DETROIT – If Tesla were to win its battle in Michigan and a handful of other recalcitrant states to bypass franchise laws and sell its electric vehicles directly to consumers, would other automakers follow suit?
Colorado dealer and National Automobile Dealers Assn. Chairman Jeff Carlson says he doesn’t believe so, though his group is adamantly against manufacturers, including Tesla, cutting out the independent retail network middleman and selling vehicles directly to the buying public.
The reason he’s confident the franchise model will remain intact? Cost.
“To try and sell cars direct and not have us as their inventory source is a couple-hundred-billion-dollar proposition (for volume automakers),” he tells WardsAuto here following a speech to the Automotive Press Assn. “The cars don’t just go off the line and to the customer. Somebody’s got to inventory them.”
Add to that the required investment in facilities, service and sales training and the prospect looks even less attractive.
“So I do not know of a manufacturer who has come out and said, ‛If we could, we would like to adopt (the Tesla model),’” Carlson says. “In fact, there’s a manufacturer in this town I’m not going to name that is nowhere near embracing the Tesla model.
“Volume is the enemy of direct sales.”
Many see a federal court victory by Tesla allowing it to sell direct in Michigan as the edge of the slippery slope that would erode dealer franchise laws and persuade other automakers to follow suit. But Carlson insists NADA’s opposition is more customer-focused, saying direct-sale methods cost consumers money and ultimately hurt the economy.
The organization cites Phoenix Group data indicating buyers pay as much as $700 less on a new vehicle when the model they are looking for is available from more than one dealer in their market.
“Inter-brand competition drives the price down,” Carlson says. “Tesla CEO Elon Musk basically sent out a communication to his people that they are not to discount their product, (saying) that he pays retail for his cars and he would expect his customers to pay retail for cars. I don’t think the consumer is going to support that – they still like the discount.”
The Tesla battle is just one of a handful undertaken by NADA, which is lobbying hard against several other measures it says also would cost consumers money and prevent policymakers from achieving their clean-air and traffic-safety objectives.
“Washington doesn’t always understand the negative consequences of its actions,” Carlson says.
In the group’s crosshairs is the proposed increase in U.S. fuel-economy requirements for 2025 that NADA says would inflate new-vehicle prices and shut some buyers out of the market. A better solution for boosting mileage and reducing emissions is to turn over the fleet faster, Carlson says, meaning policies should be focused on promoting new-vehicle sales, not discouraging them.
“If we can’t turn the fleet, we’re never going to get to the safety, the fuel economy, the autonomous stuff that we are (trying to introduce),” he says. “All of those things occur when dealers turn the fleet.”
The dealer association also is fighting increased oversight on auto loan practices it says would result in higher interest rates to consumers and excessive red tape in the handling of recalls that often negatively impact used-car trade-in values and take additional cash out of buyers’ pockets.
“NADA is in the business of telling Washington that they better get it right. And getting it right means keeping it affordable,” Carlson says, who notes his group was formed in 1917 to challenge a government plan to levy a special luxury tax on new-vehicle sales.
“So what NADA has said to leaders in Washington is that ‛We understand your goals and we agree with many of your goals, but we cannot accomplish those goals on the backs of our customers,’” he says. “We are the solution, not the problem.”
[email protected] @DavidZoia