Connecticut Auto Dealers War on Tesla, Elon Musk, and the Future

February 12, 2015

Connecticut Auto Dealers have declared war on Tesla Motors. Lead by Jim Fleming they are deploying a cynical and misleading public relations campaign against America’s newest domestic manufacturer of automobiles. Their bone of contention is S.B. 198 An Act Concerning Electric Vehicles and H.B. 6682 An Act Concerning the Licensing of New and Used Car Dealers. S.B. 198 is more narrow and would create an exemption for Tesla while H.B. 6682 is a little more broad. The passing of either bill would be a win for consumers and for making Connecticut a more friendly place for innovators and start-ups.

Manufacturer and company owned retail is already here. In the clothing industry companies like Brooks Brothers, Victoria’s Secret, and New Balance all sell their products in stores that they own. In the electronics industry consumers buy from manufacturers like Apple Computer and Microsoft. Chipotle, the hottest property in the restaurant industry right now, has eschewed the franchise model to build its burrito empire. The majority of Starbucks coffee shops are company owned. Todays consumers are voting with their feet for the more innovative and enjoyable experiences provided in retail by company owned operations than those that are run by third parties.

Furthermore Tesla’s direct sales model is simpler and more equitable than the dealer system. Tesla cars are sold at sticker price without negotiation. Yale professor Ian Ayres conducted a study that showed auto dealers engage in race and gender discrimination when they negotiate prices with consumers. This disproportiontely impacts populations that are already disadvantaged in our economic marketplace. While Tesla only sells a small number of automobiles in comparison to its competitors, encouraging this system of selling would lead us closer to achieving a broader policy goal of reducing racism and sexism in our society.

Finally while there are some advantages to the dealer system, consumers should have the right to choose between a dealer purchase and a direct purchase the way they pick between Starbucks and Dunkin Donuts. Car dealers are no less at risk of going under themselves than Radio Shack. In fact it seems they already are heading that way as there is consistantly a year over year decline in the number of auto dealerships in the United States. I am less scared of the publicly traded Tesla Motors company going under and being unable to service my car than I am the local auto dealer.

If auto dealers want to win in the marketplace they should do so through customer service and innovation and not through lobbying. If dealers are able to do a better job of selling Tesla automobiles then Tesla will rationally ask them for their help. If consumers believe that the dealer experience and products are better than the direct sale experience and products then dealers will prosper and direct sale companies will fail. If the direct sale employees of auto dealers truly are skilled at selling than the direct sale companies will likely try to recruit them into new jobs. This misguided public relations war makes no sense and I cannot wait for it to end.

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This work by Matt Zagaja is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.