Patterico's Pontifications

3/19/2014

Planet Money on Rent-Seeking, Part 1: The Tesla Ban in New Jersey

Filed under: General — Patterico @ 7:39 am

As many of you have heard, Tesla was recently told that they have until the end of the month to sell their electric cars direct to consumers in New Jersey:

Gov. Chris Christie said today that the state Legislature — and not him — should bear the blame for a new rule that effectively bans Tesla, the high-end manufacturer of electric automobiles, from selling their cars directly to customers in New Jersey.

. . . .

“I’m not pushing Tesla out; the state Legislature did,” Christie said. “They passed a law — which is still on the books — which says if you want to sell cars in this state, you must go through an authorized dealer. My job is not to make the laws, it’s to enforce the laws. And Tesla was operating outside the law.”

Christie is right — and this is nothing new or uncommon. The NPR show Planet Money recently re-ran an episode of theirs from last year on state laws that create and maintain monopolies for car dealerships. Every state in the union has passed laws that 1) mandate that cars be sold through auto dealers; 2) ban auto manufacurers from setting up competing dealerships in the same territory; and 3) ban manufacturers from closing dealerships unless the dealership has engaged in fraud or some similar activity amounting to “cause.”

I have decided to provide a little detail in this post, even though it is legalese, so you can see it with your own eyes. Here is the Massachusetts law protecting the territories of existing car dealerships:

Section 6. (a) Except as provided in subsection (b) of this section, it shall be a violation of subsection (a) of section 3 for a manufacturer, distributor or franchisor representative without good cause, in bad faith or in an arbitrary or unconscionable manner to:

(1) grant or enter into a franchise agreement with a person who would be permitted under or required by the franchise agreement to conduct its dealership operations from a site any boundary of which is situated within the relevant market area of an existing motor vehicle dealer representing the same line make, regardless of whether said franchise agreement delineates a specific area of responsibility or provides that the area of responsibility of said existing motor vehicle dealer is to be shared or operated in common with others; or

In English, this means, stay out of the existing car dealerships’ territory. More:

(2) permit the relocation of an existing motor vehicle dealer representing the same line make as another existing motor vehicle dealer to a site any boundary of which is within the relevant market area of an existing motor vehicle dealer which is not relocating, regardless of whether the franchise agreement of either motor vehicle dealer delineates a specific area of responsibility or provides that the area of responsibility of either motor vehicle dealer is to be shared or operated in common with others; but a dealer of the same line make shall not be permitted to file a protest if the site of the proposed relocation is farther away from said protesting dealer than the existing location.

In English: no relocating existing dealers. Remember what we said about their territory. It’s theirs.

And here is the Massachusetts law requiring renewals of dealerships on the same general terms, and prohibiting termination without “good cause”:

Section 5. (a) It shall be a violation of subsection (a) of section 3 for a manufacturer, distributor or franchisor representative without good cause, in bad faith or in an arbitrary or unconscionable manner: (1) to terminate the franchise agreement of a motor vehicle dealer; (2) to fail or refuse to extend or renew the franchise agreement of a motor vehicle dealer upon its expiration; (3) to offer a renewal, replacement or succeeding franchise agreement containing terms and conditions the effect of which is to substantially change the sales and service obligations, capital requirements or facilities requirements of a motor vehicle dealer; or (4) to amend, add or delete any other material term or condition set forth in a motor vehicle dealer’s franchise agreement.

In English, this means: the dealership gets to stay. No matter what. (“Good cause” does not mean “we think we could make more money with someone else.”)

Every state has similar laws. It’s government-created and government-maintained monopoly..

The Tesla ban is just a specific application of the general state of law across the country.

This ridiculous state of affairs survives for the reason most ridiculous laws survive: money. Dealerships have lots of it; gobs and gobs of it. This is why dealerships are passed down through the generations like royalty. They employ huge numbers of people, contribute giant amounts of sales tax, and give heavily to politicians (unless you cross them). They have money, and they have power.

This is called “rent-seeking”: achieving wealth through lobbying rather than creating value for consumers. And car dealerships are just one example of silly laws that are passed due to rent-seeking.

What’s more, this is just one specific application of rent-seeking. There are many, many, many other ridiculous examples in our society. To keep these blog posts relatively bite-sized, I plan to tackle them one at a time.

Planet Money has several other shows about rent-seeking, and I plan to highlight at least a couple more in future posts. One thing I like about Planet Money is that, although it’s an NPR show, it is quietly subversive, because they consistently show how government intervention in the economy distorts the market. They don’t go as far as I would, but they still help the lefties who are their core audience see how good intentions (and often not-so-good intentions motivated by money) create government interventions that hurt real people.

Stay tuned.

53 Responses to “Planet Money on Rent-Seeking, Part 1: The Tesla Ban in New Jersey”

  1. You’ve got me slightly confused here, Paterico. I’m not a lawyer but have been a businessman for 40 years so I look at things from a business point of view.

    Let’s say I invest $20 million in a new car dealership with GM to sell Chevy and Cadillac. If these laws did not exist to protect me and my very sizable investment, couldn’t GM Manufacturing open a $40 million dealership across the street and since they are the manufacturers cut my prices and drive me into bankruptcy?

    Aren’t these laws made to thwart a style of monopoly from the manufacturer? IOW, wouldn’t manufacturers have the power to manufacture, distribute, retail and repair exclusively without dealerships. The only auto related field left for the little guy would be used cars, maybe.

    And Tesla should be held to the same laws and standards as their competition. I’m really sick and tired of certain “friends” getting waivers and exceptions. Especially when they have been given billions of my tax dollars.

    Hoagie (511e55)

  2. Sorry, that should have been: hundreds of millions of my tax dollars, not billions. But in the words of the Sage, what difference does it make at this point?

    Hoagie (511e55)

  3. Let’s say I invest 1 million dollars in a Zipcar (or some such) franchise and $500,000 on a website that sells cars.

    You pay for the discount 30 day membership (sometimes they have them free) and you can test drive all the cars on my lot. Conveniently, I can also sell you a new one of those cars through my website with convenient no-haggle Internet pricing based on the same car-buying-advice websites you can get online.

    I don’t care if GM sets up a 40 million dollar dealership across from me. I have a different business model.

    luagha (5cbe06)

  4. luagha said; “I don’t care if GM sets up a 40 million dollar dealership across from me. I have a different business model.”

    I hate to state the obvious but if you have a different business model then a physical dealership wouldn’t pertain to you, now would it? Since you would not be paying millions in franchise fees nor millions more in building and floor planning, etc.. I’m talking about the specific protections provided by these laws that Patterico mentioned for the Dealership buyer/owner. I’m not talking about alternate business plans or other businesses. I’m talking about Dealership protection from the potential of predatory manufacturers.

    Just so you know, if you paid $1 million for a Zipcar franchise you still need to set up a lot to store the cars and provide test drives. And if Zipcar were to do the same they could undercut you or charge you more and put you out of business. I believe that’s the object of these laws, to protect the independent dealer from the control of the manufacturers.

    Hoagie (511e55)

  5. Every state in the union has passed laws that … and 3) ban manufacturers from closing dealerships unless the dealership has engaged in fraud or some similar activity amounting to “cause.”

    Only the federal government is allowed to summarily close dealerships with a stroke of a pen (especially if said dealerships are owned by Republicans or conservatives). We learned that lesson a few years ago, didn’t we?

    in_awe (7c859a)

  6. How many of these laws were passed when obama used the restructuring of gm and chrysler to close Repubican owned car dealers?

    Is it possible these laws are in reaction to the democrats politicizing the auto market to benefit their supporters?

    Jim (145e10)

  7. Jim, I believe that GM used bankruptcy law to supersede such state laws.

    SPQR (768505)

  8. SPQR, gm used bankruptcy law or obama’s auto restructuring committee decided that only the Republican dealers were problems?

    Jim (145e10)

  9. Jim, you are confusing different things. The dealer contracts were terminated by GM in bankruptcy proceedings. That the dealerships were or might have been identified by Obama’s “czar” was separate.

    SPQR (768505)

  10. As has been pointed out elsewhere, Tesla is no stranger to cronyism itself (having taken millions in government loans just like Solyndra, Fisker, etc), so their complaints are really about other cronies having more juice.

    It’s not quite a stand on principle.

    Kevin M (dbcba4)

  11. crony capitalism at its worst…

    redc1c4 (abd49e)

  12. “Good cause” does not mean “we think we could make more money with someone else.”

    Just have the state close a dealership under Eminent Domain and give it to someone else (Kelo).

    askeptic (2bb434)

  13. Jim, I think that you’ll find that these laws protecting dealers have been on the books for a half-century or more.

    askeptic (2bb434)

  14. SPQR, so the fact that obama’s csar identified which dealers needed to be closed and gm was looking for a federal bailout and just happened to select those same dealers are two unrelated events? Which turnip truck do you think I was on this morning?

    Jim (145e10)

  15. The Leyland lorry?

    askeptic (2bb434)

  16. the dealership gets to stay. No matter what.

    Not no matter what.

    Federal bankruptcy law overrides it.

    That explains why it was such a traumatic thing for GM and Chrysler to close dealerships. That was something that couldn’t normally be done.

    I guess these laws go back to the 1930s or earlier, and the auto companies actually wanted new cars sold only through dealerships, because they didn’t want to have the price get too low, where their salesmen (dealers) would not have an incentive to sell (push) their cars.

    Sammy Finkelman (20c5cc)

  17. And car dealerships are just one example of silly laws that are passed due to rent-seeking.

    Don’t forget taxi medallions.

    Maybe real estate agents.

    Sammy Finkelman (20c5cc)

  18. Excellent post, Patterico! Interesting!

    Let’s say I invest $20 million in a new car dealership with GM to sell Chevy and Cadillac. If these laws did not exist to protect me and my very sizable investment, couldn’t GM Manufacturing open a $40 million dealership across the street and since they are the manufacturers cut my prices and drive me into bankruptcy?

    So? The free market should be a free market. If your business can’t compete with another, yes, your investment will fail. That’s how a free society works. Getting the government to force your investment to succeed by barring competition is terrible for the customers and for freedom. There is no moral reason why Tesla, for example, can’t just sell these cars on Amazon. If such a business model was a bad idea, then the old dealership model wouldn’t have anything to worry about. In other words, this law is useless to society, and only useful to those who bought the politicians.

    Dustin (303dca)

  19. Dustin – I agree with you. In that example the auto dealer’s protection should be built into his dealership agreement with GM specifying some kind of exclusive territory and non-compete from the manufacturer, not some heavy handed intervention from the state.

    I don’t know the origin of the laws but the balance of power when they were written probably considerably favored the manufacturer. To convince people to invest substantial sums selling their products lobbying to get those protections enshrined in state law was probably seen as a very big plus by dealers or retailers.

    daleyrocks (bf33e9)

  20. they don’t even make a tesla piggy pig can get in and out of

    governor jerseytrash should stick to humping obama’s leg I think

    it’s always better to play to your strengths

    happyfeet (8ce051)

  21. Patterico, you forgot to mention all the money car dealers spend on advertising. Not that any media company would ever let revenue impact what/how they report.

    Time123 (066362)

  22. It’s not that big an investment to get a car dealer’s license in New Jersey. http://www.state.nj.us/mvcbiz/BusinessServices/UsedNew.htm Which is probably the reason for the protectionism. Exactly for because (sic) it’s easy for daleyrock’s Chevies to open across the street from nk Chevrolet. But it would be a “big investment”, to a shoe-string government-subsidy outfit like Tesla, to have to open even one dealership.

    nk (dbc370)

  23. And, except that you have to be a licensed card dealer to sell a car, all that “protectionism” has nothing to do with Tesla’s situation. And if you’re a dumb hippie, who’ll dish out upwards of $80,000 for a car shown to be a dead-end concept a century ago, the state might have more than a rational basis to want to protect you by some kind of locus and license requirement.

    nk (dbc370)

  24. 8-) “card dealer” was Freudian. Tesla is kind of a three-card monte in my subconscious I think.

    nk (dbc370)

  25. “It’s not that big an investment to get a car dealer’s license in New Jersey.”

    nk – I was talking about the investment to build or lease a showroom and lot, hire employees, etc.

    Floor plan and other financing is probably available in that industry the way it is for industries selling larger ticket items or franchises.

    daleyrocks (bf33e9)

  26. nk – Why would you focus on the small dollars like the license rather than the big dollars like the capital investments that a dealer would not want to see flushed down the toilet?

    daleyrocks (bf33e9)

  27. I wasn’t disagreeing, just agreeing from another direction. All your points are valid. I was just pointing out, and especially in the case at hand, that the law also protects the consumer and the existing dealers from fly by nights.

    nk (dbc370)

  28. It seems like Tesla can be a little creative and thwart the system. There is no requirement that the dealer invest $20 million in facilities like Hoagie did in number 1 above. The manufacturer just needs a local dealer. The customer can still buy the car online (dealer’s website linked to Tesla website.) Then the customer can complete the transaction (tag and title) at the dealer’s small office.

    Mike S (89ec89)

  29. nk – Got it. I think Dustin and I were on the same page. I think territory agreements are fairly common in franchise deals, although the geographic scope and exclusivity can vary widely by and inside industries.

    daleyrocks (bf33e9)

  30. Why I am afraid of electric cars. Safe but disturbing link. http://off2dr.com/modules/cjaycontent/index.php?id=16

    As I figure it, Tesla’s 300 horses need 250 kilowatts of electricity. I calculate the electric chair’s maximum output at less than 15 kilowatts.

    nk (dbc370)

  31. “Why I am afraid of electric cars.”

    nk – Haven’t those Chevy Volt sales been knocking the cover off the ball?

    daleyrocks (bf33e9)

  32. Fascism. Pure and simple. Government picks the winners and losers.

    It’s a minor miracle that mechanics have not run into a similar restriction yet. The only real money made by dealers is in their body and mechanical repair shops. Why is it that any old person can set up a shop to fix cars? Why aren’t manufacturer-approved and trained representatives the only shops allowed?

    While I am at it, why are non-manufacturer parts allowed to be used, or even fabricated?

    My favorite anti-competitive licensures are the alcohol and beer distributors, and the hard cap on saloon/retail licenses. We are well beyond the total ban on demon rum. This protectionism has no functional basis, except to benefit favored parties and politicians.

    My very favorite state requirement is the one protecting the various eye doctors. It is illegal in most states to try to buy prescription glasses without a prescription obtained within the previous two years. Never mind that the science of optometry has proven that radical changes are very unlikely in any given two-year period, absent the onset of some specific disease. I’d also love to know the harm in having someone who is satisfied with their sight purchasing glasses/contacts which work nicely for him/her.

    We are well past the point where the government has to justify itself to us. It is now WE who must justify OURSELVES to the state.

    King George III is looking up and wondering why he was so vilified. He was a piker compared to our current apparatchiks.

    Ed from SFV (3400a5)

  33. You’ve got me slightly confused here, Paterico. I’m not a lawyer but have been a businessman for 40 years so I look at things from a business point of view.

    Let’s say I invest $20 million in a new car dealership with GM to sell Chevy and Cadillac. If these laws did not exist to protect me and my very sizable investment, couldn’t GM Manufacturing open a $40 million dealership across the street and since they are the manufacturers cut my prices and drive me into bankruptcy?

    Aren’t these laws made to thwart a style of monopoly from the manufacturer? IOW, wouldn’t manufacturers have the power to manufacture, distribute, retail and repair exclusively without dealerships. The only auto related field left for the little guy would be used cars, maybe.

    And Tesla should be held to the same laws and standards as their competition. I’m really sick and tired of certain “friends” getting waivers and exceptions. Especially when they have been given billions of my tax dollars.

    Sorry I am just now responding to your point; I just got home.

    I think everyone should be held to the same laws and standards as well — I just think that the laws should not exist.

    As for the idea that the dealers made a huge investment that has to be protected, I have a few thoughts:

    First, I agree with Dustin that the mere fact that someone has made a large investment in a business does not mean that government should pass laws restricting competition. If the business provides poor service or bad prices, another business (which would also have to make a large investment) should be able to compete or take them over. The consumer benefits when there is competititon.

    Second, maybe in the absence of such laws, car dealerships could start with smaller investments. Maybe it’s not necessary for every dealer to invest (on average) $11 million in a new dealership. Maybe a free market economy would result in many small dealerships, competing with one another. I’m certain that it would result in some number of Internet-based car dealerships, which (like many Internet businesses) could probably increase choice, cut prices, and generally make the buying experience less utterly miserable.

    But I will admit that I have a bias for the free market, which allows people to make their own decisions, over central planning, government protectionist laws bought by rich soft businessmen, and oppressive regulations.

    Patterico (9c670f)

  34. Keep in mind that, by historical standards, this kind of thing is NORMAL. The idea that the common man should be allowed to do with his property what he damn well pleases is fairly new, very revolutionary, and upset all kinds of apple-carts when it became something other than the ravings of the deranged. The Right People (whoever they might be at any given moment) have been fighting a bitter rear-guard action against it for longer than any of us have been alive.

    OF COURSE The State should choose winners and losers. How else will The Right People prevail? They certainly aren’t going to do it on their nonexistent talent!

    I’m not saying that it is right. I favor free markets up to a point (What point? The point where I have to seriously worry about what’s in my milk, however that comes about). I just decline to make the mistake of thinking of the Statist Left (and go-along-to-get-along-fellow-travelers) as something NEW. They may say they are new. They may even believe it. They aren’t. They are just another bunch of would-be aristocrats, ripe for the Guillotine. Socialism/Communism/Environmentalism/What-Have-You; it doesn’t matter. The would-be Aristos have ALWAYS had all kinds of excuses. And they have only rarely been worth the oil that will be necessary to fry them in Hell.

    C. S. P. Schofield (e8b801)

  35. Let’s say I invest $20 million in a new car dealership with GM to sell Chevy and Cadillac. If these laws did not exist to protect me and my very sizable investment, couldn’t GM Manufacturing open a $40 million dealership across the street and since they are the manufacturers cut my prices and drive me into bankruptcy?

    If that was a viable business model, there should be nothing to stop the manufacturer from doing so, unless it is contractual between the parties.

    JD (9c73be)

  36. It has to do with legal things and the east coast, otherwise off-topic, but has to do with prosecutions:
    http://articles.philly.com/2014-03-17/news/48269239_1_investigation-kane-ali

    Apparently under the previous AG of PA, now governor, Tom Corbett (R), there was a sting set up looking into corruption of state officials. It was not brought to completion under Corbett, and eventually under new AG Kane (D) the effort was dropped. She cited as a reason that the effort was racist, as all of those who had taken the bait were African American (Dems) from Philly.

    Now this is not the first occasion that interesting behavior from Ms. Kane has been noted. She is also known for investigating if there were any improprieties in how long it took Corbett’s office to investigate Jerry Sandusky. Of note, she has been proceeding with this investigation since she took office in Jan 2013 (I believe). It is anticipated she will release whatever findings that she can right before election time with Corbett running for re-election.

    MD in Philly (f9371b)

  37. I still don’t understand why, with two showrooms already there, Tesla cannot get a car dealer’s license. But then, there are a lot of things I don’t understand.

    nk (dbc370)

  38. nk, perhaps NJ law does not allow company-owned dealerships – stranger things have happened.

    askeptic (2bb434)

  39. You’re right. Tesla did get two car dealer licenses. This brouhaha is over getting them revoked, because cars may be sold only through franchisees. http://mashable.com/2014/03/12/new-jersey-tesla-dealers/ I love it: “Car dealers are the consumer’s protection from predatory manufacturers.” If you have not stopped laughing in four hours, call a doctor. But don’t tell him why you’re laughing — he won’t be able to stop either.

    nk (dbc370)

  40. Patterico, I was in business for almost 40 years and if there is anybody who has “a bias for the free market, which allows people to make their own decisions, over central planning, government protectionist laws bought by rich soft businessmen, and oppressive regulations.”, it is I.

    My own area of expertise was the restaurant business however, I had a great deal of exposure to auto dealerships. My first wife (who I lost to cancer) was the daughter of one of the largest new car dealers on the East Coast. His dealerships went from New York to Atlanta and back in the ’70′s he had over $150 million invested and was generating over $500 million in gross sales a year. That was a lot of money then. I was often involved with him at his dealerships to either manage or in a couple cases build a new location or refurbish an older one.

    I must have come across as believing that the “mere fact that someone has made a large investment in a business does not mean that government should pass laws restricting competition.”. I did not intend that interpretation. I certainly don’t believe anything of the sort. I just don’t necessarily believe that the laws mandating manufacturers cannot be dealers “restricts” competition. Quite the contrary, they increase competition and avail more options to the consumer. If manufacturers could control the retail end of the industry I believe that ultimately they would drive the financially smaller dealers out and thereby lessen the quality and competition in the auto market.

    You then stated: ” Maybe it’s not necessary for every dealer to invest (on average) $11 million in a new dealership. ” First off $11 million is an average (perhaps) but if your dealership is in a big city you’ll be closer to $30 million by the time the dust settles. That said, the investment includes franchise fees, building costs, financing, inventory*, training and advertising just to start. And yes, dealers need to invest that much.

    Then you say: ” I’m certain that it would result in some number of Internet-based car dealerships, which (like many Internet businesses) could probably increase choice, cut prices, and generally make the buying experience less utterly miserable.” First of all these laws were passed 40-50-60 years ago. There was no such thing as “internet businesses”. They weren’t even dreamt of. *But here is something you need to understand, dealerships have the responsibility to provide Warranty service and maintenance service to the consumer. Over 60% of the cost of building a car dealership goes into building the repair and parts shops. Millions in lifts, equipment, spare parts, etc..

    Buying a car is one thing but I don’t think one can get his transmission repaired under his warranty over the internet.

    Now, over time the paradigm will change, they always do. So the laws will change, they always do. I just can see the existing laws were put there to protect consumers and franchisees from being overpowered by the deep pockets of manufacturers. I’ve been wrong before. ( Like the time I told my father in law NOT to buy a Hyundai franchise because “nobody” would buy Korean cars. Oops! ).

    Hoagie (511e55)

  41. Your post was very informative. Thanks, Hoagie. What you noted about the costs to build dealerships’ repair, maintenance and warranty service shops helped me better understand why competing dealers of my car brand in the area are constantly sending me offers and trying to poach that business from the dealership where I bought the car.

    elissa (f6314d)

  42. There’s one other point, Patterico. From my experience between 60% and 75% of the gross profit to new car dealers comes in through the Shop. Warranty work, repairs, standard maintenance, body work and parts generate more income in any given month than New and used car sales do combined. The amount of capital invested in a modern Service Facility is unbelievable. Just a diagnostic computer alone can cost upwards of $350,000 and most modern shops have at least two, higher end shops four or five. Then you have lifts, frame, wheel and headlight alignment, lathes, fabricators, hand tools, power tools and we could go on and on. We all see the showroom but the real money isn’t made delivering Hoagie his new Lincoln, it’s in the shop.

    So perhaps we could cut out salesmen, managers, lot boys , car jockeys and secretaries by going “internet”, but we’ll still need a facility to do repairs and maintenance. And we’ll still need licensed franchisees to perform warranty work.

    Hoagie (511e55)

  43. That’s where the money is, elissa. First they court you in with a special price, say a $19.95 oil change. Then they try to win your loyalty with great service and personal attention. That can make or break a dealership. Have you noticed how many dealers now have their own car wash? They clean your car inside and out when they service you. But again, that car wash costs a ton of money to build. But it gets customers into the shop.

    Hoagie (511e55)

  44. There’s one other point, Patterico. From my experience between 60% and 75% of the gross profit to new car dealers comes in through the Shop. Warranty work, repairs, standard maintenance, body work and parts generate more income in any given month than New and used car sales do combined. The amount of capital invested in a modern Service Facility is unbelievable. Just a diagnostic computer alone can cost upwards of $350,000 and most modern shops have at least two, higher end shops four or five. Then you have lifts, frame, wheel and headlight alignment, lathes, fabricators, hand tools, power tools and we could go on and on. We all see the showroom but the real money isn’t made delivering Hoagie his new Lincoln, it’s in the shop.

    So perhaps we could cut out salesmen, managers, lot boys , car jockeys and secretaries by going “internet”, but we’ll still need a facility to do repairs and maintenance. And we’ll still need licensed franchisees to perform warranty work.

    Well. In a free economy, would dealers necessarily be mechanics? I’m not so sure.

    I do know this. In this non-free market, there’s nobody in the world I trust less than the mechanics at the dealer. For years, I have gone to independent mechanics I have learned about through word of mouth, and have probably saved thousands that way. When you take your car in for servicing, the dealers are the biggest crooks on the planet.

    So if you’re justifying these laws because of the honesty and quality of dealer mechanics, you are not convincing me.

    Patterico (9c670f)

  45. “Well. In a free economy, would dealers necessarily be mechanics?”

    No, dealers are dealers and mechanics are mechanics in any economy free or other. That’s not the point.

    I don’t get you here; “I do know this. In this non-free market, there’s nobody in the world I trust less than the mechanics at the dealer.” Are you saying because the dealer has his own mechanics the market suddenly becomes Not-free? Because if that were true you would not have the option to patronize “independent mechanics (you) have learned about through word of mouth”, now would you? And you seem to paint all dealership service with a pretty broad brush. The dealers are the biggest crooks on the planet? Bigger than lawyers? Oh my, I’m sorry. All I know is when I want my Lincoln worked on by a certified Ford/Lincoln technician and the repair fully guaranteed for the life of my ownership I use a dealer. If I want a cheap oil change or new wiper blades I go to Pep Boys. Sounds like a free market to me. How about your Warranty service? Do you have “independents” perform that? Of course not. So you really do have choice don’t you? In our so called not-free market you can choose a dealers mechanic, your own independent or even do it yourself, can’t you? So where’s the monopoly?

    Hoagie (511e55)

  46. “So if you’re justifying these laws because of the honesty and quality of dealer mechanics, you are not convincing me.”

    I am not trying to justify these laws because of dealer mechanics. I’m trying to explain that keeping manufacturers out of the retail and repair sector opens more options for the consumer. That’s all. And I can read here you have a distain for dealers, their mechanics and apparently their ethics. So I obviously am not trying to convince you of the moral purity of dealers. (Ha, ha) But I would hope that poor ethics occur everywhere even with the independents.

    One thing I know for sure. All technicians at certified dealerships undergo intensive training before they’re set loose on your car. They’re not gypsies at the Lukoil down the road.

    Hoagie (511e55)

  47. That was supposed to read “But I would hope YOU UNDERSTAND that poor ethics occur everywhere….” Sorry.

    Hoagie (511e55)

  48. There are two kinds of monopolies. Vertical and horizontal. Vertical is where you own the farm, the truck, and the grocery store. Horizontal is where you own all the farms, or all the trucks, or all the grocery stores. New Jersey may have a valid reason for not wanting a manufacturer to have a vertical monopoly in its products. It may want dealers for the same manufacturer to compete in the sale of the same car. Ok. On the other hand, it may have created a de facto horizontal monopoly if the car dealers are a relative few and have a tacit agreement between themselves, a way of doing business if you will, to keep retail prices as high as possible. Which is worse?

    And, in any event, neither kind of anti-monopoly laws concern themselves with the consumer. They look at the effect competition, or lack of, has on the businesses. If the consumer gets any benefit, it’s trickle down.

    nk (dbc370)

  49. I am not trying to justify these laws because of dealer mechanics. I’m trying to explain that keeping manufacturers out of the retail and repair sector opens more options for the consumer.

    I think if the business model warranted manufacturers getting I to direct sales and service, they would have long since done so.

    JD (9c73be)

  50. I’m not sure who is trying to force what here. I am not sure how many people in NJ would want to open a Tesla dealership, though I guess some high end car retailers would like to offer Tesla under their umbrella with their other cars, rather than compete with it (I think there is a Cadillac luxury electric coming out…Hmmm, GM dealers manipulating the market through political means? I don’t know, will sit by and be edumacated).

    MD in Philly (f9371b)

  51. Why do you guys keep bringing up the term “Business model”? A business model can mean any damn thing you want it to. They’re as flexible as one of those bendy-straws kids use. I know, I’ve written them. They have more escape clauses than the Law dept. at Temple U.

    Auto manufacturers in the beginning were consumed with one thing (model, if you will); Building cars, period. But building cars isn’t selling cars. So they went out and “licensed” people to sell cars. Then They found when you sell a car you have to be able to fix the cars you sell. Now, once the manufacturers grew to the Titans of industry they became, what was to stop them from taking back all those licenses they had issued? Remember, the car dealers don’t own the Marque, they lease it. Then we would have ended up with that vertical monopoly nk mentioned. But no matter how you cut it with hundreds of dealers there is no monopoly vertical, horizontal or diagonal.

    Hoagie (511e55)

  52. MD in Philly, last year I got my wife a high end British car at Kerbeck in Palmyra, NJ. If Tesla was worth it’s subsidy, Kerbeck would sell it. They sell Rolls Royce, Bentley, Aston Martin, Ferrari, Lamborghini, Penoz, Maybach and others, so Tesla would fit right in.

    Hoagie (511e55)

  53. Hoagie,
    How about inviting the Mrs. and me to your next barbecue?
    As long as the dress is casual and you don’t mind a Ford Focus in your driveway…
    Seriously, as long as you goy it honestly, which I assume you have, good for you.

    I wrote a business plan once, for trying to market Windows based tablet PC’s before the iPad thing took off.
    The people I shared it with were not impressed, and I had nowhere to go with it.
    But then, I would be in a different place in life now if I did, and maybe it wouldn’t be better.

    MD in Philly (f9371b)


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