Washington bill: SB5377

[CyberGus]

That way, the big megacorporation has to split the profits with the local boy, and some of that money stays in town.

Is that perception accurate? There’s no “splitting”. The auto company sells wholesale at a profit, and the dealer keeps 100% of the markup.

Sure, some of that money stays local, but in someone else’s pocket.

Historically, when consumers are given the choice of patronizing a local business or saving a few cents at the megacorp… they give their money to Wal-Mart.

Old people want dealerships. Kids want to know why they just can’t click “Buy It Now”.

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[YDR37]

Historically, when consumers are given the choice of patronizing a local business or saving a few cents at the megacorp… they give their money to Wal-Mart.

But a car dealership is not like either "a local business" or "a Wal-Mart". It's a franchise, like a McDonald's: locally owned, but part of a national chain. So in a sense, it is both local business and megacorp.

And franchised outlets commonly operate independently, even in competition with each other. The McDonald's downtown could have different ownership and different pricing than the McDonalds at the freeway exit, even though they both sell exactly the same products. Same is true for Chevy dealers.

Now, McDonald's products are cheap enough that you probably don't shop around; if you wanted a Quarter Pounder with Cheese, you would probably just go to the most convenient franchised location. But if you wanted a Silverado ZR2, which is not cheap, you might be prepared to check out multiple franchised dealerships and do some comparison shopping.

This is different from Wal-Mart (or Tesla). If you don't like the price of a propane grill at Wal-Mart, too bad. It's not negotiable, and every other Wal-Mart in the state would have exactly the same price. Same is true for a Model Y. Wal-Mart (and Tesla) stores don't operate independently, and don't compete with each other. This is not inherently better for consumers than the franchise model.

 

[CyberGus]

Wal-Mart (and Tesla) stores don't operate independently, and don't compete with each other. This is not inherently better for consumers than the franchise model.

However, they don’t price-gouge either.

Tesla locations do not compete with each other, but Tesla competes with every other car being sold.

The only thing dealers compete on is the amount of markup.

 

[Jellybean]

I sell cars, but not new Teslas. I may have insight into this, but i admittedly don’t know teslas sales models. I am going to ask around

 

[Crissa]

After working for uh... dozens of different businesses, franchises seemed to be the worst features of local and corporate businesses. Their wages and management incompetence is like a local business, but their extraction and local economy destruction is like a corporate business.

If I can choose not to spend at a franchise, I will choose not to. I would rather experience corporate vertical or local creativity.

-Crissa

 

[Crissa]

Be nice if right to repair and right to parts were enshrined - because being stuck waiting or traveling to a corporate or franchise monopoly store and beg for help.

-Crissa

 

[YDR37]

However, they don’t price-gouge either.

The dealership model isn't perfect. If the demand for a given product greatly exceeds the available supply, then yes, dealers have a lot of freedom to mark up the price until the supply catches up, even if the parent company disapproves.

But the direct-to-consumer model doesn't necessarily eliminate price-gouging in this situation -- it may just move the price-gouging to a different party. For example, when the Cybertruck was new and hot, some Tesla customers bought CTs with the intention of marking them up and quickly flipping them for a hefty profit, basically the same as what a dealer would do. Tesla did try to quash this practice with the notorious "no resale for one year" clause, but I don't think they were 100% successful, and seems like they gave up on it.

 

[Killlbox]

Sooooooooo glad I left Washington 4 years ago. It’s a crap state.

 

[Vegetaban]

Other auto manufacturers, like Rivian or Lucid, also use the direct-to-consumer sales model. But Tesla has historically been the top target of the dealer lobby, simply because it is the largest.

However, the dealers have recently discovered an even bigger villain. In the future, Volkswagen wants to sell Scout EVs using the direct-to-consumer model -- even though VW already has a franchised dealer network. That's a huge threat, because if VW can bypass its own dealers and sell directly to consumers, what's to stop Ford or GM from doing the same thing?

Good get rid of the middle man, sick of the stealerships

 

[Vegetaban]

However, they don’t price-gouge either.

Tesla locations do not compete with each other, but Tesla competes with every other car being sold.

The only thing dealers compete on is the amount of markup.

how the hell can they justify doubling the cost of a car as a “market adjustment”

 

[HaulingAss]

I don't disagree, and I'm not defending the aggressive lobbying by the dealerships. I'm just trying to explain why many people -- and not just car dealers -- are uncomfortable with the direct sales model.

Some people -- maybe most of the people on this forum -- think:
"ew, why would anyone want to haggle over price with a sleazy car dealer?"

And other people think:
"ew, what if your only choice was a non-negotiable offer from a faceless multinational corporation?"

Non-negotiable just means you are already being offered the best price at a given time. If you find more value in another vehicle, that's 100% your choice. Having to negotiate means you have to try to negotiate the dealer markup down as low as possible. You might have to do that on 5 or 6 different vehicles to find out what the true price is. You might even have to negotiate the price of the same car at multiple dealerships to get the best deal.

The dealer model can work to the consumer's benefit, because it allows shopping around. If you don't like Billy Bob's best and final offer on a new Silverado ZR2, you are free to drive 40 minutes down the highway, across the county line, to discuss Billy Bob's offer with Big Dave over at Smith Family Motors. Big Dave might be prepared to offer a better deal, if it means that he can steal the sale from Billy Bob (in fact, rumor has it that Big Dave has been pissed at Billy Bob ever since that incident in the parking lot after the football game).

Generally speaking, all you can do is negotiate a big markup down to a small markup. The direct to consumer model doesn't view their delivery centers as profit centers, they exist just to move the metal - you are already getting the best deal the manufacturer is willing to offer, based upon supply and demand.

If you don't like the direct to consumer business model, don't use it! But making a law telling everyone else they have to use the dealership model is anti-competitive and anti-everything that makes developed nations better places to live than third-world countries. I say let the direct to consumer manufacturers compete with dealerships and let each consumer decide for themselves which they want to use. After all, it's the consumers money to spend as they see fit.

In contrast, shopping around is pointless under the direct-to-consumer model, because every sales outlet has exactly the same pricing, set centrally at corporate HQ. Maybe the suits at HQ will set prices lower than either Big Dave or Billy Bob, but it's not clear that this is necessarily the case.

I don't want to have to go to multiple dealerships just to discover what the "real" price is, that's not transparent, particularly when it can take hours of dicking around just to get to the "real" price. I want the manufacturer to tell me how much they are willing to sell them for, not play games with dealerships who are only out for themselves. Time is valuable. If they can't tell me their best price upfront, I don't have time for them.

 

[YDR37]

If you don't like the direct to consumer business model, don't use it! But making a law telling everyone else they have to use the dealership model is anti-competitive and anti-everything that makes developed nations better places to live than third-world countries. I say let the direct to consumer manufacturers compete with dealerships and let each consumer decide for themselves which they want to use. After all, it's the consumers money to spend as they see fit.

Look, I agree. I'm only pointing out that the laws against "direct-to-consumer" sales aren't just something that greedy dealers and their paid lobbyists concocted with the help of big campaign contributions to state legislators (although that is part of the story). There is genuine grassroots discomfort with the "direct-to-consumer" model in some parts of the country, for reasons discussed above. Ironically, the people in those parts of the country are often rural and conservative -- just the sorts of people that Elon Musk would like to align with politically.

As of now, Tesla operates a grand total of zero stores in Montana, Wyoming, North Dakota, South Dakota, Nebraska, Kansas, Arkansas, Alabama, West Virginia, and Alaska combined. I'm not going to review the dealership laws in every one of those states, but I'll bet they are a factor in most cases. And we can all agree that those are "red" states.

Even in Texas, where Tesla is headquartered, Tesla has to jump through hoops to sell cars. They have "galleries", not "stores", and purchases have to be handled as out-of-state transactions.

 

[Docedward]

Tesla is different. Their culture is as different as the dealership model is from theirs. All the establishment car companies have been screwing consumers for three + generations- they simply cannot go direct to consumer

Tesla’s model is sell long lasting cars and electricity- and keep repeat customers. Ford, Toyota, Honda, Chevy etc sell moderate lasting cars with 15 years of maintenance fees that are hidden in the cost that the dealership gets to consume. That’s the parasite/host model that requires dealerships and corporate cars to coexist. Their model cannot live without that symbiosis- all draining the consumer.

A Tesla dealership would die because there is no maintenance on Tesla’s. Their is simply not enough revenue in repairs.

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