4 ms·

I'm not opposed to what Musk is trying to do but how or why are auto dealers a monopoly? Those direct sales laws were originally created to preserve small busin

by zipop 13y ago

I'm not opposed to what Musk is trying to do but how or why are auto dealers a monopoly? Those direct sales laws were originally created to preserve small business.

silverlight 13y ago
I thought he did a good job explaining why those laws were put in place and why they're not needed to be applied here. Even if you don't agree it's a monopoly, clearly in this case the law is not being applied as it should be.
- notahacker 13y ago
  I was impressed by the fact that he bothered to offer an explanation of why the law was introduced and what purpose it served; it makes for a more compelling argument than some cookie-cutter rant about Big Evil Corporations wrapping their rent-seeking tentacles around the government.
  - rhizome 13y ago
    Cookie-cutter rants are rarely published by people with skin in the game.
    - stcredzero 13y ago
      I suspect it's the same general mechanism as even the most liberal of recent US presidents strangely doing the bidding of the military-industrial complex. (Obama and Carter.)
- npizzolato 13y ago
  Don't forget that Musk is completely biased here, and his representation of the history of those laws are likely to be tainted by that bias. I don't know the full history of why these laws were put into place, but I wouldn't trust Musk to tell me the full story when he's clearly trying to paint a very specific picture.
Sniperfish 13y ago
Oligopoly more than monopoly. But if there is a single dealer lobby group then it's a collusive oligopoly (cartel) which will be able to wield monopolistic power.
digikata 13y ago
This Planet Money episode[1] gives a interesting of the history of autodealers, with some additional info regarding the latest twists that had come up due the fiscal crisis too. [1] http://www.npr.org/blogs/money/2013/02/12/171814201/episode-435-why-buying-a-car-is-so-awful http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...
- kyrra 13y ago
  That's a fairly one-sided view on the situation. Just some random points: * Saturn tried the "no-haggle" new car buying experience. People generally liked this, though Saturn doesn't exist anymore. * "closing a dealer is hard". Dealers have to pay for the land they own. The cars on their lot tend to be bought with money from the bank (a bank really owns the cars). The dealers just have to pay insurance/interest on the cars. The longer a car is on the lot, the more insurance and interest the dealer has to pay. If a dealer isn't selling cars to pay the bills, they will shutdown. * Dealership "look". My knowledge is only from Texas.... Some brands, like Lexus and Cadillac set some very strict looks for the dealership. Specific signage, layout, etc... A manufacturer can set standards the dealer must live up to. Also, if a dealership ranks below a certain score on their customer surveys, the manufacturer can close them down. * Pricing... yes, a middle man increases the cost of something. But that middle man can help explain features, is there to help deal with problems, and as they tend to be more locally rooted than an auto-maker, will try (hopefully) try harder to please their customers. Why do we have to pay real-estate agents so much? Good agents really help a buyer, same could (hopefully) be said for a car sales person. * (edit addition) Why are sales people jerks? This will heavily depend on the dealership you are dealing with. Management of a dealership does a lot to shape the experience for their customers. A few things: sales people are paid a % of the money they hold over the cost of the car, so they are financially incentivized to keep the car price high. A car that has been on a lot for a long time has incentives added to it for a sales person. Sales people get bonuses based on number of cars sold. Sales people sometimes get bonuses based on their customer surveys (or are required to keep a certain average or be fired). Dealers are allocated new shipments of cars based on past sales, so a lot of dealers want to sell as many cars as possible (if they are trying to grow); dealers that don't care about growing will be less flexible about pricing. Though, I agree that the car buying experience should adapt as information about cars is more easily accessible, it would require all of the states redoing the state auto franchise laws.
pbreit 13y ago
The monopoly is that only dealers are allowed to sell cars. Whatever the original intent, they seem not only unnecessary but quite anti-American (most definitions) now.
300bps 13y ago
My first reaction upon reading your comment was that there was no way you read the article before commenting. Basically, what you say is directly and effectively addressed in the article. I was going to give you the benefit of the doubt though until I saw that the article was posted 23 minutes ago. Your comment was posted 21 minutes ago.
cylinder 13y ago
Most dealerships would not count as "small" businesses. They are at the very least "medium enterprise" and at the most Fortune 500 companies[1]. http://en.wikipedia.org/wiki/Group_1_Automotive http://en.wikipedia.org/wiki/Group_1_Automotive
- runako 13y ago
  Excellent link! Some quick stats on the size of this particular "small" auto dealer company: Trailing 12-month revenue: $8.9B Trailing 12-month gross profit: $1.29B CEO Pay: $2.5mm (for comparison, this is higher than the cash comp of the CEOs of GM and Microsoft) I'm not sure this business needs regulatory protection from the likes of Tesla.
- Consultant32452 13y ago
  Well, most dealerships are probably used car dealerships that almost certainly qualify as small businesses. Of course, that has little to do with our current conversation. I'm just feeling extra pedantic today.

by zipop 13y ago

I'm not opposed to what Musk is trying to do but how or why are auto dealers a monopoly? Those direct sales laws were originally created to preserve small business.

silverlight 13y ago

I thought he did a good job explaining why those laws were put in place and why they're not needed to be applied here. Even if you don't agree it's a monopoly, clearly in this case the law is not being applied as it should be.

notahacker 13y ago
I was impressed by the fact that he bothered to offer an explanation of why the law was introduced and what purpose it served; it makes for a more compelling argument than some cookie-cutter rant about Big Evil Corporations wrapping their rent-seeking tentacles around the government.
- rhizome 13y ago
  Cookie-cutter rants are rarely published by people with skin in the game.
  - stcredzero 13y ago
    I suspect it's the same general mechanism as even the most liberal of recent US presidents strangely doing the bidding of the military-industrial complex. (Obama and Carter.)
npizzolato 13y ago
Don't forget that Musk is completely biased here, and his representation of the history of those laws are likely to be tainted by that bias. I don't know the full history of why these laws were put into place, but I wouldn't trust Musk to tell me the full story when he's clearly trying to paint a very specific picture.

Sniperfish 13y ago

Oligopoly more than monopoly. But if there is a single dealer lobby group then it's a collusive oligopoly (cartel) which will be able to wield monopolistic power.

digikata 13y ago

This Planet Money episode[1] gives a interesting of the history of autodealers, with some additional info regarding the latest twists that had come up due the fiscal crisis too. [1] http://www.npr.org/blogs/money/2013/02/12/171814201/episode-435-why-buying-a-car-is-so-awful http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...

kyrra 13y ago
That's a fairly one-sided view on the situation. Just some random points: * Saturn tried the "no-haggle" new car buying experience. People generally liked this, though Saturn doesn't exist anymore. * "closing a dealer is hard". Dealers have to pay for the land they own. The cars on their lot tend to be bought with money from the bank (a bank really owns the cars). The dealers just have to pay insurance/interest on the cars. The longer a car is on the lot, the more insurance and interest the dealer has to pay. If a dealer isn't selling cars to pay the bills, they will shutdown. * Dealership "look". My knowledge is only from Texas.... Some brands, like Lexus and Cadillac set some very strict looks for the dealership. Specific signage, layout, etc... A manufacturer can set standards the dealer must live up to. Also, if a dealership ranks below a certain score on their customer surveys, the manufacturer can close them down. * Pricing... yes, a middle man increases the cost of something. But that middle man can help explain features, is there to help deal with problems, and as they tend to be more locally rooted than an auto-maker, will try (hopefully) try harder to please their customers. Why do we have to pay real-estate agents so much? Good agents really help a buyer, same could (hopefully) be said for a car sales person. * (edit addition) Why are sales people jerks? This will heavily depend on the dealership you are dealing with. Management of a dealership does a lot to shape the experience for their customers. A few things: sales people are paid a % of the money they hold over the cost of the car, so they are financially incentivized to keep the car price high. A car that has been on a lot for a long time has incentives added to it for a sales person. Sales people get bonuses based on number of cars sold. Sales people sometimes get bonuses based on their customer surveys (or are required to keep a certain average or be fired). Dealers are allocated new shipments of cars based on past sales, so a lot of dealers want to sell as many cars as possible (if they are trying to grow); dealers that don't care about growing will be less flexible about pricing. Though, I agree that the car buying experience should adapt as information about cars is more easily accessible, it would require all of the states redoing the state auto franchise laws.

pbreit 13y ago

The monopoly is that only dealers are allowed to sell cars. Whatever the original intent, they seem not only unnecessary but quite anti-American (most definitions) now.

300bps 13y ago

My first reaction upon reading your comment was that there was no way you read the article before commenting. Basically, what you say is directly and effectively addressed in the article. I was going to give you the benefit of the doubt though until I saw that the article was posted 23 minutes ago. Your comment was posted 21 minutes ago.

cylinder 13y ago

Most dealerships would not count as "small" businesses. They are at the very least "medium enterprise" and at the most Fortune 500 companies[1]. http://en.wikipedia.org/wiki/Group_1_Automotive http://en.wikipedia.org/wiki/Group_1_Automotive

runako 13y ago
Excellent link! Some quick stats on the size of this particular "small" auto dealer company: Trailing 12-month revenue: $8.9B Trailing 12-month gross profit: $1.29B CEO Pay: $2.5mm (for comparison, this is higher than the cash comp of the CEOs of GM and Microsoft) I'm not sure this business needs regulatory protection from the likes of Tesla.
Consultant32452 13y ago
Well, most dealerships are probably used car dealerships that almost certainly qualify as small businesses. Of course, that has little to do with our current conversation. I'm just feeling extra pedantic today.