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Tesla and the Car Dealers’ Lobby
January 2014
Daniel A. Crane
Summary
In this article Mr. Crane outlines the challenges facing Tesla at both the state and federal levels. Reviewing the events that led to the creation of independent franchising laws this article also provides insight into the origins of the distribution restrictions on the automotive industry. Specifically the protections dealerships sought from manufacturers to safeguard their businesses. The article also describes the advantages of independent dealerships such as allowing the manufacturer to focus of research and development as well as manufacturing. Dealerships also enable managers to make decisions based on the realities of regional markets. Contrary to this there are also reasons for direct sales to consumers from manufacturers. Such as having greater control over brand influence and how the brand is represented. When it comes to consumer preferences the current franchising laws severely limit consumer choices. Consumers in Michigan are unable to decide for themselves the best course of action when purchasing a vehicle. Identifying the political implications and difficulties in changing current franchising laws the author explains what can be done to see the laws amended.
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Policy Implications
As new technologies are making electric cars more affordable and consumers begin to view them as the way of the future, it is inevitable that Tesla’s support only grows. With a popular brand and strong market power Tesla is capable of presenting its fight against franchising laws as a fight for consumer’s choice. There have been suggestions in states such as Ohio that special exemptions be made to the franchising laws specifically for Tesla, although this was met with strong resistance from the auto lobby. Tesla’s legal bid to overturn state franchising laws could spell the end for protectionist policies that favor large auto manufacturers. Instead of manufacturer-protection we can expect states to focus on consumer-protection.