General Motors Sends Anti-Tesla Direct Sales Letter to Ohio Governor

MAR 24 2014 BY ERIC LOVEDAY 166

General Motors Letter to Ohio Governor

General Motors Letter to Ohio Governor

Oh boy, the battle is a brewing in Ohio.

GM Isn't Happy With Tesla's Direct Sales Way

GM Isn’t Happy With Tesla’s Direct Sales Way

As Yahoo! Autos reports, General Motors is none too pleased with Tesla’s direct sales approach:

“We do not support Tesla being exempt from providing the same type of service we have to provide in Ohio — servicing cars and warranty.  Tesla is an automobile manufacturer, they compete with our vehicles in the market and they should compete under the same laws we do.”

Stated General Motors.

On March 5, General Motors sent the above letter to Ohio Governor John Kasich.  The letter doesn’t skirt around the issue.  In essence, it says that General Motors is strongly against the idea that Tesla could receive favorable treatment in Ohio if it’s allowed to sell directly.

GM argues that this would provide an advantage to only one automaker, that being Tesla Motors.

Ohio is one of the battleground states for Tesla Motors.  Ohio is currently considering an exemption that will allow Tesla to open additional stores within the state.  At the same time, Ohio lawmakers are drawing up bills that could ban Tesla’s direct sales approach.

It’s a battleground for Tesla and now General Motors is on the front lines of the opposition.

Source: Yahoo! Autos

Categories: Tesla

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166 Comments on "General Motors Sends Anti-Tesla Direct Sales Letter to Ohio Governor"

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Maybe GM should start selling direct….

THEY CAN’T! All the “big boys” have to play by 100 year old franchise laws. Tesla is asking for special treatment.

That’s what it sounds like. Since GM is stuck in a sh!tty situation, they think Tesla should be stuck in the same sh!tty situation. How about just eliminating the sh!tty situation for everyone instead?

+1

My understanding is that various state laws state that auto companies that have bought into a traditional business model of selling franchises cannot also sell direct to the public causing major conflicts of interest.

These laws DO NOT STATE that a new company that HAS NEVER SOLD IT’S PRODUCT IN SUCH A WAY HAS TO DO SO. THAT WOULD BE UNCONSITUTIONAL . It doesn’t matter what the product is – it is like saying donuts have to be vended in a predetermined way in that state or not sold at all. I know of NO LAW anywhere that says automobiles have to be sold by the franchise model by any new player in the industry.

What’s even more dishonest and bogus is these franchisees stating that they are fighting Tesla’s business model TO PROTECT THE CONSUMER! WHAT A MOUNTAIN OF *HIT THAT IS!!!

If anything causes ulcers in the common man, it’s tax time and when the time comes to buy a new car! Then try and fight service departments and ENTIRE CORPORATIONS to get your car recalled that has major flaws. Case in point – my Prius. The car has suffered regular recalls, its becoming a joke. While the feds and lawyers grabbed the spotlight with the unintended acceleration scandal, Toyota quietly pissed on Prius owners whose HID headlights would go out before the car warranty expired, or just after. Then Toyota had the stones to charge $1000-1800 PER HEADLIGHT TO REPLACE!

Yes, it’s these companies and their wonderful dealers who have our best interest at heart.

A couple class-action lawsuits finally got Prius owners HID Headlight relief. For me, I didn’t want to lie to have my Toyota dealer replace my lights – i.e.: telling them the lights were flickering and failing when they weren’t. So my wife and I painfully waited for them to fail – and they did, two months after the vehicle warranty expired. I fought and fought until they charged me $300.00 and replaced both headlights. Tell me how this stress and threats of lawyers is protecting me, the consumer.

Add GM to companies that do not have your best interest in mind.

I own a Volt, and it will be my last.

Go Model E!

I’m perplexed that you’ll no longer own a GM vehicle because GM wants a fair playing field for all automakers, to have legislation forcing them to use the dealership model removed.

But, people will “see” what they want, when they read a story, I suppose.

I also own a Volt, and my next vehicle will be… whatever vehicle best suits my needs.

James, I agree with EVERYTHING you said. I too own a Volt, but it will be my last GM car. Model E for me!

Why do you blame this headlight problem on the local dealership? And it sounds to me like they hinted to you what you needed to say to get it fixed by Toyota, but you refused. And now you are mad at the dealer???

This was a Toyota problem. The local dealer was following corporate warranty rules passed down to them.

How would it have been any different if the local dealership was out of the picture? I would think the dealerships were complaining loudly to Toyota corporate about this as well, as they are the ones losing customers over it, don’t you think?

JMHO

Isn’t that what GM is suggesting? Contrary to the Inside EV’s article title…

“Simply put, General Motors strongly believes there exists no justification for an INDIVIDUAL auto manufacturer to receive such unique, favorable protection under Ohio law.” (Emphasis mine)

So GM clearly feels that direct sales is favorable, and they don’t think it’s right for one manufacturer to have that benefit.

That does not sound like an unreasonable objection.

Oh no no no no.

Please don’t twist words around.

Nowhere in the letter does GM suggest it wants to do away with the dealership model. When this model is described, the letter uses only positive words.

The intent is rather clear: to ban Tesla unless it establishes a dealership network in the mold of Big Three dealerships.

IF GM CEO Barra has been unaware of this letter, she should fire its author immediately. If it’s with her support, then she should be ashamed.

Assaf, how do you figure? They call what Tesla would have access to “favorable,” that there is no precedence for an “individual” manufacturer to have that right,and they conclude by asking for a resolution that is “fair to all market participants”

GM doesn’t actually say how it feels a level playing field must be must achieved. It wins either way: franchise for all: Tesla gets stuck with an expensive retail model it can’t afford and will be largely eliminated as a competitor. Direct sales: GM gets more efficient retail options.

Note that forcing Tesla in the franchise model wouldn’t actually level the playing field since Tesla sells a product with fundamentally different economics as GM and would be hit harder by the downsides of the franchise dealer system as GM.

GM suggests discrimination but applying the same rules to different cases can be discriminatory too.

The same rules for everyone is not discrimination, by definition. It is potentially not advantageous, I agree.

I want Tesla to succeed. I still don’t understand why they couldn’t thrive under the existing model… Franchises that are simply required to only carry the Tesla brand. But I want them to have direct sales instead. I just also want other automakers to also have that option. Fair is fair. It will benefit all electric vehicle sales.

You really seem sympathetic of GM’s position.I also noticed that this your first appearance on this forum. Could it be that you are involved in some sort of professional GM damage control program? Seems to me GM realised that its action would be a PR nightmare and it could be useful to sent in the cyber shills.

Hi Chris,

Actually, I post here quite often, as I’m sure others can attest to. I’ve also been known to write an article or two.

Whether the letter was written by GM, Ford, or someone else isn’t of consequence to me. I just think all auto makers should have a chance to maximize plug-in sales by having this prohibitive legislation removed for everyone, not just Tesla.

That doesn’t seem unreasonable.

This is too funny, Chris. Mr. Cote has been an active participant of insideEVs since the forum started ramping up. He has even written articles for the forum. No, you are the relative newcomer here and accusing him of being a paid shill is more than a little over the line.

I too think that it is wrong for Tesla to be granted a special exemption from these moronic, anti-competitive, protectionist, obsolete, rent-seeking franchise laws.

Currently, these laws serve absolutely no purpose other than to protect dealerships from increased competition. They should have been repealed decades ago.

I find it interesting (and telling) that the GM letter does not advocate any particular solution to their “issue”. It is clear to me that they were quietly keeping the “repeal the idiot laws” remedy open.

“The exemption would allow Tesla to continue to sell vehicles directly to customers without utilizing a network of independent franchised dealers, which is PROHIBITED for all other automakers. Tesla would gain a distinct competitve advantage by avoiding RESTRICTIONS that all auto manufacturers face in Ohio…”

GM talks about being prohibited from direct sales, and that not being able to do so is a restriction all auto manufacturers have to face. How is that positive in any way towards such a model, as you suggest?

It could be their segue into asking for the same “advantage”. Time will tell.

I wholeheartedly disagree Clarkson. You forget to mention, “ESTABLISHED COMPANIES”. These are franchise laws for existing business partners who have bought into the existing model for selling cars. You seem to believe that the government should be able to establish by law how a hamburger is sold based upon precedents set by fast food chains like McDonalds. If that were the case, our avenues for enjoying a juicy burger would be highly limited. So, because McDonalds is rich and so are it’s base competitors like Burger King – they can force legislation to insure burgers cannot be purchased in frozen form, or in diner or café. Perhaps you feel letting established vendors control the way I can obtain a burger is justified? Read my above post and you cannot deny this battle is about established business who by law are locked into limitations on how they can sell cars are fighting a NEW MANUFACTURER, not limited by these laws because they never have used their franchise business model to sell their cars. Also, the cars in question are a “NEW KIND OF BURGER”. So in essence, all these battles are about how a new kind of car can be sold.… Read more »

If a car company believes it cannot sell electric cars on the same lot, under the same banner as their high-profit ICE cars – they can simply evolve or die. One way GM and their dealers can compete with Tesla ( ha ha – GM sells 1,000,000s of cars to Tesla’s 25,000 )…is to market their electric product under a completely different division ( ala: Saturn ). Manufacturers can develop new companies that sell only electric product. They can locate these dealers away from their ICE counterparts. They can even develop their own direct sales model with satellite service departments, like Tesla.

Does anyone remember the statement made by scientists in the documentary: Who Killed The Electric Car? who said, “in the history of the earth – any species that has refused or failed to evolve has gone extinct”. So automakers and dealers have to evolve – and if Tesla is this “disruptive technology” that GM refers them to – then, perhaps we are only witnessing the old dinosaurs fighting change for to survive a bit longer – at all of our expense.

(James) “So automakers and dealers have to evolve”

Then support automakers with laws that allow them to evolve.

Just because something is beneficial to the dealerships does not make it beneficial to the manufactures.

GM can not sell direct in Ohio or other states. They can in Brazil, and have profitably.

“Established companies” is simply legalese for an incorporated company. Everyone reads this letter with their own biases and opinions in mind and the resulting conclusions are borderline conspiracy theory.

If Tesla is the only company to have the right to sell direct, that is truly discrimination at its finest. Let all companies have the right. Then Tesla wins, and the playing field is level.

While I might say discrimination is due the behavior of some in the auto space, I think James is saying discrimination against the technology is being practiced, and the technology deserves an exception to the rule, just as EV’s get a battery tax-credit where oil unfairly gets much more in defense protection. Hybridcars.com reported 96k plug-in sales in ’13. That would be .7-.8 billion in tax credits, if all had 16kwh batteries.

The “gov’t shouldn’t pick winners” stuff doesn’t fly because it is both moot, and the private market is doing worse. If GM wants to address Tesla, let them also sell EV’s directly.

Hi pjwood,

You said, “I think James is saying discrimination against the technology is being practiced, and the technology deserves an exception to the rule”

So then let’s give an exception to the TECHNOLOGY and not just a single auto-maker.

Case in point: GM makes the Volt, which its owners LOVE! But the dealers, more often than not, want nothing to do with the vehicle. Many don’t sell it, many others don’t understand it. If GM could do the same thing with the Volt that Tesla wants to do, they’d probably sell many more.

I prefer the legislation forcing dealers be removed. But if an exception is instead to be granted for the technology, as you state, it should go beyond just Tesla… Which is what GM’s letter is requesting.

What a sophomoric comment: So let all of them ( established manufacturers who began and cultivated the franchise business model ) to now dump their dealers and sell direct.

Are you daft? They absolutely cannot. If they see Tesla and every other EV-exclusive manufacturer as a threat they are free to start new companies that will not compete with their own franchisees. It’s really not that complicated Clarkson, what are you not getting?

Look at the Saturn model. I’m sure established GM dealers balked at that too. It didn’t stop GM from starting Saturn and competing directly with their own franchise model with their other brands.

James, I didn’t realize we had to start resorting to name-calling.

After your comment about how government shouldn’t be involved in sales, you choose to be condescending at the idea that legislation restricting all automakers be removed.

You know your McDonalds analogy? Believe it or not there are restaurant chains that have corporate stores AND franchise stores, and they still survive. Your assertions don’t follow from what I’m saying, but you haven’t really been listening so I shouldn’t be surprised.

Between your name calling and self-contradictions, it seems the debate can’t be very productive from this point forward (not that it really was to productive to begin with).

I don’t think my point of removing legislation that limits the ability of manufacturers to choose how they sell is that crazy of an idea.

“You seem to believe that the government should be able to establish by law how a hamburger is sold based upon precedents set by fast food chains like McDonalds”

JUST THE OPPOSITE! Show me the law that forces McDonalds to sell ONLY through franchised restaurants. It doesn’t exist, yet such a law exists for all automakers.

I believe the government should not tell automakers how to sell their products, and that goes beyond just Tesla. An exception should not be made for Tesla. Instead, all automakers should be given the option.

You really seem sympathetic of GM’s position.I also noticed that this your first appearance on this forum. Could it be that you are involved in some sort of professional GM damage control program? Seems to me GM realised that its action would be a PR nightmare and it could be useful to sent in the cyber shills.

Hi Chris,

Actually, I post here quite regularly, as others can attest to, and even write an article from time to time,

I am a bit sympathetic, only because I feel all automakers should have a chance at making plug ins as successful as possible.

Whether the letter was written by GM or Ford or someone else doesn’t really matter.mmto me legislation should be removed instead of circumvented for one case only.

Completely agree with that,if you think or a new business model, you should be able to use it to your advantage (was Dell banned for selling direct),they should addapt instead not using their lobbying power.

I’m with you, Dawg. But to do it, we’ll have to find courageous politicians.

@kdawg, An enthusiastic +1 on your comment. That comment was the most concise, coherent, straightforward and entertaining synopsis of the GM position that I have read to date. Bravo!

You wrong auto dealers are like cartels. this model is over we the people DO NOT LIKE DEALERSHIPS and the salesman model.

BEVs are a disruptive technology. In fact they are more like a series of computers working together to control a four-wheel battery electric motor drive line. There are few mechanical maintenance requirements, no fluid changes except brakes, etc.

so EVs changes the rules, lots of rules, including the way you sell and service cars. Tesla sees no big deal, when most times buying and fault problems can be fixed using the internet and USPS.

Lets not forget most of a dealer’s money is made serving customer’s cars. The poorer the cars are made, the more money the dealer makes. Could it be that GM needs the dealerships to help cover the defects of poorly manufactured automobiles? In today’s news, I watched a video of a 2014 Yukon burn to the tires while on a sales test drive.

Dear Selim Bingol:
I’m never buying a Volt. You made that decision really easy for me just now.

Sincerely
Anderlan

PS (Only GM vehicle I would ever consider buying was the Volt.)

PPS (Or maybe the Spark EV if it had a Chademo port. But now they’re both out. Take a flying leap.)

PPPS: +1

+2, and we should also let GM know of our decision.

Judging by your previous posts, its not like you were about to buy a Volt anyway.

+1,000,000

Those “GM haters” always find a reason to hate GM cars and pretend to say they like the product and now they don’t…

A bunch of liers.. LOL.

I feel like everyone here is missing the point. GM’s letter states that every other auto manufacturer has to go through dealers for warranty issues, sales, etc. and that they feel the Tesla proposal is favorable, but not right to limit to simply one company.

Read the whole letter carefully. They’re not saying they’re against Tesla, in fact they’re pretty clearly saying they thing everyone should get this capability.

And why not? That is appropriate for competition, and it would also result in lower auto prices across the board.

if one reads the whole letter in the aggregate context that it conveys, there’s really nothing to be upset at GM for here.

They’re a business that wants that same benefit for every automaker that is being considered for Tesla.

What’s wrong with that? Nothing. If I’m going to be pissed at GM, it’s for not making another Voltec vehicle already, not for this letter.

The biggest complaint Volt owners have is dealing with dealers. If GM were allowed to eliminate those independent franchises as well, all the better.

Exactly.

GM haters will always find a reason to hate.

This letter is simple.

Tesla gets the exemption. But the same exemption should be applies to either ALL or NONE. That is what GM is asking for.

Personally, I favor the “none” part. But GM is NOT gonna fight the war across all 50 states and it is just asking OHIO to “level the playing field”.

Unfortunately, GM does not really care about you not buying a Volt 🙁

So GM is wrong to insist on a level playing field?

“Tesla being exempt from providing the same type of service we have to provide in Ohio”

Huh?

How could any auto company survive without offering service to their customers?

Tesla is at a disadvantage here, not being to able to tap into a vast dealer network.

What a nonsensical argument.

GM’s letter is stating that Tesla is being exempt from THE MANNER in which these services have to be provided. In other words, it’s more costly to do business the franchise/dealer way.

This jibes with a report previously by congress (?) that said a 20% reduction in vehicle prices could be had if the forced dealership model were eliminated.

So your logic is that instead of an evolution that is beneficial to the consumer – we should all be forced into the 20% more expensive model to protect the established businesses?

James, you’re completely ignoring what I’m saying. My point has been that every auto maker should be allowed to sell direct, rather than just Tesla.

Where does he say that? What people want is the ability for any manufacturer to not have use the dealership franchises.

There’s too many people here ready to jump on the “Hate GM” bandwagon, and it affects their ability to parse out the letter, and as you can see, put lots of words in my mouth that I never stated 🙂

It isn’t helped by a “GM is anti-tesla!” headline in the article.

GM is completely in the right here. Tesla shouldn’t have exclusive rights to do a direct sales model. EVERY AUTOMAKER should have the right.

I am with Clarkson on this one…..

If Tesla does not like the franchised dealer laws, get them changed.

But they have to be changed for all, not just Tesla.

I am just not sure that a non-dealership method of buying cars is what most people want.

There could be a lower price, but that also means major changes in how you buy a car. No more going to the dealer to buy a car and come home the same day with a new one. Keeping 500 cars and trucks on the lot costs a lot in interest charges for the dealer. And all those factory jobs they are kept running regularly because the dealers by lots of inventory may not be so secure if cars are only built when people direct order them.

Don’t forget that a large part of car purchases are impulse buys. Not everyone buys cars the way we do here on these EV sites!!!! If there are not a lot of cars to choose from on a dealer’s lot, many people will simply put off the purchase. That affects production. And production affects jobs.

JMHO

The independent dealer network is an enormous investment in servicing GM products for which they don’t have to invest any money and don’t run any risk. That is a huge advantage.

And no, the law does not prescribe THE MANNER in which to provide service. It only describes BY WHOM the service must be provided. Big difference.

Service is service and only generic consumer laws apply, to which Tesla has to adhere just as anyone else.

Mary Barra, GMs new CEO needs to come up with a better approach than whining to government officials about the TESLA sales model. If GM believes established dealerships are important, they should try to sell that as their advantage over TESLA.

Trying to get the states to make that dealership decision for the consumer is not working. It was embarrassing for government officials in New Jersey, and it is embarrassing for GM. Hopefully, Ohio officials will learn this lesson from New Jersey and not follow their mistakes.

Good job at twisting it.

I don’t see you holding a sign out there to favor the abolishment of all dealership REGARDLESS of brands…

I bought a Tesla for this very reason, I am tired of being bullied by dealers….Every time my BMW went in for an oil change it was a $1000 of extra crap they wanted to fix.

A lot of people would like to do that but cannot afford to, because Tesla’s vehicles are more than double average price of a new car. Why should Tesla get special treatment, why not all automakers?

There is no special treatment for TM:

Both TM and GM can not direct sell in competition with their franchises.

The new version of the franchise law is special treatment for franchises.

You know, the more I read on the topic the more I think that the distinction you point out could make a difference in some (but not all) states. I think some states the dealer associations have strong enough laws in place to require all new cars be sold through dealers not owned by the manufacturer. I think NADA chapters and other dealer associations have the system rigged pretty well, and changing it will not be easy.

I think some states the dealer associations have strong enough laws in place to require all new cars be sold through dealers not owned by the manufacturer. I think NADA chapters and other dealer associations have the system rigged pretty well, and changing it will not be easy.
Interesting change, isn’t it?

You can’t sell directly if you have granted a franchise
-> You can’t sell directly, regardless.

You can’t cross the road if the light is red
-> You can’t cross the road regardless.

You can’t kiss someone without their consent.
You can’t kiss someone regardless.

Ah, big bad GM has joined the dealers in their legal war against Tesla. Not as an advocate of the franchise system clearly, its argument is that not using that system is actually a competitive advantage for Tesla. It’s more like a “the enemy of my enemy is my friend” thing apparently. GM must figure that joining the dealers in targeting the retail system that fits the sort of product Tesla is selling is a convenient way to deal a major blow to an upcoming competitor.

Bit weird that it’s basically asking legislators to force Tesla into a system that it clearly considers uncompetitive itself .

Clever how it leaves out the part how using this system basically makes sales of all electric vehicles infeasible in the US because they don’t generate the sort of maintenance income franchise dealers depend on and selling takes more effort than it’s worth for commission dependent salespeople.

Makes me wonder how much more competitive BMW could be with its i3 or Nissan with its Leaf and e-NV200 if they were to open direct sales.

Customer: I’m interested in the Leaf.
Sales person: eh really? You know, these electric cars are just a fad and those batteries cost a fortune to replace. But listen I do have a great deal on this Sentra…

At least, that’s how Elon Musk figures his cars will fare if they end up in some franchise dealer’s showroom.

Nissan has actually been doing a great job in turning the Leaf into a flagship model, and dealerships compete in the amount of Leafs they sell.

But they’ve been the only ones. With GM it’s been the opposite. This letter – unless it is retracted – is the last nail in the coffin.

This letter is a lot better than Nissan’s comments about the NJ situation.

Also, not sure from your comment if you’d prefer to by your next Leaf from a dealer or directly from Nissan. It sounds like you’re saying the dealership model is working well for Nissan and your experience is good. When I shopped for cars last summer I got quotes for the Leafs from a couple dealerships, and of course they were not the same, leaving me to question if I had gotten down to the lowest possible price.

This was my exact experience when calling about the Honda Fit EV, the salesman tried to talk me out of it and into an ICE.

The Nissan dealership did not.

We now have a Nissan Leaf.

I agree with GM in that Tesla should not be uniquely exempt. All automakers should be exempt. GM rightly states this bill will create an advantage for Tesla, admitting the inefficiency and failures of traditional “independent” dealers to serve their customers.

Then again, Ohio is not a Right To Work state either. Same applies there, if a labor union is allowed to say who may and who may not practice a trade then why shouldn’t a dealer’s union be allowed to say who may sell automobiles?

I disagree on both points. If Tesla wants to sell direct then that is great! If John Doe doesn’t want to join a union or pay union dues then that too is great!

Note that GM is misrepresenting its case here by suggesting that it and Tesla offer similar products, yet get different treatment. BEVs are fundamentally different products from classic ICE vehicles in some respects and therefore need a different retail approach.

For one thing BEVs don’t generate the sort of maintenance revue that is the bread and butter of franchise dealers.

Also the product is new and unknown so sales need to be handled by specialist outlets that are conveniently located so people have a low threshold opportunity to get informed. It’s typical how the dealers -now supported by GM- are actually aiming for the mall location concept to be made illegal.

Tesla is not the only manufacture to make a plug in or ev. However, they are the only manufacturer to be exempt.

Are you saying that GM should be allowed to sell their “plug-in” cars directly to buyers? See how many states dealership would start the war on GM with that questions.

The truth is that NO automakers love their dealers. But they are forced into this by the law and NONE Of them is willing to fight the law due to the vested interest with dealerships that control their existing revenue. But Tesla has NO vested interests. So, it can fight the law without much at stake….

GM is just asking for the level playing field without risking its own investment in existing car sales….

There’s a lot of truth to what GM is saying. They are required by law to have this broken dealership structure.

If I were GM, I’d potentially take another approach: Use the opportunity to have a “Voltec” direct sales offering. Include the Volt, a Voltec SUV, a Voltec Minivan, etc. Anything with a plug, sell it direct, and push for legislation to allow that.

+1

That could indeed be the compromise, especially fair if we take Tesla’s viewpoint at face value, namely the fact that selling ICEVs and BEVs alongside causes a conflict of interest. Same with BMW and their “i” division.

I think that GM’s letter could have been written in a fashion more obviously supportive of Tesla’s position. However, that approach might have gotten them in hot water with the franchise dealers. And, so, they wrote a letter that for so many “scan” readers, appears to say that they are against Tesla’s position. However, careful reading, as has been done by Clarksoncote, shows that they are really asking for lawmakers to extend the franchise exemption to all car manufacturers. The author is really a seasoned politician. Everyone gets to read what he wants to read, while the real intent is slipped through. Neat. I hope that the Ohio legislature expands the exemption to all car manufacturers. Then, GM can operate as MacDonalds does 8^D

Really???

Tesla must service the cars under the warranty agreement.

It should be the consumers choice.

When online retailers started up, it was supposed to be the end of brick and mortar stores. The brick and mortar stores adjusted and it benefitted consumers.

Every Chevy dealership cannot service the Volt right now. One friend said the dealer service is over one hour away from his local dealership where the car was purchased.

Looks like GM has forgotten about their non-dealership experience with Saturn or maybe it’s just a tad of jealousy since the non-haggle direct model did not work for them.

Some people like the dealership model because they like the feeling of “negotiated” a good deal as the salesperson “worked it out with the manager”, getting mark ups on aftermarket stuff, financing ripoffs but I digress.

The franchise laws were put in place to protect the local dealer from the big bad auto company who could squeeze them out. It was not to prevent competition.

I bought a Tesla.

“Some people like the dealership model because they like the feeling of “negotiated” a good deal as the salesperson “worked it out with the manager”, getting mark ups on aftermarket stuff, financing ripoffs but I digress.”
———
I’ve never met these people

I’m one of those folks! I enjoy the “hunt”, playing one dealer against another. When you buy a Tesla, you pay ” dealer list” price, no negotiations, no fun. Who pays list price for a car?

You can get the same experience in Chinatown

Your definition of fun and mine are not the same.

And you payed dealer markups. Sure, that’s a better deal. lol
Do you really think the middle man does it to NOT make money? Where do you think the money comes from to finance that “Dealer Network”?
Not the manufacturers……YOU!
So is that “in the best interest of the customer”?

(Ken J) “Looks like GM has forgotten about their non-dealership experience with Saturn”

Or, they remember that Saturn was still subject to the same powerful dealership lobby interests and was not exempt from the rules, and that it ultimately wasn’t successful.

Then there is the confidence of service, the dealer network service department makes you feel ripped off. Like when they charge you the book time to repair something, even if it takes less time. So you get charged for the time an oil change should take instead of the actual time it takes.

The law was to prevent a manufacturer from creating a new product and circumventing their dealer network. Tesla does not have franchises — so this is not a problem.

I feel like your first point was quite valid and then your second went off the mark.

GM is pretty clearly stating that they should also be able to sell direct instead of Tesla being singled out.

That doesn’t seem unreasonable. It gets Tesla what they want, and removes that dated requirement for other automakers, leveling the playing field.

No, GM isn’t stating it wants to sell direct, it wants to force Tesla into the franchise model it knows wouldn’t work for it because EVs don’t generate the sort of maintenance requirements the expensive franchise system has become dependent on.

That’s not at all how the letter reads. Nowhere in the letter is the dealership model praised, and in fact, there’s only paragraphs to the contrary, citing that they GM is prohibited from direct sales, and has to deal with requirements that Tesla would not have to deal with.

Clarkson, I don’t know what kind of dog you have in this hunt, but I read the letter word for word, and I came to the same conclusion as Chris O.

Hi Rick,

Let’s break it down then. Please cite quotes for the statements you feel justify your conclusion.

I have no vested interest in either company, investment, employment, or otherwise. I do, however, want all automakers to succeed in selling electrified forms of transportation.

+1.

It’s funny that GM is the first to complain while also showing the world that dealers DO NOT ADVOCATE FOR THE CONSUMER. Notice the recall of 1.6 million ignition switches after allowing a deadly defect to fester for a decade. Dealer advocacy obviously fell on deaf ears, or it never existed.

The extent to which this ignition switch recall has been blown out of proportion is mind boggling. It continues to amaze me how much mainstream news distorts the true story, and how much the American public accepts whatever they say as true.

I know a lot of mainstream news stations that also say electric vehicles are golf carts…

The switch failure disabled power steering and brake vacuum pressure, from what I understand. If true, how is this not dangerous to the average Joe, or someone not strong, or fast, enough to react when it happens?

Because the “real story” only provided in some small level of detail and in passing, is that the switches only failed AFTER someone was in an accident, and due to all the heavy stuff people hang from their key rings.

So firstly, the ignition switches didn’t cause any accidents, and when they did fail, it remains questionable if they themselves caused deaths, which would be dependent on the extent of each individual accident, and whether or not the people owning the vehicle hung enough on the key ring to cause a failure of safety systems that could’ve otherwise prevented death if the accident wasn’t severe enough to cause it anyway.

Obviously Tesla — should be allowed to sell directly to the consumer. However, so should GM and every other company on Earth. GM is not objecting to auto companies selling directly to the consumer. GM is objecting to making Tesla the ONLY company allowed to sell directly to the consumer. That seems like a reasonable objection. It’s like Starbucks objecting to Peet’s being the only company to sell coffee tax-exempt. It’s fine if they’re ALL tax-exempt, not just one company. Tesla should be allowed to sell direct, as should EVERY other company. No special laws for one single company.

GM’s objection is not as reasonable as it seems. It disingenuously demands a “level playing field” knowing full well that the result would be a very “unlevel” playing field because Tesla offers a very different product.

The franchise system works for traditional cars that generate the sort of maintenance income franchise dealers need. Tesla would have to offer dealers a very large sales margin to compensate for a much lower maintenance revenue basically pricing itself out of the market.

Whether or not a company should have the right to sell directly should not depend on what kind of product it is. Who is to say who should have the right to sell directly or not? You have one opinion; another person will have another opinion. In my opinion, all of my competitors should be forced to sell in a particular way, whereas I should be free to sell anyway I want. How about that?

Definitely agree that no carmaker should be forced to use a middle man to sell its products. My point is that the franchise system is more harmful for the sort of product Tesla is making than the sort of products traditional carmakers are making.

It’s not the type of vehicle that matters, it’s the fact that Tesla does not have franchisees, therefor selling direct would not violate any franchise agreements. Period. It’s the status quo that wants to make it so that every car maker has to go through a dealer.

GM doesn’t care about Tesla breaking or not breaking a franchise agreement. What they care about is making sure they are able to compete on a level playing field. Direct sale is an opening to a whole different way of marketing cars, and Tesla should not be the only one with that advantage.

Exactly. I am 100% in FAVOR of allowing ALL manufacturers to sell directly. That helps consumers. I am 100% OPPOSED to allowing SPECIFIC companies to sell directly.

Doing this on a company basis is beyond stupid. That just distorts the market and replaces one from of crony capitalism with another worse form of crony capitalism.

I don’t think Ohio is actually about to exempt a specific company like GM is suggesting. I’m sure the legislation Ohio is contemplating would allow all EV makers without existing franchise dealers to be exempt from the franchise system. At this point that is just Tesla of course.

I agree that no car company should be forced to use a middleman.

The legislation makes a clear exemption for Tesla, not a removal of the franchising laws for everyone. That is the point of GM’s objection, to which I agree.

The Volt would sell in much higher volumes if the dealer network were not there. Some dealers are great, but unfortunately most are not.

+10

“Doing this on a company basis is beyond stupid.”

The original law did not do this. If a company granted a franchise, they could not compete with it.
TM did not choose franchises.
If they had, then this would be an exemption.

It is not COMPANY specific, but SITUATION specific.

What the Fu… One reason to buy a TESLA MODEL E!

Hey GM! How do you service faulty ignition switches responsible for dozens of deaths?

Oh wait.. you don’t!

Toyota just admitted to not only not fixing defects that caused deaths but having management actively lie and hide information that would have forced it to fix those defects.

I doubt that GM ever approached this level of evil. We’ll see how the GM investigation turns out but I doubt it will find anything like this. My guess is that the group looking at the failure of the airbags to deploy didn’t know about the ignition problems and never linked the airbag problem to it. Maybe there is more. Time will tell.

GM is right in one respect. If there is legislation that allows for direct sales to the public, then all automakers should have the same right. Not just one company.

But similar to NJ where it’s specific to BEVs with a certain critical mass volume before third party dealerships are required.

Which would also give GM and other automakers an opportunity to run their own clean EV stores if they choose to do so.

Buying and owning an EV is a completely different experience than buying a traditional ICE vehicle with a big ole combustion engine, with all the noise, moving parts and fluids.

I see buying an EV like buying clean, elegant, leading edge technology on wheels.

If GM offered a line of BEVs they would better understand. But right now with their plug-in hybrid Volt, they got one foot in the past with one foot in the future.

GM could have left it, complaining about the inequity, but went too far with “General Motors strongly believes there exists no justification for an individual auto manufacturer to receive unique, favorable protection..”

So, they “strongly” believe the acceleration of domestic energy consumption, the environment and the consumer’s wallet, shouldn’t be on legislator’s minds. There was tons of grey they could have left alone, but they went ahead and removed all doubt. I feel pretty strongly about that.

pjwood, I’m not sure how you take the direct quote you cited and then infer all that other stuff. This isn’t a green issue.

In the business world this is clearly a competitive advantage to one manufacturer, regardless of whether they sell EV’s or Hummers.

In reality, Ohio and all other states should consider removing franchise requirements altogether. It provides Tesla the sales model they need to not be dwarfed by common gas engine salesmen, while also keeping competition fair.

Clarkson, I don’t see how anybody taking GM’s side can give them credit for failing to justify the problems with the dealer model, to the Governor of a state no less. GM could easily take issue with it, but they didn’t. The low road in all of this is the status quo. I repeat, GM did not explicitly advocate for repealing dealer laws, in Ohio, no matter what some seem to infer here. That is not a free-market position, nor does it support innovation. Saying Tesla has an unfair advantage, is like telling me you are blind to all the other BS being put out there about EVs. Their costs are high. What free-market right, do you the consumer have to tell the auto industry you want them to spend an extra 4-5k, so you can pay back most of the higher price when you buy, and then save 6-7k over the life of a vehicle? If you care, you might assume you also have some right to effect which fuel your car consumes. Are you exercising this kind of free-market consumption, or is GM looking over its shoulder at VW, and Toyota, and deciding as a FRANCHISED group, that… Read more »

The issue with GM citing dealers is a matter of perspective. Think about it and their current position. They’re kind of between a rock and a hard place.

They probably don’t like the dealer model they’re forced to adhere to, but if they come out and say that, how do you think the dealers — the people selling your product — would react?

GM has to therefore be careful about how they word their opinion so as not to alienate the only people that can legally sell their products, while also taking exception to a company that can get around that rule.

So you believe that individual auto manufacturers should receive unique favorable protection? I see. Samsung can have a store but Apple can’t.

In what alternative universe would it be a good idea to have the government pick the winners and losers? We know from all the failed economic states how this works. Winners and losers end up being chosen on the basis of campaign contributions. Or maybe just bribes and kickbacks. Lovely. All I can say is “Wow, just Wow”.

I couldn’t agree more. Your Samsung vs Apple example is as good as any. Should Samsung or Apple get the right to sell directly to the consumer if they just lobby more than the other guy? It would just be an insane amount of arguments forth and back. Let every company sell whatever they want, to anyone they want, in any way the seller & buyer mutually agree. End of story.

You’re missing the point. What if Samsung had mom and pops pay outrageous franchise fees to quickly build out an extensive network, and then came back later and started selling direct and cut out the middle man and bankrupted mom and pop. But then apple didn’t have franchises at all. Should apple be forced to issue franchises so that they are on equal footing with Samsung?

p.s. I know neither of these conditions exist, it’s just an analogy.

One option would be to temporarily get rid of the dealer franchise laws in Ohio for 5 years. If things get out of hand reinstate the law. Do it Ohio, set a precedent.

NPNS! SBF!
Volt#671

The law should be written to allow BEVs to be sold independent of the dealer network. That has been Elon’s position all along due to the inherent conflict a dealer has between service charges for a BEV vs an ICE as service and parts are where the dealers make the bulk of their profit. GM, or any other manufacturer, could then sell BEVs directly, and leave ICE sales as is.

+100

NPNS! SBF!
Volt#671

Right! And anything with an ICE in it stays with the dealers.
Which would certainly push GM and Ford to increase their BEV production.

It shouldn’t matter what it runs on. GM profitably sold direct in Brazil. The manufacturers aren’t the ones that are against direct sales. Let them be competitive, and let consumers choose how they want to buy.

GM’s argument is NOT to allow them to do as Tesla does. It’s to force Tesla to do as they do. Because Tesla is a threat, they represent a new way of business, and it eliminates so much of the nonsense that goes on and has gone on for decades. If the dealer model thrives on service related work to generate sufficient income to be profitable, then let the dealer model continue, as they clearly want it to. But if a company has no dealer franchises, who does it hurt? Certainly NOT the consumers.

Exactly!

The dealer network currently holds a neck choke against existing auto maker….

Translation: We can not compete if Tesla can sell without pay the Dealership cartel their part of the cake, so we asked to you to help us to push Tesla screw customers as we the other car manufactures have to.
P.S. Please push Tesla to produce ICE version V8.

Thanks GM

Tesla should get into Ohio. Good of the consumer/environment arguments.

Considering all the preferential state tax subsidies that GM gets from the State of Ohio, I don’t think GM has a leg to stand on when it comes to complaining about special treatment.

From their special exemptions from property taxes, to their special exemptions from income taxes, to even special exemptions from K-12 school taxes, GM and other auto industry corporations gets more special treatment from Ohio than Tesla could ever dream of getting.

I’d prefer Tesla’s direct sales model, but they make nothing I can afford.

GM has a point. Its only fair that other manufactures can do the same instead of just one.

so every car company has to follow the same puppet scheme for the rest of eternity? Tesla doesnt want that do that bull****

Tesla isn’t afraid to be different, they are changing everything.

No. Let others besides Tesla sell direct.

Telsa shouldn’t get special treatment, direct sales should be an option for all manufactures.

Manufactures limiting public product offerings to franchisers is a throwback to Victorian notions from the era of prohibition and gender spheres. Beyond the 1920’s & 1930’s society didn’t collapse because women could vote, or an adult consumed a beverage.

Perhaps it’s time to reconsider the role of franchise businesses in modern society? Why is the purchase of a vehicle in the U.S. unlike the experience in other economically developed countries, or products tendered by other industries?

Let GM sell direct.

I wonder if Tesla has tried to argue that they are not subject to these laws because they are not a traditional car. The fact that they don’t have all the moving parts, heat, and liquids of a conventional ICE car, a Tesla should not be subject to the same franchise rules that arose partly due to the need for maintenance of ICE cars.

That is their argument. However, there is a lot of money to be made on servicing cars outside the drivetrain. Just looked at the 60k service interval on a Subie and almost all the items. Here is the list, once you take out changing the engine and tranny oil. There is still a lot of money to be made on ANY car regardless of the drivetrain.. Check to ensure air conditioning and heating systems are operating within factory specifications Rotate tires, inspect tread wear and check and adjust tire pressure as needed Perform brake system inspection; pads and/or drums, lines, hoses and fluid Inspect suspension system and steering components to ensure factory specifications Service battery, clean terminals, install anti-corrosion pads and check battery condition Inspect wiper blades and linkage operation Lubricate all door, trunk and hood latches and hinges if needed Inspect exhaust system and heat shields Replace front and rear differential fluid Adjust emergency brake to within factory specifications if needed Replace air filter element Inspect steering operation, tie rod ends and steering rack guides per factory specifications Inspect motor and transmission mounts Check all interior and exterior lighting operation Replace brake fluid Factory trained technician to conduct road… Read more »

Doesn’t the fact that Tesla hasn’t enslaved it self to the franchise model mean it is competing under the same laws. I don’t think the franchise laws was to protect one manufacturer from another. Rather protect the franchise from being under cut by the manufacturer.

GM chose to participate in the franchise model, so the laws should apply to them. Tesla on the other hand…

By that logic, someone who never chose to sell alcohol w/out a liquor license should get an exemption to be able to continue to do so. However, someone who wants the same exemption should not if they had ever played by the rules and had a liquor license. I disagree that this should work this way. If you exempt one let the others be exempt. For dealership franchises, get rid of the laws and let them all sell direct.

It is NOT a choice.

Dealership laws have been in place for a long time…

They are stuck in this thing until the law changes…

Tesla is fighting it b/c they got nothing to lose since it is ONLY selling 1 model right now.

Other estabilished automarkers have to sell their ICE models to fund their plugin cars right now.

GM created the franchise model – it was a choice.

I don’t see how dealerships and their associations should have the power to dictate how a company sells its vehicle. Why should Tesla be penalized for not opting in to a franchise?

I don’t see GMs problem. They don’t have any car that compares to the Model S. Not really.
And I agree. All manufacturers should be allowed to sell direct.

They have the Volt, but dealers have proven incompetent there. They either opted not to sell them (how can they even do this??) or don’t know much about them. Sales are lackluster in large part because of this.

Clarkson,
Sitting in an airport enjoying your fight. I read the letter somewhere in the middle. They want to stop the proposed legislation because it does not include them. That is the all or nothing scenario and EVs lose.

I think an op ed is in order describing an earlier comment releasing the voltaic as a separate entity. One should include the dealers who opted not to sell the ELR. Their is a model here that truly is a combination of you, James, Chris O, David Murray, and more.

The fact that – in theory – every dealer could opt not to sell a car, thus making it impossible for GM to sell the car as they can’t sell direct, just proves the dealer system is broken to begin with 🙂

Surya, you are 100% right, and if GM wants to fight that battle, then I’m behind them, but that is NOT what they are saying in this letter.

Has Tesla spent any money lobbying for the repeal of dealership laws, or just asking for exemptions for themselves?

Strangely, I agree with GM, at least in the way that they worded the letter.

Laws and regulations should not single out any individual. The rules should be uniform for all competitors.

Personally, I think that California’s franchise protections work pretty well. They basically say that a manufacturer may not open a “dealership” (whatever that means) within X miles of an existing franchised dealer. I think this is a perfectly reasonable restriction to protect the investment that the franchisees have made. If you want to be even more protectionist about it, you could even say that a manufacturer may not open a dealership if they have any other franchisees in the state. For a smaller state, that would be reasonable too.

“Laws and regulations should not single out any individual. The rules should be uniform for all competitors.”

And originally, they were.
>You may not sell directly in competition with your granted franchises<

No one singled out, same rule for all.

Then came the dealer organisation and got special treatment for themselves.
They got themselves singled out.

For those of you who thinks GM is favoring the dealer model, then just look up at how many dealers are refusing to sell the ELR and in addtion, how many dealers refuse to sell the Volt.

GM is at a choke hold by the dealership. It can NOT afford to fight all the dealers in all 50 states b/c its current revenue which will fund future EV development depends on that unless laws change overnight.

Tesla got nothing to lose today. It only sells 1 model and dealers have NO current revenue choke hold on the company…

The compromise should be that new laws allow any automakers with any plugin cars to sell directly to the consumer.

Of course, I am sure that dealerships will put “pressure” on automakers who come with the most plugin cars.

The reason GM and other manufacturers love the franchise arrangement is because it is a huge private subsidy that offsets their costs, protects them from many liabilities, while being able to dictate to the franchise how they can and can’t run their business.

For GM and other auto manufacturers to sell direct or open up direct sale stores like Apple is nothing but a money pit, they tried it before and have always failed,

that is what scares them.

Its not true that they love the franchise arrangement. What benefits the dealers does not necessarily benefit the manufacturers. They have butted heads in the past. If they could direct sell they would.

Where is your source for where they tried direct sales before and failed in a U.S. state? Challenges to the private franchise laws to be able to sell direct in the U.S. have failed: http://www.justice.gov/atr/public/eag/246374.htm

“because it is a huge private subsidy that offsets their costs, protects them from many liabilities, while being able to dictate to the franchise how they can and can’t run their business.”

I don’t get it. Unless you mean the dealership lots and building and all the local ads.

But generally, automakers fund the inventory cost at the dealership for at least 30 days and sometimes 60 days. All warranty repairs are billed to the automakers… Dealership don’t have to sell the car at what automaker wants. That is why it is called “Manufacturer Retail Suggested Price”. Dealership frequently mark up thousands dollars in high profits for hot models and frequently discount unfavorable models heavily…

If the dealer is out of the way, automakers can save much of that inventory cost AND potentially warranty service cost.

perhaps GM is just trying to scare the dealerships!? obviously they had higher expectations of sales and then find out from Joe public dealerships are trying to talk people out of buying them. I am sure all the GM haters can recall exactly how many gm was gonna make a year

I’m all for leveling the playing field for all manufacturers as long as the technology is a full BEV. Not a hybrid or PHEV, no ICE at all.

The auto industry did this to themselves. Just because they screwed themselves doesn’t mean the new kid on the block needs to get screwed too.

Hey NADA! ┌∩┐(◣_◢)┌∩┐

PLUS ONE!

So how are you going to deal with the BMW i3 which can be a BEV OR an EREV?

Wow! What a hot/controversial topic! Observation #1: A poll of the readership here is in order. I’m curious of the percentages among a green readership. Observation #2: This letter would not have been written if EV sales were not making a finacial impact. This is a historic milestone. Observation #3: Tesla is out for revolution and wants to be copied. What laws will facilitate current manufacturers to make and sell more EVs? Could selling only EVs direct finally be the carrot that gets other’s on board? Just a thought. Whatever law is enacted, it will influence existing EV sales from Nissan, Ford, etc. Observation #4: Many high end products are moving to fixed pricing: Apple, Tempurpedic, etc. I see nothing stopping car manufacturers from doing the same thing under current law if they did it across the board. Heck, theoritcally a manufacturer could legally sell direct via web like Tesla does now, at least I think. Which makes me ask what the real issue is. The truth is that current margins on new cars is horribly low for the dealer (I used to work for a Honda dealership). They gave you such a “good deal” on the car to get… Read more »

I thought maybe it was time to loom for the actual bill under consideration in Ohio. It is SB-260. Here it is:

http://www.legislature.state.oh.us/bills.cfm?ID=130_SB_260

And here is an analysis of the law:

http://www.lsc.state.oh.us/analyses130/s0260-i-130.pdf

What it says is that the two Tesla direct sales stores currently in operation can stay open, and that they can open one more. But any other requests from any other manufacturer MUST be denied.

Sorry but this is not right……

The existing franchise “laws at their core” were first proposed and lobbied for by the dealers themselves as a means to ensure that the manufacturer could not be in competition with them. They were trying to protect their own interests. Additionally at the time of these proposals there were no laws requiring manufacturers to utilize a franchise system. The manufacturers essentially created their own monster in enlisting the “then” help of and utilizing franchises to increase their footprint without using their own funds. Subsequently the franchises took on a life of their own and when they came under pressure from manufacturers who had realized that they had essentially lost the handle on controlling their brand image those same franchises banded together against manufacturer control and became too big to fail. Flash Forward… Along comes Tesla (note I could find no reference to “any” law requiring a “NEW” manufacturer to utilize the franchise system) As has been said elsewhere, Tesla HAS NO franchises which would come under the protections of existing law “as current dealers do” Tesla cannot compete against it’s own dealers because it has none!! ALSO dealer or franchise protections were not intended to protect any dealer against an… Read more »