This week, there has been a high profile showdown between the state of New Jersey and the rising automotive juggernaut Tesla. This battle has raised a lot of questions about the automotive industry and the business practices that surround it.
So, what exactly is going on?
Well, in recent years, Tesla has been trying to shake up the way consumers buy their cars. Across the country, Tesla has been trying to sell directly to the consumers without using a middle man car dealership. However, this approach has been banned in states like Texas and Arizona. Now, it’s been banned in New Jersey after a unanimous vote by the New Jersey Motor Vehicle Commission (NJMVC).
New Jersey Coalition of Automotive Retailers president Jim Appleton says, “[This] promotes greater access to warranty claims and safety recall service, which are both something manufacturers hate.” However, nobody has really indicated HOW this helps with warranty claims and safety recall service. Isn’t this something that could very easily be done by manufacturers?
Personally, setting up car dealerships to work as middlemen just seems like a way for people to make money off of doing nothing constructive. A few hundred years ago, these jobs would have been nearly non-existent. People that did this type of work would have been seen as lepers.
Blogger Tim Savioli agrees, saying, “Frankly, having car dealers all over the place is a very poor use of scarce economic goods. What efficiency is gained by having so many resources devoted to selling cars, and inherently non-value adding activity? Its work and economic activity that sure, generates tax dollars and provides jobs, but it’s akin to tax preparation- it’s an activity that does not really need to be done.”
Of course, some don’t agree with these views, claiming that dealerships are valuable and underappreciated. Roger Lanctot, associate director of global automotive practice at Strategy Analytics, says, “I believe in dealers but in an ideal world you wouldn’t see your car dealer very often, but when you need him you want him to be there in a timely, trustworthy manner.”
But there is one word that is very important in this statement: trustworthy. If anybody has ever dealt with a car salesman (or had the unfortunate experience of knowing one personally, ugh), then they know probably know that these salesman are as slippery and slimy as anybody around. They will do anything to sell you a car (their job is based on commissions!), and they will try to tack on all types of unneeded costs. (Check out my Fargo clip below HAHA)
Why would we want to trust these people over the manufacturers? Why do states like Texas and New Jersey and Arizona want so badly for this business approach to stick around?
David Kiley, president of New Roads Media, believes he has the answer. He says, “Car dealers have an enormous amount of political clout at the state house. They give a lot of money to politicians to keep franchise laws tough in protecting their business interests. They also give a lot to the communities.”