Tuesday, April 08, 2014

What do New Jersey, Texas and Arizona have against Tesla?

Back in the last century, auto dealer franchise laws were adopted in response to the monopolistic behavior of car manufacturers.  They also kept a portion of the profits from car sales in the states where the cars were being sold.  The inefficient layer of middle-men may have inflated prices a bit but some of that money remained in-state where it could be taxed for effectively.

Now,Tesla is challenging that business practice.  In any given location, there aren't enough cars sold to support a traditional dealership.  And the prices are already steep enough such that bumping them up to support middle-men would hurt the small volume of sales even more.  Furthermore, no smudge-pot car dealership is going to be effective at selling Tesla's because of the conflict of interest that comes with selling a product that would supplant the product line that generates almost all of your profits.

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