a result. There are strong consumer protection laws that mean people do generally have access to repairs, which blunts the worst impact, but I wouldn't hold it up as an example of a system that works well.
- HelixEndeavor 5y agoThis hypothetical of manufacturers swooping in and undercutting the dealers out of business sounds real spooky - but has it ever happened?