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Auto Dealers Whine That Tesla Stores Are Illegal

145 points by is74 14y ago

noarchy 14y ago
The legal protection afforded to cartels is just astounding. I think just yesterday the front page of HN was talking about the taxi cartels, and their efforts to use the law to prevent competition. And now this? As others here have already pointed out, this doesn't really resemble the free market that the US is alleged to have.
eric_bullington 14y ago
All that the auto dealers are going to do with this effort is draw attention to this cool new car. Sure, they might succeed in banning them in a state or two (which is ridiculous), but in the end any publicity will benefit Tesla and hurt the dealers (disclaimer: I am not a marketing professional). EDIT: To clarify my vague statement above, I meant "banning" the Tesla display store business model, not banning Tesla altogether. That's a much more unlikely outcome, although I'm sure they would if they could.
- camiller 14y ago
  "Sure, they might succeed in banning them in a state or two..." More likely they will be forced to create a franchise dealership network.
- damoncali 14y ago
  The most likely outcome, unfortunately, is that Tesla is forced to sell through dealers like everyone else. I hope I'm wrong.
cs702 14y ago
Anyone who's ever bought a car knows firsthand how unpleasant it is to deal with traditional car dealers. The price of every vehicle is fully negotiable but the negotiating room is opaque.[1] Key car features and options are bundled in arbitrary packages and priced in ways that make pricing even more opaque. Car salesmen (they're typically men) almost always have a fake smile on their face and come across as smooth-talking, commission-seeking sharks pretending to be one's best friend. Customers who bite the bullet and buy a vehicle nearly always come away feeling like the dealer took advantage of them. Kudos to Tesla for taking on this cartel. -- [1] Edmunds lists the following types of fees charged by traditional car dealers at the time of sale: "registration fees," "doc fees," "trade-in fees," "dealer fees," "holdback," "financial reserve," and "advertising fees." Good luck trying to figure out what these fees ought to be for the vehicle you want to buy. Source: http://www.edmunds.com/car-buying/what-fees-should-you-pay.html http://www.edmunds.com/car-buying/what-fees-should-you-pay.h...
- tomrod 14y ago
  Indeed. A persistent cartel is a sign that such industry has unethical legal protection, to the detriment of the consumer.
- talmand 14y ago
  It can be a rather unpleasant experience, plus it makes me feel bad to immediately hate the person before I get to know his/her style of selling. I know it's unfair but when that salesperson walks up I'm immediately "just go away and leave me alone". Plus the sad fact is that the salesperson is the middleman of the manager, who is the middleman of the financier, who is the middleman of the dealership. There are probably more steps I'm forgetting. Why can't cars be sold just like any other product? What makes them so special that government has to be involved, other than protecting monopolistic practices? I may never purchase a Tesla but I would argue against anyone that would want to stop this type of car sales.
  - btilly 14y ago
    Why can't cars be sold just like any other product? If you want to walk in, look at a sticker, and walk out with your new car, you should visit a Saturn dealership. Unless they changed it recently, they never haggle.
    - minitrollster 14y ago
      >Unless they changed it recently... Saturn doesn't exist anymore. From Wikipedia: "Following the withdrawal of a bid by Penske Automotive to acquire Saturn in September 2009, General Motors discontinued the Saturn brand and ended its outstanding franchises on October 31, 2010. All new production was halted on October 1, 2009."[1] 1. http://en.wikipedia.org/wiki/Saturn_Corporation http://en.wikipedia.org/wiki/Saturn_Corporation
    - bdbrash 14y ago
      I thought the Saturn brand was discontinued.
    - deleted 14y ago
xmpir 14y ago
tesla did some great work here. i can't follow the argument that automakers selling cars kills competition. the analogy to apple stores is a perfect example: there are still thousands of resellers offering apple products!
sbarre 14y ago
So if "anything that gets you to the executed contract is part of the sale", shouldn't all those independent car dealerships be paying the car manufacturers for those expensive and slick TV, magazine and internet advertisements they produce to get people to go to said dealerships to buy their cars? (Or do they already?)..
- jellicle 14y ago
  They do.
  - jimm 14y ago
    Actually, we do. If you look closely you'll often see a line item on the final invoice for something like "advertising" or "promotion". Yup --- they make you pay for the advertising. I learned this years ago from a site that walked through car purchase negotiation techniques. Sorry, I don't remember which site.
    - damoncali 14y ago
      Semantics. We also pay for their air conditioning, tools, coffee, uniforms, etc. if you want to use that logic. It's just broken out for some reason.
    - njharman 14y ago
      We (consumers) pay for all advertising.
    - sbarre 14y ago
      Thanks for clarifying that. Although I would guess that the dealers don't pay for 100% of the advertising? Or is that also the case?
jakubp 14y ago
I'm confused. Is this article saying that in the US it's illegal for a maker of the product to sell the product to whomever he wants? How is that helping anyone but the dealerships?
- tomrod 14y ago
  > How is that helping anyone but the dealerships? It's not.
  - aleyan 14y ago
    > > How is that helping anyone but the dealerships? > It's not. That was my initial though as well, but I came up with at least one case where survival of the dealerships is critical to an open market place. If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers. Not only do new entrants have to build a car company, but now they have to create a new distribution network as well at the same time. That said, Tesla is a new car company and creating a new distribution network for them does not seem that big an issue.
    - travisp 14y ago
      >If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers. Is that a barrier to Tesla? It appears a big potential barrier to Tesla (a new automaker) is in fact the dealerships and the law preventing manufacturers from selling directly. In this case it's helping to prevent new entrants into the industry.
    - jmaygarden 14y ago
      Then shouldn't the law simply ban such pricing practices? That seems like a less oppressive solution. Banning an important industry from selling its own products just sounds wrong.
      - tomrod 14y ago
        It's not my area of expertise. But there have been lawsuits against vertical exclusivity in car dealership. These slides seem to go into it: http://www.justice.gov/atr/public/hearings/single_firm/docs/219945.htm http://www.justice.gov/atr/public/hearings/single_firm/docs/...
jasonkolb 14y ago
So my running list of things that are obviously outdated and fruitlessly resisting their death throes now includes: - Auto dealerships - Music labels - Government secrecy
- tomrod 14y ago
  Only 3? I figured Radioshack/Bestbuy belong in this category in the long run. Would be interesting discussion on what industries denizens of HN think will fall in this manner.
  - alexlarsson 14y ago
    Also: Bookstores, Record stores
  - freehunter 14y ago
    Radio Shack made themselves obsolete. I don't think Best Buy is obsolete, but merely needs a restructuring. Radio Shack used to be great when you were working on a project and just needed one more part; a capacitor, a motor/servo, a PIC, etc. I don't need another phone reseller, I don't need useless RC cars, I don't need odd TV remotes. I need an electronics store that sells electronic parts. Best Buy is great for researching your purchases. I can read reviews of a laptop online, but I can't feel it, feel the build quality or the keyboard, I can't test the viewing angle. I can read reviews of TVs, but I can't see the picture quality, I can't hear the speakers. I can't ask questions and get answer immediately. Best Buy is great for this. I don't mind paying a higher price if it means I get what I need as soon as I need it. These stores should, IMO, focus on things that a customer would not trust an online purchase for, and focus on adding value to these immediate purchases. Radio Shack for parts, Best Buy for consumer purchases, each with value added by knowledgeable salesmen.
    - jmaygarden 14y ago
      The number of people that would buy a capacitor, motor/servo or PIC is not what it used to be. Electronics don't ship with schematics anymore or have nice big through-hole components that are easy for a layman to replace. I miss the old Radio Shack too, but we are in a tiny minority.
crazypyro 14y ago
I abhor when people use "veep". It just looks childish and makes no sense....
talmand 14y ago
"Oh no! It's a new business model that is different than our old business model! We must use legal means to stop it immediately because we don't know yet if we can compete with it!" Plus, customers may like it better since the current method is usually despised...
- jetti 14y ago
  There is no competition to be had. The dealerships aren't scared of competition from Tesla, especially since the price of a Tesla Model S is out of range for the majority of car buyers. What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work.
  - mratzloff 14y ago
    What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work. Good. There's no reason it should receive protection by the government in the first place. It's bad for the consumer.
  - talmand 14y ago
    What you say is true, but I think it supports my statement. It's the dealerships themselves that have to compete with the business model, not necessarily the automakers. The dealers have to show to the automakers that their method is better or they fail.
  - jmj42 14y ago
    >What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work. No. What they're afraid of is that Tesla sets a precedence for other manufacturers to follow suit which would then move revenue out of the dealer's reach. Or: It's not about jobs, it's about money.
  - sageikosa 14y ago
    Putting people out of work == freeing up labor from inefficiencies. They can be productive or inefficient elsewhere, at their own expense, rather than mine.
jwr 14y ago
Today I found out that USA (arguably the most libertarian country on earth, as far as business is concerned) has strict laws governing the sale of vehicles, said laws actually preventing companies from selling vehicles. I find that quite amazing.
- artursapek 14y ago
  If there's any industry begging to be "disrupted," it's the automotive industry.
  - ImprovedSilence 14y ago
    True, and Tesla has been the biggest disruptor. But barriers to entry are huge, and regulation really clamps down on "disruption". You know all those awesome concept cars you see at car shows that never get built? One reason nothing revolutionary comes out is that the industry is regulated to the max. Much of it is "safety" features, which may be well and good, but much of those "safety" constraints are arbitrary. But there are laws about everything from the shape of the steering wheel, to how far apart headlights need to be, and the CAFE standards pushing for fuel economy limits how cars have to be designed and built, as the companies need to squeak out every last mpg on the car.
    - artursapek 14y ago
      Let's hope the government sees Tesla as the exception it is and lets them do their thing.
- deleted 14y ago
  [deleted]
- jetti 14y ago
  Not to mention that there are some states that just prohibit the sales of vehicles on Sunday. That is what I find amazing. I can't imagine being told that one day a week I'm not allowed to sell my product.
tzaman 14y ago
True story (mine): I knew a car dealer that made it very clear to me that if I buy the new car from him (and leave the old one there for a lower price) he'll give me significant discount. I said to myself "can't hurt to try" and went this route. The next day after owning the car (which I still own) the new owner of my old car called to ask what's the realistic condition. Turns out the dealer sold him the car for about $1500 more than I got from him, so I can only imagine he made the same thing with my new car, earning him $3000 for less than two hours of papirology. I don't mind people making money, but for $10 - %15k cars it's an absolute steal.
- lysol 14y ago
  This is normal. The dealer makes very little from a new car. They have to recoup that from trade-ins and selling used cars, which have a higher margin. New cars don't offer a lot of wiggle room because the invoice price for them is set, and they already sell them for little profit.
  - btilly 14y ago
    The dealer makes more than that from the new car. In addition to the invoice price (which is significantly higher than the dealer price) they also make money from add-ons, extended warranties, and the loan terms. This doesn't stop them from making top dollar on everything else that they can though.
    - ssimpson 14y ago
      And some manufactures have "holdback" which means the dealer can get a percentage back if the car sells within 90 days. For VW it is 2% off MSRP. http://www.edmunds.com/car-buying/dealer-holdback/ http://www.edmunds.com/car-buying/dealer-holdback/
  - pc86 14y ago
    And the invoice price is always more than they pay for the vehicle anyway. It's not uncommon to see new vehicles advertised at several hundred below invoice (most I've seen is -$300 or so).
dasil003 14y ago
Timing is ripe for Tesla to join up with other auto manufacturers to start a PR campaign to get these laws overturned. Normally special interests are the only ones who care enough to lobby about niche issues which is how we end up with so much bass-ackwards legislation. But in this case it's manufacturers vs dealers, and the public by and large hates dealers, so this could quickly be turned against them and I bet they'd shut up pretty fast.
btilly 14y ago
I am not a lawyer and this is not legal advice. Every one of these sales takes place over the internet, and across state lines. This is interstate commerce. How then are states able to regulate it?
- icebraining 14y ago
  It's not that simple: http://law2.umkc.edu/faculty/projects/ftrials/conlaw/statecommerce.htm http://law2.umkc.edu/faculty/projects/ftrials/conlaw/stateco... Since the regulations aren't applied specifically to out-of-state businesses, and considering that many states have the same laws (hence there's no unreasonable burden on out-of-state businesses), they may be legal. I'm not a lawyer either, though.
rickdale 14y ago
"If, after the sales pitch, you’re ready to pull the trigger, you are politely directed to a computer to make your deposit and place your order." Sounds like their business model will be left for a judge to decide. I think people on HN are angry because the auto industry feels like a monopoly and the law that Tesla might be infringing on should be illegal any ways. But what the judge wil have to decide is whether Tesla's interpretation of the law is correct. In normal cases this could take a pretty long time and Tesla would be able to operate until a judge says otherwise. Without reading the law I would like to think that Tesla is onto something here. Just like the rest of the angry HN users, I would feel satisfied to know that the big auto industry wrote a law for their own benefit and technology passed them by.
amorphid 14y ago
If Tesla encourages one to buy the car at a terminal within the non-dealership, to me that feels like something similar to self help checkout lines at a retailer who offers home delivery. My best guess is that the car dealership law was never intended to cover this.use case, and that both Tesla and the dealer associations should be lobbying to change the law in their favor. I'd hate to rely ok existing law for this one.
AVTizzle 14y ago
>>“Anything that gets you to the executed contract is part of the sale,” Bob O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, told the auto industry publication. When I read this, I couldn't help think of another quote from a 2008 Wired article [1] - ironically on Elon Musk and SpaceX. In it, he shares nails down a guy names John Pike, who predicted doom for SpaceX. The context is different but the quote works: >>Wired.com: Your whole mantra is "cheaper and more reliable." But so far you're zero for three, which is anything but cheap and reliable, and guys like GlobalSecurity.org's John Pike say the reason it has taken billions of dollars and tens of thousands of people to successfully launch rockets is physics, not some new design or economic model. >>Musk: Guys like John Pike have existed since the dawn of time, and if you listen to people like that then things will never get better, never change. Guys like Bob O’Koniewski have existed since the dawn of time. You can either generate wealth by creating value or seizing and hoarding value. It's clear which side of that dichotomy Elon and Bob each stand, respectively. [1] http://www.wired.com/science/space/news/2008/08/musk_qa http://www.wired.com/science/space/news/2008/08/musk_qa
geebee 14y ago
"Whine" is an alert word for me. Any time someone tries to present his opponent's argument through an unflattering characterization "whining, stomping his feet, throwing a tantrum" rather than by presenting a well reasoned argument, I immediately become more guarded and skeptical about the argument I'm about to hear. Have you ever presented what you felt was a very fair and reasoned argument, only to have someone disregard it all and tell you you're whining? I know, I know, you just can't expect too much from journalistic headlines. "Auto dealers claim that tesla stores are illegal" doesn't have the same punch. And based on what I've read here, I am on tesla's side (though it's pretty hard to find anyone on the side of the auto dealerships).
- raganwald 14y ago
  I sense the presence of the submarine. http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html
AVTizzle 14y ago
Epic comment in the quotes: "What is best in life? To crush the middlemen, see them driven before you, and hear the lamentation of their lawyers."
sixQuarks 14y ago
Henry Ford was the one that started the independent dealer model. It made sense back then, because there was no way he could handle both the manufacture and distribution of the vehicles across the nation. Today, the average dealer makes about $750,000 in profit each year. Many of these dealers are family owned and very active with local politics. In many smaller cities, the car dealership provides a good portion of tax revenues. With all this said, dealerships have incredible clout when it comes to legislation. They pretty much ruined TrueCar.com's business model. I think Tesla will be forced to offer independent distribution at some point if they get larger. And I've read that they are planning to do so. The dealer lobby is just way too strong in this country.
BryanB55 14y ago
There was a similar discussion on how terrible car dealers are a few weeks ago on HN when tesla announced their stores. The car dealer model is clearly flawed. As an auto enthusiast and someone who spends way to much money on my cars I absolutely hate car dealers and the BS you have to go through to buy a car. Not only that but it seems that every time I go into a car dealership I know more about the cars than the sales people. Most of the time they're just some random guy off the street that decided to sell cars and got their training from a generic book or reading the sales materials. It's like they spent more time learning how to negotiate, con their customers and make the most commission they possibly can than they do learning about the car and what they are actually selling. I feel bad for consumers that are not "car people" and go to a dealership seeking info from sales people.
marcomonteiro 14y ago
As an American, this disturbs me to no end. There are laws on the books to prevent a manufacturer from selling their own product directly to consumers? And what of the benefit? To protect a certain class of sales people. I'm a licensed real estate agent (non-practicing) and I can understand the need for government regulation to protect consumers from ignorant and unscrupulous sales people but in no way is a home builder prevented from selling their homes directly to home buyers. Real estate law, at least in California, covers required disclosures which apply both to manufacturers and salespeople. I can understand limiting sale of certain classes of products that can be dangerous if in the hands of the general public but not limiting sales to monopolize a class of salespeople. Especially to the detriment of manufacturers and consumers. Am I missing something? I can't see who wins except for car dealerships.
- beagle3 14y ago
  > As an American, this disturbs me to no end. . . > Am I missing something? The fact that this surprises you means you've probably missed the hundreds of other such laws that are on the books, and for which you are paying daily (and dearly) without even realizing.

145 points by is74 14y ago

The legal protection afforded to cartels is just astounding. I think just yesterday the front page of HN was talking about the taxi cartels, and their efforts to use the law to prevent competition. And now this? As others here have already pointed out, this doesn't really resemble the free market that the US is alleged to have.

eric_bullington 14y ago

All that the auto dealers are going to do with this effort is draw attention to this cool new car. Sure, they might succeed in banning them in a state or two (which is ridiculous), but in the end any publicity will benefit Tesla and hurt the dealers (disclaimer: I am not a marketing professional). EDIT: To clarify my vague statement above, I meant "banning" the Tesla display store business model, not banning Tesla altogether. That's a much more unlikely outcome, although I'm sure they would if they could.

camiller 14y ago
"Sure, they might succeed in banning them in a state or two..." More likely they will be forced to create a franchise dealership network.
damoncali 14y ago
The most likely outcome, unfortunately, is that Tesla is forced to sell through dealers like everyone else. I hope I'm wrong.

cs702 14y ago

Anyone who's ever bought a car knows firsthand how unpleasant it is to deal with traditional car dealers. The price of every vehicle is fully negotiable but the negotiating room is opaque.[1] Key car features and options are bundled in arbitrary packages and priced in ways that make pricing even more opaque. Car salesmen (they're typically men) almost always have a fake smile on their face and come across as smooth-talking, commission-seeking sharks pretending to be one's best friend. Customers who bite the bullet and buy a vehicle nearly always come away feeling like the dealer took advantage of them. Kudos to Tesla for taking on this cartel. -- [1] Edmunds lists the following types of fees charged by traditional car dealers at the time of sale: "registration fees," "doc fees," "trade-in fees," "dealer fees," "holdback," "financial reserve," and "advertising fees." Good luck trying to figure out what these fees ought to be for the vehicle you want to buy. Source: http://www.edmunds.com/car-buying/what-fees-should-you-pay.html http://www.edmunds.com/car-buying/what-fees-should-you-pay.h...

tomrod 14y ago
Indeed. A persistent cartel is a sign that such industry has unethical legal protection, to the detriment of the consumer.
talmand 14y ago
It can be a rather unpleasant experience, plus it makes me feel bad to immediately hate the person before I get to know his/her style of selling. I know it's unfair but when that salesperson walks up I'm immediately "just go away and leave me alone". Plus the sad fact is that the salesperson is the middleman of the manager, who is the middleman of the financier, who is the middleman of the dealership. There are probably more steps I'm forgetting. Why can't cars be sold just like any other product? What makes them so special that government has to be involved, other than protecting monopolistic practices? I may never purchase a Tesla but I would argue against anyone that would want to stop this type of car sales.
- btilly 14y ago
  Why can't cars be sold just like any other product? If you want to walk in, look at a sticker, and walk out with your new car, you should visit a Saturn dealership. Unless they changed it recently, they never haggle.
  - minitrollster 14y ago
    >Unless they changed it recently... Saturn doesn't exist anymore. From Wikipedia: "Following the withdrawal of a bid by Penske Automotive to acquire Saturn in September 2009, General Motors discontinued the Saturn brand and ended its outstanding franchises on October 31, 2010. All new production was halted on October 1, 2009."[1] 1. http://en.wikipedia.org/wiki/Saturn_Corporation http://en.wikipedia.org/wiki/Saturn_Corporation
  - bdbrash 14y ago
    I thought the Saturn brand was discontinued.
  - deleted 14y ago

xmpir 14y ago

tesla did some great work here. i can't follow the argument that automakers selling cars kills competition. the analogy to apple stores is a perfect example: there are still thousands of resellers offering apple products!

sbarre 14y ago

So if "anything that gets you to the executed contract is part of the sale", shouldn't all those independent car dealerships be paying the car manufacturers for those expensive and slick TV, magazine and internet advertisements they produce to get people to go to said dealerships to buy their cars? (Or do they already?)..

jellicle 14y ago
They do.
- jimm 14y ago
  Actually, we do. If you look closely you'll often see a line item on the final invoice for something like "advertising" or "promotion". Yup --- they make you pay for the advertising. I learned this years ago from a site that walked through car purchase negotiation techniques. Sorry, I don't remember which site.
  - damoncali 14y ago
    Semantics. We also pay for their air conditioning, tools, coffee, uniforms, etc. if you want to use that logic. It's just broken out for some reason.
  - njharman 14y ago
    We (consumers) pay for all advertising.
  - sbarre 14y ago
    Thanks for clarifying that. Although I would guess that the dealers don't pay for 100% of the advertising? Or is that also the case?

jakubp 14y ago

I'm confused. Is this article saying that in the US it's illegal for a maker of the product to sell the product to whomever he wants? How is that helping anyone but the dealerships?

tomrod 14y ago
> How is that helping anyone but the dealerships? It's not.
- aleyan 14y ago
  > > How is that helping anyone but the dealerships? > It's not. That was my initial though as well, but I came up with at least one case where survival of the dealerships is critical to an open market place. If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers. Not only do new entrants have to build a car company, but now they have to create a new distribution network as well at the same time. That said, Tesla is a new car company and creating a new distribution network for them does not seem that big an issue.
  - travisp 14y ago
    >If all stores were owned by car manufacturers, that would be a significant barrier to entry of new automakers. Is that a barrier to Tesla? It appears a big potential barrier to Tesla (a new automaker) is in fact the dealerships and the law preventing manufacturers from selling directly. In this case it's helping to prevent new entrants into the industry.
  - jmaygarden 14y ago
    Then shouldn't the law simply ban such pricing practices? That seems like a less oppressive solution. Banning an important industry from selling its own products just sounds wrong.
    - tomrod 14y ago
      It's not my area of expertise. But there have been lawsuits against vertical exclusivity in car dealership. These slides seem to go into it: http://www.justice.gov/atr/public/hearings/single_firm/docs/219945.htm http://www.justice.gov/atr/public/hearings/single_firm/docs/...

jasonkolb 14y ago

So my running list of things that are obviously outdated and fruitlessly resisting their death throes now includes: - Auto dealerships - Music labels - Government secrecy

tomrod 14y ago
Only 3? I figured Radioshack/Bestbuy belong in this category in the long run. Would be interesting discussion on what industries denizens of HN think will fall in this manner.
- alexlarsson 14y ago
  Also: Bookstores, Record stores
- freehunter 14y ago
  Radio Shack made themselves obsolete. I don't think Best Buy is obsolete, but merely needs a restructuring. Radio Shack used to be great when you were working on a project and just needed one more part; a capacitor, a motor/servo, a PIC, etc. I don't need another phone reseller, I don't need useless RC cars, I don't need odd TV remotes. I need an electronics store that sells electronic parts. Best Buy is great for researching your purchases. I can read reviews of a laptop online, but I can't feel it, feel the build quality or the keyboard, I can't test the viewing angle. I can read reviews of TVs, but I can't see the picture quality, I can't hear the speakers. I can't ask questions and get answer immediately. Best Buy is great for this. I don't mind paying a higher price if it means I get what I need as soon as I need it. These stores should, IMO, focus on things that a customer would not trust an online purchase for, and focus on adding value to these immediate purchases. Radio Shack for parts, Best Buy for consumer purchases, each with value added by knowledgeable salesmen.
  - jmaygarden 14y ago
    The number of people that would buy a capacitor, motor/servo or PIC is not what it used to be. Electronics don't ship with schematics anymore or have nice big through-hole components that are easy for a layman to replace. I miss the old Radio Shack too, but we are in a tiny minority.

crazypyro 14y ago

I abhor when people use "veep". It just looks childish and makes no sense....

talmand 14y ago

"Oh no! It's a new business model that is different than our old business model! We must use legal means to stop it immediately because we don't know yet if we can compete with it!" Plus, customers may like it better since the current method is usually despised...

jetti 14y ago
There is no competition to be had. The dealerships aren't scared of competition from Tesla, especially since the price of a Tesla Model S is out of range for the majority of car buyers. What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work.
- mratzloff 14y ago
  What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work. Good. There's no reason it should receive protection by the government in the first place. It's bad for the consumer.
- talmand 14y ago
  What you say is true, but I think it supports my statement. It's the dealerships themselves that have to compete with the business model, not necessarily the automakers. The dealers have to show to the automakers that their method is better or they fail.
- jmj42 14y ago
  >What they are scared of is that Tesla sets a precedence for other manufacturers to follow suit which would then put a lot of people out of work. No. What they're afraid of is that Tesla sets a precedence for other manufacturers to follow suit which would then move revenue out of the dealer's reach. Or: It's not about jobs, it's about money.
- sageikosa 14y ago
  Putting people out of work == freeing up labor from inefficiencies. They can be productive or inefficient elsewhere, at their own expense, rather than mine.

jwr 14y ago

Today I found out that USA (arguably the most libertarian country on earth, as far as business is concerned) has strict laws governing the sale of vehicles, said laws actually preventing companies from selling vehicles. I find that quite amazing.

artursapek 14y ago
If there's any industry begging to be "disrupted," it's the automotive industry.
- ImprovedSilence 14y ago
  True, and Tesla has been the biggest disruptor. But barriers to entry are huge, and regulation really clamps down on "disruption". You know all those awesome concept cars you see at car shows that never get built? One reason nothing revolutionary comes out is that the industry is regulated to the max. Much of it is "safety" features, which may be well and good, but much of those "safety" constraints are arbitrary. But there are laws about everything from the shape of the steering wheel, to how far apart headlights need to be, and the CAFE standards pushing for fuel economy limits how cars have to be designed and built, as the companies need to squeak out every last mpg on the car.
  - artursapek 14y ago
    Let's hope the government sees Tesla as the exception it is and lets them do their thing.
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jetti 14y ago
Not to mention that there are some states that just prohibit the sales of vehicles on Sunday. That is what I find amazing. I can't imagine being told that one day a week I'm not allowed to sell my product.

tzaman 14y ago

True story (mine): I knew a car dealer that made it very clear to me that if I buy the new car from him (and leave the old one there for a lower price) he'll give me significant discount. I said to myself "can't hurt to try" and went this route. The next day after owning the car (which I still own) the new owner of my old car called to ask what's the realistic condition. Turns out the dealer sold him the car for about $1500 more than I got from him, so I can only imagine he made the same thing with my new car, earning him $3000 for less than two hours of papirology. I don't mind people making money, but for $10 - %15k cars it's an absolute steal.

lysol 14y ago
This is normal. The dealer makes very little from a new car. They have to recoup that from trade-ins and selling used cars, which have a higher margin. New cars don't offer a lot of wiggle room because the invoice price for them is set, and they already sell them for little profit.
- btilly 14y ago
  The dealer makes more than that from the new car. In addition to the invoice price (which is significantly higher than the dealer price) they also make money from add-ons, extended warranties, and the loan terms. This doesn't stop them from making top dollar on everything else that they can though.
  - ssimpson 14y ago
    And some manufactures have "holdback" which means the dealer can get a percentage back if the car sells within 90 days. For VW it is 2% off MSRP. http://www.edmunds.com/car-buying/dealer-holdback/ http://www.edmunds.com/car-buying/dealer-holdback/
- pc86 14y ago
  And the invoice price is always more than they pay for the vehicle anyway. It's not uncommon to see new vehicles advertised at several hundred below invoice (most I've seen is -$300 or so).

dasil003 14y ago

Timing is ripe for Tesla to join up with other auto manufacturers to start a PR campaign to get these laws overturned. Normally special interests are the only ones who care enough to lobby about niche issues which is how we end up with so much bass-ackwards legislation. But in this case it's manufacturers vs dealers, and the public by and large hates dealers, so this could quickly be turned against them and I bet they'd shut up pretty fast.

btilly 14y ago

I am not a lawyer and this is not legal advice. Every one of these sales takes place over the internet, and across state lines. This is interstate commerce. How then are states able to regulate it?

icebraining 14y ago
It's not that simple: http://law2.umkc.edu/faculty/projects/ftrials/conlaw/statecommerce.htm http://law2.umkc.edu/faculty/projects/ftrials/conlaw/stateco... Since the regulations aren't applied specifically to out-of-state businesses, and considering that many states have the same laws (hence there's no unreasonable burden on out-of-state businesses), they may be legal. I'm not a lawyer either, though.

rickdale 14y ago

"If, after the sales pitch, you’re ready to pull the trigger, you are politely directed to a computer to make your deposit and place your order." Sounds like their business model will be left for a judge to decide. I think people on HN are angry because the auto industry feels like a monopoly and the law that Tesla might be infringing on should be illegal any ways. But what the judge wil have to decide is whether Tesla's interpretation of the law is correct. In normal cases this could take a pretty long time and Tesla would be able to operate until a judge says otherwise. Without reading the law I would like to think that Tesla is onto something here. Just like the rest of the angry HN users, I would feel satisfied to know that the big auto industry wrote a law for their own benefit and technology passed them by.

amorphid 14y ago

If Tesla encourages one to buy the car at a terminal within the non-dealership, to me that feels like something similar to self help checkout lines at a retailer who offers home delivery. My best guess is that the car dealership law was never intended to cover this.use case, and that both Tesla and the dealer associations should be lobbying to change the law in their favor. I'd hate to rely ok existing law for this one.

AVTizzle 14y ago

>>“Anything that gets you to the executed contract is part of the sale,” Bob O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, told the auto industry publication. When I read this, I couldn't help think of another quote from a 2008 Wired article [1] - ironically on Elon Musk and SpaceX. In it, he shares nails down a guy names John Pike, who predicted doom for SpaceX. The context is different but the quote works: >>Wired.com: Your whole mantra is "cheaper and more reliable." But so far you're zero for three, which is anything but cheap and reliable, and guys like GlobalSecurity.org's John Pike say the reason it has taken billions of dollars and tens of thousands of people to successfully launch rockets is physics, not some new design or economic model. >>Musk: Guys like John Pike have existed since the dawn of time, and if you listen to people like that then things will never get better, never change. Guys like Bob O’Koniewski have existed since the dawn of time. You can either generate wealth by creating value or seizing and hoarding value. It's clear which side of that dichotomy Elon and Bob each stand, respectively. [1] http://www.wired.com/science/space/news/2008/08/musk_qa http://www.wired.com/science/space/news/2008/08/musk_qa

geebee 14y ago

"Whine" is an alert word for me. Any time someone tries to present his opponent's argument through an unflattering characterization "whining, stomping his feet, throwing a tantrum" rather than by presenting a well reasoned argument, I immediately become more guarded and skeptical about the argument I'm about to hear. Have you ever presented what you felt was a very fair and reasoned argument, only to have someone disregard it all and tell you you're whining? I know, I know, you just can't expect too much from journalistic headlines. "Auto dealers claim that tesla stores are illegal" doesn't have the same punch. And based on what I've read here, I am on tesla's side (though it's pretty hard to find anyone on the side of the auto dealerships).

raganwald 14y ago
I sense the presence of the submarine. http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html

AVTizzle 14y ago

Epic comment in the quotes: "What is best in life? To crush the middlemen, see them driven before you, and hear the lamentation of their lawyers."

sixQuarks 14y ago

Henry Ford was the one that started the independent dealer model. It made sense back then, because there was no way he could handle both the manufacture and distribution of the vehicles across the nation. Today, the average dealer makes about $750,000 in profit each year. Many of these dealers are family owned and very active with local politics. In many smaller cities, the car dealership provides a good portion of tax revenues. With all this said, dealerships have incredible clout when it comes to legislation. They pretty much ruined TrueCar.com's business model. I think Tesla will be forced to offer independent distribution at some point if they get larger. And I've read that they are planning to do so. The dealer lobby is just way too strong in this country.

BryanB55 14y ago

There was a similar discussion on how terrible car dealers are a few weeks ago on HN when tesla announced their stores. The car dealer model is clearly flawed. As an auto enthusiast and someone who spends way to much money on my cars I absolutely hate car dealers and the BS you have to go through to buy a car. Not only that but it seems that every time I go into a car dealership I know more about the cars than the sales people. Most of the time they're just some random guy off the street that decided to sell cars and got their training from a generic book or reading the sales materials. It's like they spent more time learning how to negotiate, con their customers and make the most commission they possibly can than they do learning about the car and what they are actually selling. I feel bad for consumers that are not "car people" and go to a dealership seeking info from sales people.

marcomonteiro 14y ago

As an American, this disturbs me to no end. There are laws on the books to prevent a manufacturer from selling their own product directly to consumers? And what of the benefit? To protect a certain class of sales people. I'm a licensed real estate agent (non-practicing) and I can understand the need for government regulation to protect consumers from ignorant and unscrupulous sales people but in no way is a home builder prevented from selling their homes directly to home buyers. Real estate law, at least in California, covers required disclosures which apply both to manufacturers and salespeople. I can understand limiting sale of certain classes of products that can be dangerous if in the hands of the general public but not limiting sales to monopolize a class of salespeople. Especially to the detriment of manufacturers and consumers. Am I missing something? I can't see who wins except for car dealerships.

beagle3 14y ago
> As an American, this disturbs me to no end. . . > Am I missing something? The fact that this surprises you means you've probably missed the hundreds of other such laws that are on the books, and for which you are paying daily (and dearly) without even realizing.