Tesla Sued by NY and MA car dealers over franchise laws

Looks like the local dealerships in Massachusetts and New York have their defenses up against upstart electric car company Tesla. The logic they're using on why it should be illegal to sell cars directly to the consumer is a little fuzzy to me, can anyone figure out why it would be a problem?

Robert O'Koniewski, the executive vice president of the Massachusetts State Automobile Dealers Association, is suing Tesla for opening a store in a local mall.

In Massachusetts, franchise law 93B prohibits a manufacturer from owning a dealership, O'Koniewski says. An auto dealer association in New York is also suing Tesla.

Typically, car manufacturers build the cars, then ship them out to local car dealers, which have to meet the various manufacturers' standards.

Manny Quinones is a sales manager at one of those dealers, Manhattan Motorcars in New York.

"We're multibrand, so we have brand-specific showrooms," he says.

Each brand represents another manufacturer that can require expensive equipment and training. Not having to meet those various needs, O'Koniewski says, gives Tesla an unfair advantage.

http://www.npr.org/2012/11/09/164736...franchise-laws

Way to block innovations MA and NY!

free market capitalism my a$$.

Sounds like they are upset that Tesla can sell cars with so much less overhead. Hope Tesla pulls through on this one.

Originally Posted by tim330i

way to block innovations ma and ny!

Originally Posted by flzrider

sounds like they are upset that tesla can sell cars with so much less overhead. Hope tesla pulls through on this one.

+1

+2

Section 4(10) to own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor. A manufacturer or distributor shall not be in violation of this paragraph when: (i) owning or operating a dealership temporarily for a reasonable period, in any case not to exceed 1 year; (ii) in a bona fide relationship in which an independent person is required to make an initial ownership investment subject to loss in the dealership of not less than 7 per cent of the equity investment and can be reasonably expected, pursuant to a bona fide written agreement in effect between the manufacturer or distributor and the independent person, to acquire full ownership of the dealership on reasonable terms and conditions and within a reasonable period of time not to exceed 12 years unless good cause exists to extend said 12 year time period; provided, however, that the source for said initial ownership investment shall be from investors or lenders other than the manufacturer or distributor holding an ownership in the dealership; and provided, further, that for the purposes of clause (ii), good cause shall mean circumstances that are beyond the reasonable control of the independent person or the manufacturer or distributor holding an ownership in the dealership; (iii) owning or operating a dealership selling recreational vehicles temporarily during the transition from one owner of the dealership to another that the temporary period may be extended in 1 year increments for a maximum extension up to 2 years, if good cause is shown; provided, further, that the manufacturer or distributor who owns or operates a dealership selling recreational vehicles upon owning or operating the dealership shall immediately make a reasonable effort to notify all dealerships selling recreational vehicles in the commonwealth that the dealership is for sale, the earliest date that the manufacturer took ownership or began operating the dealership and the contact person to arrange the sale of the dealership.

Originally Posted by FlzRider

Sounds like they are upset that Tesla can sell cars with so much less overhead. Hope Tesla pulls through on this one.

Tesla will need the MA law overturned to do it, if it is as clear cut as what's posted "franchise law 93B prohibits a manufacturer from owning a dealership". Could be tough, but if they do it, family owned dealerships will be a thing of the past as manufacturers see a way to increase profits

http://www.justice.gov/atr/public/eag/246374.htm

Apparently, those laws exist in almost every state. Interesting, I guess I always thought it was a choice of business models, not mandated by law.

'Murica.

I for one would not mind overturning a law that prevents manufactures from engaging in direct sales of their products. By cutting out the middle man and implementing standardized operations across the board, it would result in lower costs to the manufacture, which would ultimately benefit the customer as manufacturers fight to attract customers to their brand(s) by lowering prices.

Dealerships would remain as would their employees. It's simply run by the parent company.

That's assuming the manufactures want to take on the additional liability, which they may very well not want to do.

Originally Posted by casino is no lie

I for one would not mind overturning a law that prevents manufactures from engaging in direct sales of their products. By cutting out the middle man and implementing standardized operations across the board, it would result in lower costs to the manufacture, which would ultimately benefit the customer as manufacturers fight to attract customers to their brand(s) by lowering prices.

Dealerships would remain as would their employees. It's simply run by the parent company.

That's assuming the manufactures want to take on the additional liability, which they may very well not want to do.

I agree, with one caveat...they would ACTUALLY have to have a dealership...a full on brick and mortar dealership. If all Tesla dealers are located in a mall, with a car, a couch, and a small sales desk, where does the customer get their car serviced? Where do they get their car towed to? There should be a requirement that they MUST maintain a dealership with a full service garage, but they can own it themselves.

imagine buying a car from a BMWNA rep

Originally Posted by casino is no lie

I for one would not mind overturning a law that prevents manufactures from engaging in direct sales of their products. By cutting out the middle man and implementing standardized operations across the board, it would result in lower costs to the manufacture, which would ultimately benefit the customer as manufacturers fight to attract customers to their brand(s) by lowering prices.

Dealerships would remain as would their employees. It's simply run by the parent company.

That's assuming the manufactures want to take on the additional liability, which they may very well not want to do.

I lean toward your last statement. I'm not sure the major car mfgs actually want to be in the retail store business.

Could they make more money if they internalized (sorry, guess the term is "vertically integrated") the dealer network? I think so. Or could they make the same amount of money and just pass the savings to the customers? Maybe.

But the mfgs might actually like having the private dealers out there owning the lots, dealing with the haggling, the service, the local environmental and employment regs, the community involvement, area-specific advertising, . And the customers in metro areas probably like having several dealerships they can play against each other for price and service.

Originally Posted by NFRs2000nyc

I agree, with one caveat...they would ACTUALLY have to have a dealership...a full on brick and mortar dealership. If all Tesla dealers are located in a mall, with a car, a couch, and a small sales desk, where does the customer get their car serviced? Where do they get their car towed to? There should be a requirement that they MUST maintain a dealership with a full service garage, but they can own it themselves.

You're just shifting the regulation. Either open it up and let the mfgs compete for your business across the entire spectrum of price, service, convenience, product, availability and so on, or leave it alone.

Originally Posted by Xcelratr

I lean toward your last statement. I'm not sure the major car mfgs actually want to be in the retail store business.

Could they make more money if they internalized (sorry, guess the term is "vertically integrated") the dealer network? I think so. Or could they make the same amount of money and just pass the savings to the customers? Maybe.

But the mfgs might actually like having the private dealers out there owning the lots, dealing with the haggling, the service, the local environmental and employment regs, the community involvement, area-specific advertising, . And the customers in metro areas probably like having several dealerships they can play against each other for price and service.



You're just shifting the regulation. Either open it up and let the mfgs compete for your business across the entire spectrum of price, service, convenience, product, availability and so on, or leave it alone.

Regulation is inevitable. There are many laws protecting consumers in regards to cars, and having a brick and mortar dealership is necessary. Allowing makers to sell at a mall kiosk from a brochure without an actual dealer network could cause problems in terms of service, breakdowns, etc etc.

If tesla gives me the money ill buy a dealership and sell their cars
(Problem solved)

I don't quite follow the legal restrictions on the topic- but I do understand why a Manufacturer wouldn't want to take on the endeavor.

A quick google helped me find these nuggets:

First and foremost, how would you handle used vehicles or trade-in's? It's important to offer buyers, the majority of which are used buyers, a place to purchase their next vehicle and a place where they can trade-in whatever they currently have as a down payment toward their next vehicle. The manufacturers aren't set up to handle those types of transactions, and it wouldn't be a profitable venture to do so. Each dealership is structured to do several things on behalf of the manufacturer:

1) Sell and distribute new vehicles
2) Service those vehicles (and more)
2B) Perform factory recall inspections & services
3) Offer parts for those vehicles

there's a fair back and forth between automotive manufacturers and generally locally owned dealers. These dealers have a particular skill-set for locally marketing and selling vehicles through dealerships in person that is applicable to a fair number of automotive brands. In other words, Jimmy Bob's Chyrsler is often next door to Jimmy Bob's Audi and VW dealership. The dealerships are not entirely dependent upon or married to any car company and can and will sell other cars if they can become more profitable by doing so.

Alternatively, they add enough value to car companies in pushing sales and increasing profits that it is necessary for the car companies to utilize some sort of local dealership infrastructure. They can't do it on their own or don't want to undertake the investment and distraction of developing a dealership infrastructure.

The local dealers know that this factory-direct sales model would undercut their own sales and won't tolerate it on the part of the car company. That's why automotive companies don't offer factory-direct pricing or dealing.

Come to think of it, a suprising amount of the consumer economy is still via a retail model. Manufacturing and retailing are vastly divergent specialties that it is difficult for a company to effectively span. The reatiler/manufacturer relationship requires that the manufacturer go through some effort to ensure consistency in the way a product is marketed. Hence why companies require that retailers sell at MSRP even if a low-overhead internet firm could still be profitable at a lower price.

In my understanding, these are only 1/10th of the stresses encountered trying to juggle dealerships.

The % the manufacturers stand to gain from "cutting out the middle man" do not outweigh the additional difficulties they would have to endure. [Most] manufacturers enjoy the buffer between customers, as customers are usually stupid and can cause big problems for little insigificant reasons.

JMO/U(nderstanding),
-Chris

Originally Posted by NFRs2000nyc

Regulation is inevitable. There are many laws protecting consumers in regards to cars, and having a brick and mortar dealership is necessary. Allowing makers to sell at a mall kiosk from a brochure without an actual dealer network could cause problems in terms of service, breakdowns, etc etc.

Thats dumb. What customer would buy a car at a mall kiosk from a brochure?

If Ford sets up a kiosk, GM competes by setting up a full service facility. Consumers vote with their dollars. We don't need a bunch of lawyers and professional politicians making careers out of bickering over how many sq ft a dealership has to be.

Originally Posted by jerseyzillest

If tesla gives me the money ill buy a dealership and sell their cars
(Problem solved)

Cars Of The Year.