ABC’s Nightline explains exactly what’s going on in the great state of Texas:

Here we have a clear-cut example of innovation being stifled by special interests – car dealerships – using government to suppress competition. And this isn’t the first time Tesla has had to undergo this sort of attack.

We need to change this system of political corruption so the free market can actually work. There is a plan to upend the cycle of bribery, the only question is whether we’ll follow it.

About Eddie Geller
  • This news program did not enlighten me at all about the issues at hand. Why not at least explain the details of franchise laws etc and why they prevent Musk from doing it his way?

    • Watch it again. Musk wants to sell directly to consumers. Walters wants cars sold through dealerships. Musk “doesn’t want to play by the rules.” Walters should have said “Musk doesn’t want to play our rules.”

      • I get that. But I’d like to see the legal reasoning behind a franchise law. Or at least the reasoning they’ve used to create this barrier to entry. Is there value in the franchise model for consumers? What do they say are the dangers of Musk doing it his way? Why does Musk NOT want to do it that way. I just feel like there is a lot more information that could have been shared, rather than focusing on personalities and “people are outraged” etc. For example, did the Auto Assoc guy actually prove that dealerships AREN’T just “slicked back hairdos and shiny suits”?

        • I might be very wrong, but I think that if manufacturers sell directly to the consumer, they can severely undercut most dealerships. It’s pretty pathetic when middlemen are protected by the state. I know that the middleman has his place in this world, but that place should rather be protected via private contracts, instead of laws.

        • I don’t think you get that kind of explanation here. these sites are attention grabbers, not economists or lawyers. I’m afraid you (and I) are going to do our own research on this.

        • I think what’s important to consider is how Elon has created a brand new experience in the automobile industry, and wants to be able to get that experience to the customer exactly the way Tesla wants. AKA Tesla specific ‘stores’, which follow a model of educating people rather than pushing sales on people who walk in the doors.

          I think a pretty good analogy is as-follows:

          Imagine if all computer manufacturers could only sell their products through chains like Best Buy, or Future Shop, or The Source or what-have-you. Apple would be pretty upset about this as a huge part of their business model and allure is providing that unique retail experience to their customers. If they were forced to only sell in 3rd party retailers, it wouldn’t have that attractive retail experience. Same goes for most other tech companies who have their own retail stores.

          In addition, there’s no doubt that Tesla could offer a better price to the direct consumer rather than having to sell through a dealership which also seeks to make money to pay employees/maintain a property etc. Without dealerships you could have one of two things. 1) The car manufacturer increases margins and makes more money, or 2) The savings are passed onto the consumer in the form of lower car prices.

          I think I know which one Elon Musk would opt for.

        • Originally those laws were created to prevent unfair competition. If Chevy decided to sell cars direct to consumers, they would have an “unfair advantage” over franchisers, who have to mark up prices to make money. Obviously consumers would choose to buy a car directly from Chevy than to hit up Joe Blow Chevy lot.

          In the case of Tesla, there are no existing Tesla dealerships, so the unfair competition argument doesn’t make sense. Now the dealerships are fighting against Tesla and the very spirit of the law itself.

          • They were to prevent unfair competition, but not in the manner you describe. Read up on automotive history, they only did it because at the time there was no infrastructure for them to easily manage both the production and distribution of the products. These days that is not the case and most of the franchise system can be scrapped.

          • Thanks for the discussion everyone! However, my main criticism was with our inept media. The fact that we are able to find the information outside of them is why the big media outlets are becoming dinosaurs in danger of extinction. But they do a disservice to us all in the meantime…

  • If Musk wants to change this law, he should hire people to develop and run a ballot initiative campaign in Texas that targets dealerships, maybe around consumer protection or find something free market-y that grassroots conservatives will be into. The issue doesn’t matter as long as it’s onerous for the dealers. It probably takes $20 million to run a successful campaign in Texas.

    • He has to spend $20 million to sell his product in the free market? This is exactly the “perversion of democracy” he’s talking about.

    • I’m beginning work on a video urging legislators in TX to let the bill pass when it gets looked at again in 2015. If you hear about any grasses rooting, spread the love. 😉

  • You see here the hubris of a lobbyist. While he’s saying “they should play by the same rules as everyone else.” what you should be hearing is “we don’t want to compete with a different business model, we like how we’ve always done things.” There are plenty of examples of manufacturers selling directly to the consumer without a franchise in Texas: Whataburger is an excellent example. While there are still some franchise stores out there, the majority are corporate owned. I also grant, you don’t have to negotiate the price of a hamburger; however wouldn’t it be nice if, like the burger, you didn’t have to negotiate the price of your car? I highly doubt that the big three would suddenly adopt this model if it were allowed. If you look at states where Tesla does sell directly, the other car makers are continuing with their franchise business model. It’s fear, protectionism, and the “good ol boy” network at it’s finest.

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