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Democracy and Capitalism

I never knew anything about the dealership protectionist laws until I became interested in Tesla. TM has knocked down so many barriers to achieve their current success (new car company designing new car from scratch using proprietary battery system, fundraising during great recession, reviving abandoned manufacturing facility, rolling out nationwide charging infrastructure, etc, etc, etc) - I can't believe they have to fight these battles against NADA as well.

TM, and Elon himself, have spent so much time and energy fighting these dealers associations in Texas, New York, North Carolina, etc, etc. When I watched Elon answer the question about this during the shareholder meeting, I was struck by how much this issue seems to repulse him. Not because of the impact it has on Tesla, but because it goes against everything that is good about capitalism. He made a major effort to immigrate to the US via Canada because he recognized that our system of capitalism and risk tolerance offers the best chance for him to change the world. For the dealers to fight Tesla at every opportunity is discouraging and distracting to all the other important projects they are tackling right now. But more importantly, it is offensive to the idea of free market capitalism and damaging to consumers in the US.

I now understand the history of the dealership protectionist laws, and recognize they came about for good reasons to prevent auto manufacturers from undercutting dealerships after they sunk so much money into the real estate, inventory, marketing, staffing, etc required to establish a market in each community. But this clearly has no relevance to a brand new auto manufacturer who has no relationship with any dealers (especially when the dealers have no incentive to sell electric vehicles). Especially in the age of the internet!! Customers almost universally hate the experience of buying and servicing a car through a dealer. Many customers clearly prefer the model that Tesla has established to buy the car online, selecting the options they prefer, for a known price, and visiting a commission-free showroom in person when they want more information. Surely this approach will keep costs to the consumer lower than if there is a government-mandated middle man who will also need to make a profit. And most importantly, if these assumptions are wrong then customers will get upset and vote with their feet, and Tesla will be forced to adapt a new model or go out of business. That's the whole point of free market capitalism, and clearly it's best for the consumer and the economy.

How can the dealers possibly claim that consumers are hurt by the fact that there is no dealer to "represent them" in the process?? And more importantly, how can lawmakers possibly be agreeing with this sentiment?? Elon said they will continue fighting these battles, but he thinks the tide will ultimately turn when the citizens rise up to fight this sentiment. And I think he's right!

I've never been politically active, but I'm ready to figure out how to make my voice heard and make a difference. I signed up for WhiteHouse.gov just to sign the Tesla petitions, but they aren't getting much traction and I don't know how much of a difference they will make in the end. I would write my local lawmakers, but we don't seem to be having much trouble here in California :) So what can we do? Should we write to out-of-state lawmakers? If so, who?? How can we bring awareness to the masses about this absurd anti-capitalist, anti-consumer sentiment? We need to do something here so that Tesla can keep their focus on the important work of leading the automotive revolution!

Step back a ways and take a good long look at "Capitalism". No system will work without a good moral compass; Capitalism is not exempt.

The goal is money with fewer and fewer constraints. We have gotten to the point that adding value is no longer required (repackaging mortgages as securities, marketing drugs directly to consumers, marketing PI attorneys directly to generate consumers, etc.) and politics is no longer viewed as civic duty but as a profession of its own (Citizen's United). Gordon Geko's view is proliferating to the core of who we are and we are going along as long as there is money to be made.

The idea that 99% of the people in a given state can be against something and yet the political establishment is pushing forward with laws anyway is but one of many blatant examples of how money has corrupted our collective souls and intellect.

We are accelerating in this direction so the real question for me becomes-
What is the discontinuity that changes the path? Given the momentum involved, I really hope it is a longer term corrective force and not cliff or a brick wall.

Uhum... don't blame capitalism as it has nothing to do with capitalism. This is crony capitalism or even more brutally as this is business in bed with politics spelling Corporatism, the building block of fascism.

Step back a ways and take a good long look at "Capitalism". No system will work without a good moral compass; Capitalism is not exempt.

Well said, @lolachampcar. When accumulating personal wealth is the sole objective, and the desire (or even the duty) to sustain/improve society is absent, greed will corrupt any system.

Elon's comments about first money in, last money out, building stuff makes you a real company and the like really make me like this guy. It is not lost on me that he was raised in SA and not the US.

Maybe we need to find a receptive ear in the local news media of the affected states. Most people don't know what a Tesla is, or the battle it is facing. If the evening news did a story making the points made by the OP, we might be able to turn the tide faster. Every reasonable person will be outraged by what is going on.

It makes me laugh when these legislators go on and on about freedom. What does restrictions on a company selling a product that it developed the interested consumers have to do with freedom. It sound like the opposite to me.

@lolachampcar

Another classy post. I really enjoy reading the posts I've seen from you.

TFMeth...
I really have never had too much of an interest in posting in other places. I've found a really enjoyable crowd to bounce ideas around with here and on TMC thus the posts.

Thanks for the kind words.

I agree with the OP.

Unfortunately I think we are going to need a court decision to get these types of legislations overturned. Tesla should have sufficient resources to sue the states that have banned it from selling. I don't see how Tesla could possibly lose.

I agree Tesla should be able to eventually win court decisions in individual states. But this takes a huge investment of time and money (and is a huge distraction from much more important work they have to do). And NADA is certainly prepared to spend all the time and money they have to keep throwing up road blocks; they recognize they're fighting for their very existence.

It seems the most effective way to turn the tide is for politicians to realize they're going to lose their job if they take the side of crony capitalism. If that becomes a real threat to them, I think the outcomes in these cases would starting changing very quickly. How can we collectively expedite this process?

I admit that I don't fully understand all the fine details of this issue, but didn't Saturn used to sell its own vehicles at its own stores? I don't believe Saturn dealerships sold other cars except for the trade-ins it accepted. Why would Tesla not be able to operate in this same fashion? I don't believe Saturn had any trouble, what did they do differently?

Efforts by owners and enthusiasts in each of the states is crucial, regardless of what else is attempted on a national level. It would be a mistake to abandon local efforts and place all hope in a national override -- it may not happen and then you've lost all local momentum. Not that the interstate commerce angle shouldn't be pursued -- it should -- but just that it shouldn't be the only angle pursued.

While there may be differences of opinion on capitalism, I think we can all agree on democracy and representatives being, well, representative. There are clear signs that the population in each of these states is overwhelmingly in favor of allowing Tesla to sell cars in their state. The momentum of growing awareness of Tesla is strong. And people do not like being thwarted by entrenched interests throwing their weight around. And frankly, no one really likes going to a car dealership to buy a car.

All this adds up to powerful popular local support (each with its own unique character) that could (and should) be leveraged into a groundswell that local politicians will feel.

Perhaps this topic could be used to discuss the overall issues and strategies that are in common across the states, and state-specific topics could be started by owners who reside in those states who want to lead on this issue. There ought to be community specific approaches that can be taken by these local leaders that would be more effective than a national effort. Examples include articles in well-read local news outlets, petition signing, rallies, etc.

It's also important to remember this isn't about the Model S. This is about consumer choice and the will of the people. There is a Gen III car coming and while there are many people who would jump through whatever hoops the politicians put in there way to get one, they shouldn't have to, and we want them to be available to even more folks than that.

@lolachampcar

Some good points although I blame government much, much more than "capitalism" although I prefer the term "Free Market"... Obviously you need some regulation to ensure the consumer isn't taken advantage of, but the protections are now WAY in the favor of the established status quo...
On even the most basic level, since when is it a good idea to try to kill off a business when the economy is weak at best? I was encouraged to hear that the bill in NY got struck down... Yes, even in this insane state...

NADA means "nothing" in Spanish.

It also defines the value that the NADA organization brings to consumers and what they're excuses for blocking Tesla is worth.

Change scares a lot of people. I was going to say that change is coming, but clearly it has already arrived. I think NADA and their ilk have been taken unawares with how quickly and decisively Tesla is winning over consumers and the media. Their fear is that if Tesla's model works, what's to stop Toyota, Nissan, and Ford from doing the same thing by selling directly to consumers? And if that happens, well all the dealerships go out of business.

This is what happened with Apple. Many years ago, there were no Apple stores and you could not buy from an online Apple store - it didn't exist. We had many independent Apple resellers who either sold only Apple products or a variety of computers. Then Apple decided to sell directly to consumers via the Apple Online Store. What happened? Most of the resellers (well over 90%) went out of business. While this was ultimately good for Apple's bottom line, it was utter devastation for the Apple resellers and anyone who depended on those jobs for income.

I can see both sides of this argument, but I don't think legislation is the solution.

oildeathspiral :)

stsanford,
I think our government accurately reflects the population. We know what they are doing, there is sufficient sunshine on the money to watch it at work and yet we continue to allow it to happen. In short, we are complicit in our lack of action (think Citizen's United).

I believe capitalism is good and unregulated capitalism is bad provided the regulation is for the better good. We have gone astray of that and I'm not quite sure how to get back on course. I believe the solution is to remove all the money from politics and return the body politic to community service. Until we find a way to do that, all else is simply noise meant to distract.

We are at a point where we take the best and brightest and incentivise them to do all the wrong things. I'm trying to do a better job with my daughter.

@lolachampcar
I agree it would be great IF we could get money out of politics, I would be all for it. If we do, there will be some who find a way to get things done the dirty way.... I feel that the only way we could possibly fix things is to END permanent politicians. A return to the gentleman senator where one sacrificed their business for the common good, then went back to work as soon as they were done with the "people's work".

I'm like you, trying to do my best with my 2 sons. I believe it begins with personal responsibility and hard work. Hopefully together we can turn things around....

@AmpedRealtor

Saturn dealerships were locally owned, often by the same folks who owned the other GM dealerships. They were not corporate owned.

+1 Lolachampcar.

Really substantive and thoughtful comments. It's really the moral compass and the ability to divorce oneself from all other thoughts except what is right and wrong in the objective sense.

Unfortunately, very few people are able to do that consistently.

I was surprised it is not a RED state vs. BLUE state issue. New York (BLUE) has a vastly different view from California (BLUE). And the last time I checked Texas was a RED state.

If it was a political or crony capitalism issue then that is what I would expect.

I'm not so convinced on the whole Red and Blue thing. For me, Carville and Rove look an aweful lot a like.

lolachampcar
I'm not so convinced on the whole Red and Blue thing. For me, Carville and Rove look an aweful lot a like.

That cracks me up.. I enjoy you more and more with each post!

For me that affirms the belief that it's not Red / Blue | Republican or Democrat, but rather Ruling and Ruled classes..

Totalitarian vs. Libertarian

(there are both kinds in both parties)

+1 Wayne3

+1. stsanford

+1. lolachampcar

+1. RedShift

I think everybody knows here I am Tesla supporter, but I believe it's a mistake to completely dismiss some of the valid reasons manufacturers in many cases -- if not most cases -- are not allowed to go into retail businesses of their own products. The reason is simple....it can create highly uncompetitive market which will hurt the consumer in the long run!

Don't want to go into minutia of market theories. The simple reason is Manufacture-owned retail outlets can easily monopolize any given market along their product lines by underselling independent retail businesses who sell the same products. Manufacturers can sell their products at Cost + profit margin basis. But independent retailers(ala Car dealers) have to sell their products at wholesale Price + profit margin basis, which can never compete with Manufacturer retailer price.

That might seem good on the surface. People might say hey the consumer will get lower prices for the products and Manufacturer-Owned retail stores will hire about the same# of people as the independent retailers anyway. No Harm, only Good! So what is the problem?? Well, in the short term it's a good deal....yes consumers will get better prices and retail job creations will be about the same as well But once a manufacturer puts independent retailers out of business, the story changes for much worse. The manufacturer can jack up the PRICE as it pleases since it has monopolized the market along its product line.

Nevertheless this restriction to go into retail business should not be applied to manufacturers such as Tesla who have very small share of the market along specific class of products. It's highly unlikely manufacturers with very small share of market will engage in price gauging since they need to grow their market share by lowering price as much as they can. But once they gain significant share of the market, it's not advisable to allow them to be in the retail business.

jusineet;
The scale changes, but the process is the same. If the price is too high, a competitor will come out with a lower-priced equivalent or improvement. Legislative "barriers to entry" are an abuse, and crony capitalism at its worst.

justineet, I don't understand your argument. Why is a manufacturer that sells to consumers more likely to raise its price than a manufacturer that sells to retailers?

@justineet:
This is only true if there is only one manufacturer making the product. Apple sells direct but there is competition in the phone/tablet/pc market. (They do also sell via independent resellers but keep a tight reign on the discount structure).

All retail will put the price up to what the market will bear, including car dealers.

@Mark E

It can't get very complex if one gets down into the minutia of different market theories. I don't really want to get into it too much. But the basic theory is if you allow manufacturers into retail businesses w/o very careful considerations, you can create an anti-competitive environment if certain manufacturers are able to secure very strong brand loyalty. In those situations the only way consumers can get fair value is by making sure there is competition within a SPECIFIC brand itself not only among same class of products. And that can only be assured if the retail business is left to non-manufacturers.

(I think this theory applies mainly if a specific manufacturer attains significant market share -- my opinion)

------------------------

Don't want to cause a revolt in the computer tech community. But I believe you can find some economists who can make a very good case that Apple products are way overpriced because Apple is in the retail business of its own products. They can probably make a strong argument the prices would significantly decrease if Apple was barred from retail businesses......ok now...this is the theory..I don't any AppleHeads to jump on me.....


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