FTC to Host Public Workshop Examining the U.S. Auto Distribution System Workshop Will Explore Competition, State Regulations, and Emerging Trends in the Industry, Project No. P131202
I am in favor of permitting direct sales of vehicles by automakers, particularly by Tesla Motors. There are two issues here: 1) Economics: the dealership model is not economically feasible for selling electric vehicles. It is an established fact that auto dealerships turn profits on servicing vehicles and, to a lesser extent, used car sales. Little profit is made from markup of new vehicle sales. Pure electric vehicles (sometimes called battery-electric vehicles, or "BEV" herein) require much less maintenance than any vehicle with an internal combustion engine ("ICE"). Therefore, the dealership model is not economically viable without markup on new vehicle sales, which puts an unnecessary upward pressure on new vehicle prices. The dealership model is a net drag on the BEV market, offering no additional value to the BEV due to the need to inflate the sale price and due to the relative lack of maintenance needs compared to ICE vehicles. 2) Intent: the laws in question, when originally cast, were phrased to protect existing dealerships from being undercut by direct sales from the automaker(s) whose vehicles the dealership sells. I agree with that need. However, since Tesla Motors has never participated in the dealership model, then the laws did not apply to them, since there were no dealerships that Tesla Motors could under-cut by selling direct. Since Tesla Motors has gained in popularity and have highly-regarded products on the market, the laws in question have now been changed in some states, and other states are attempting to change their laws, in order to block Tesla Motors from selling vehicles directly. This is not becoming of a market-based economy, where competition and innovation are supposed to be encouraged. There is no harm done to the dealership model, to the consumer, or to the industry at large, by permitting automakers, such as Tesla Motors, to sell direct. Therefore, automakers, such as Tesla Motors, should be permitted to sell direct to the consumer if the automaker has, nor has ever had, participated in the dealership model.