Wierd state bans control how cars are sold

New Jersey is one of several states in the US that is using legislation to prevent Tesla Motors, the major manufacturer of 100% electric cars in the US, from selling its vehicles directly to consumers through company-owned outlets. Tesla’s view is that this is a barrier to sales of its innovative vehicles.

Tesla chairman Elon Musk has posted a letter To the People of New Jersey on this topic. Among the points made in the letter:

  • under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the Governor [Christie], ended [the] right to purchase vehicles at a manufacturer store within the state.
  • when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.
  • the reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none.
  • auto dealers have a conflict of interest in that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.
  • I [Musk] have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.
  • the rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! . . . As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.
  • in North Carolina, a Triangle Business Journal poll found that 97 percent of people polled said Tesla should be allowed to sell cars directly. A poll by the Austin Business Journal showed that 86 percent of respondents were in favor of direct sales, and in a Los Angeles Times poll 99 percent of respondents came to the same conclusion.
  • it should also be noted that this regulation deals only with sales, so our service centers will not be affected. Our stores will transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our Manhattan store just over the river in Chelsea or our King of Prussia store near Philadelphia.
  • we would like to thank the many people who showed up in Trenton, New Jersey, on Tuesday to support Tesla and speak out against the MVC’s back-door tactics in passing this regulation change without public consultation or due process. It was an amazing response at very short notice and much appreciated.

It would seem that New Jersey and other states moving to regulate how electric cars are sold are seeking to prop up existing automobile dealership systems. That is about as wise as legislating that cars have to be serviced at blacksmith shops! Moving to a more sustainable society inevitably means change and that change can come about in one of two ways:

  • existing businesses evolve to a more sustainable model; or
  • existing businesses close and are replaced by new more sustainable businesses.

In reality, both models are likely to evolve simultaneously but successful companies are probably going to want to follow the former. Using regulations to try to protect those which do not wish to change is unlikely to be a viable pathway to a more sustainable future.

Elon Musk’s letter To the People of New Jersey can be found at http://www.teslamotors.com/blog/people-new-jersey. More information from Tesla’s perspective is at http://www.teslamotors.com/blog/defending-innovation-and-consumer-choice-new-jersey.

The whole flap seems to GallonDaily to be something of a tempest in a very small teapot. Bloomberg news experts project auto sales in the US will about 16 million this year. Tesla production in 2016 is projected to reach 100,000, or 0.6% of total sales if all Tesla’s built are sold in the USA. However, the battle is interesting because it is indicative of the corporate opposition sometimes faced by companies that introduce new more sustainable mass-market technologies.

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