Tesla’s war

Sam Gustin has a couple of Time articles about the last-ditch stupidity of certain states:

The electric car maker run by billionaire Elon Musk is fighting powerful auto interests in states across the US for the right to sell its cars directly to consumers, upending the traditional dealership model. Tesla’s campaign to sell its electric cars directly to consumers shifted into high gear this week as state lawmakers debated Tesla-related bills while powerful auto lobbyists braced for a fight. In New York, a measure designed to ban Tesla from opening new stores (photo) passed a key hurdle, while, in Arizona, lawmakers pushed a bill to make it easier for Tesla to sell its cars without establishing a dealer network.
The escalating conflict underscores Tesla’s role as a disruptive force in the US auto industry, not only because the company’s cars don’t use gasoline engines, but also because Tesla is trying to upend the dealership-franchise model that has underpinned the automobile industry for decades. That model— and laws protecting it— emerged in the 1930s as a way for automakers to build a national sales and service force and help foster local economic growth.
Tesla sells cars directly to customers through its own retail locations— much like Apple does with its high-tech products— whereas other car companies rely on independently owned dealerships for sales and service. Auto-industry lobbyists say this model protects the public by ensuring consumer choice. They also warn that if Tesla is allowed to skirt the franchise model, consumers could be left in the lurch without a local service location if the electric-car maker goes bankrupt.
Tesla is currently barred or restricted from selling its cars directly to consumers in several states, including Texas, Arizona, and, as of last week, New Jersey. In those states, the company operates “galleries” where consumers can inspect Tesla cars, but employees are prevented from discussing pricing or offering test-drives. After inspecting a Tesla, consumers in those states can purchase a vehicle online.
New York state assemblyman David Buchwald will hold a press conference, joined by Tesla officials and environmental advocates, to oppose the New York bill, which Tesla says would end the direct sale of its cars in New York. The bill, which passed a key New York state assembly committee, and is backed by several dealership associations, would stifle innovation and limit consumer choice, according to Buchwald.
Meanwhile, in Arizona, lawmakers are set to consider a bill that would allow Tesla to sell cars in the state without establishing a dealer network, reversing a ban that dates back to 2000. “This is a great opportunity for us to send a message that we welcome business and we welcome Tesla here to Arizona,” state representative Warren Petersen, the bill’s sponsor, said in comments cited by the Associated Press. “We shouldn’t deny our consumers from being able to purchase a product if they want.”
The Arizona bill highlights an awkward situation facing lawmakers there. Arizona is one of four states that Tesla is considering for its planned ten-million-square-foot lithium-ion-battery factory, which would supply the company’s California electric-car-assembly plant. Tesla plans to invest two billion dollars in the new battery facility, dubbed the Gigafactory, and says it could employ over six thousand workers at the plant. Earlier this week, Arizona’s entire US congressional delegation sent Tesla a letter touting the state as an “ideal choice for this revolutionary factory”.
But even as Arizona officials woo Tesla over the Gigafactory, the company is prohibited from selling its cars directly to consumers in the state. (Texas, another candidate for the Gigafactory, also bars Tesla from selling its cars directly to consumers.) According to Arizona state senator Bob Worsley, the bill allowing Tesla to sell directly to consumers is “not a quid pro quo”, he told the AP. “I want the message from our state to be that we welcome the opportunity to work with large successful companies with this size market cap.”
Tesla is battling powerful state auto-dealership interests across the country. In Ohio, the state Automobile Dealers Association waged an unsuccessful legal fight to shut down Tesla’s two existing locations in Cincinnati and Columbus. Now the group is urging state lawmakers to pass a bill that would prevent the company from expanding to new retail locations by blocking auto manufacturers from obtaining dealer licenses.
Back in New York, the anti-Tesla bill is headed for a full vote just days after the New Jersey Motor Vehicle Commission, which is composed of political appointees selected by Governor Chris Christie, blocked Tesla’s ability to sell electric cars through its own retailers in that state. In response, Tesla CEO Elon Musk charged that auto-dealer lobbyists “cut a backroom deal” with Christie “to circumvent the legislative process”. Jim Appleton, head of the New Jersey Coalition of Automotive Retailers, shot back by claiming that Musk was having a “hissy fit”.
Musk mocked the “consumer protection” rationale that was presented. “If you believe this, Governor Christie has a bridge closure he wants to sell you!” Musk wrote in a company blog post. “Unless they are referring to the mafia version of ‘protection’, this is obviously untrue.’”
As a result of the new rule, New Jersey residents will soon have to go out-of-state or use the Internet if they want to purchase a Tesla vehicle. Musk urged would-be Tesla buyers to visit the company’s New York City store or its King of Prussia, Pennsylvania location near Philadelphia.
For his part, Christie blamed the New Jersey state legislature for effectively banning Tesla from selling cars to consumers directly in the state. “I’m not pushing Tesla out; the state legislature did,” Christie said at a town-hall meeting, according to the Newark Star-Ledger. “I have no problem with Tesla selling directly to customers, except that it’s against the law in New Jersey.”
New Jersey's motor vehicle commission blocked Tesla's ability to sell electric cars through its own retailers, so Tesla CEO Elon Musk is urging buyers to visit the company's locations in New York City and Philadelphia. He blasted New Jersey officials for moving to prevent consumers from buying vehicles directly from the electric car maker, charging that auto dealer lobbyists “cut a backroom deal” with Governor Chris Christie “to circumvent the legislative process.” In response, the head of the state Coalition of Automotive Retailers accused Musk of throwing a “hissy fit.”
As a result of the new rule, New Jersey residents will soon have to go out-of-state if they want to purchase a Tesla vehicle, and that’s exactly what Musk is now suggesting. In a blog post, Musk urged would-be Tesla buyers to visit the company’s New York City store or its King of Prussia, Pennsylvania location near Philadelphia.
For decades, the major US automakers have sold vehicles under the now-familiar dealership franchise model. As a result, the US auto market is composed of thousands of independently owned dealerships, which are granted the right to market and sell brands like Ford, much in the same way that fast-food restaurants like McDonald’s are independently-owned franchises.
“When Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them,” Musk wrote. “The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none.”
This market structure has created a conflict of interest that stacks the deck against Tesla, according to Musk, because the auto dealers “make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plugs, or fuel filter changes, no tune-ups, and no smog checks needed for an electric car.”
In the blog post, Musk wrote that he has “made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry, and happened to me personally on several occasions when I drove gasoline cars.”
Musk mocked the “consumer protection” rationale that was presented to justify the New Jersey rule change. “If you believe this, Governor Christie has a bridge closure he wants to sell you!” Musk declared. “Unless they are referring to the mafia version of ‘protection’, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.”
Kevin Roberts, a spokesperson for Governor Christie, defended the policy: “This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation, and Tesla has been aware of this position since the beginning,” Roberts told CNNMoney. Jim Appleton, head of the New Jersey Coalition of Automotive Retailers, denied there was a backroom deal, and told NorthJersey.com that Musk was having a “hissy fit”.
As for Tesla, Musk said that the company’s New Jersey stores will “transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our Manhattan store just over the river in Chelsea, or our King of Prussia store near Philadelphia.” Musk added: “We are evaluating judicial remedies to correct the situation.”

Rico says yes, yes, New Jersey is among them, of course. (So, you can have six thousand-plus new jobs, or you can protect your current dealers; you choose...) Rico still hopes his father will buy one...