There's already a Tesla store in Houston. How did they open that store, and will they be able to keep it open? I've seen a couple Teslas driving around Dallas, and am hoping to see more.
They also have one in Austin, but the greater issue here is that the stores can't help customers as much. Specifically, in order to comply with state laws the stores can't talk about the purchasing process nor help with the registration. Tesla's site has more details on what they can and cannot do: http://www.teslamotors.com/advocacy_texas
I remember reading some time ago that Tesla's loop-hole for opening storefronts is that they don't actually sell cars to people there... they just inform people about the cars and answer their questions. When it's time to actually buy one, they sit you down at a internet terminal and you order over the web just as you would if you were purchasing from anywhere else.
I think you pay the sales tax when you register the car, just like you would during a private sale. The only difference is that when you buy a car from a dealer, they probably help fill out that paperwork.
I could be wrong, I've never bought a new car & my current vehicles were both gifts from a family member which only carried a flat $10 tax.
In some states, Illinois for example, the dealership can register the car on your behalf and collect tax at the time of the sale. When you leave the dealership, you already have your permanent license plate along with the registration sticker and get to skip the DMV altogether.
I don't believe Texas even allows for in-store internet sales. Last I heard Tesla couldn't even inform people in the store how much the cars cost. Tesla also cannot deliver the vehicle to the customer, the customer must provide arrangements. Oh, no test drives either. It's absolutely ridiculous. I assume they opened the store just to have a better argument against the dealership cartel.
I wonder if they could get around the "no test drives" rule by opening a "Tesla Car Rental" chain, where you can rent a Tesla for a day. This way they are neither selling nor testing cars, but people who are interested would be able to try it out.
They can show the demo car and the skateboard model (i.e. wheels and battery pack) they have in the store, and they can answer technical questions about the car, but they are not allowed to discuss prices with anyone nor are they allowed to facilitate the purchase. There are further frustrating restrictions in Texas around the service of vehicles. The Tesla service center cannot directly handle a request for service. The customer must call a department in California and make arrangements with them, then that department forwards the request to the Texas service center.
This information is based on what I remember of reading various posts in the teslamotorsclub.com forums.
However it is important for them to make a point why they are not allowed to do that.
Tesla buyers are not average Joes, they are people with money. People with money have connections, often political. Annoy just a few rich people and it is like magic, the legal and lobbying wheels start spinning.
It's an "Educational Showroom" not a dealership. You can see the car and have questions answered about it but they can't tell you the price or actually sell you a car. You can buy a car online and they will ship it directly to your house (on a massive truck). Because it's not a dealership, you can't go there if you need repairs, instead there is a little repair truck which drives out to your house and repairs the car.
There's already a Tesla store in Houston. How did they open that store, and will they be able to keep it open? I've seen a couple Teslas driving around Dallas, and am hoping to see more.
All too often, the media as well as average people mistake support for corporate interests as support for "free enterprise." When large corporate interests are essentially writing bills for lawmakers, "free enterprise" is precisely what is not being practiced.
The large corporate interests have the infrastructure in place and don't particularly want to sell directly. This regulation serves as a moat to keep out competition.
To be clear, this is more about inertia than it is some nefarious cabal erecting barriers to Tesla.
But, if the regulation was a big problem for the corporate interests? The regulations would definitely not still be here. When it comes to money and regulations, I like to picture water acting on rock over time -- they get carved away a little bit at a time.
IIRC auto manufacturers are prohibited by law from owning dealerships. So Tesla would be introducing a dependency of variable quality between itself and its customers.
> What's stopping Tesla from partnering with Toyota dealers?
My guess is Tesla not wanting to slap a bunch of dealer costs on top of the cost of the cars.
> Tesla could build 10 very nice dealerships for 1% of its valuation.
As I understand it, Tesla owning those dealerships would be just as illegal. If Tesla doesn't own the dealerships, they're either going to share the profits of the sold cars with the dealership or deal with the dealers markup and dealers fees increasing the costs of the cars.
If true, then given the fact that there are about 20,000 car dealerships is Texas (http://txdmv.gov/dealers-portal/motor-vehicle-dealers), that means the dealerships outweigh Tesla by a factor of 20. And that's not even counting the fact that these are all dealers in Texas, whereas Tesla's presence applies to the entire country. If we assume Texas is about 1/10th of the US, that means the local dealers outmatch them by a factor of about 200.
It's mentioned in the article that joining the dealership network is relatively more difficult for a startup like Tesla than the other big manufacturers.
Also I don't see why being able to sell directly to consumers should be count as a "special rule". On the contrary, being forced to find a dealer in the "network" to work between you and your consumer is.
It should be considered a "special rule" because an exception would be made for Tesla, and no one else (including other small car manufacturers). Either let every car manufacturer sell directly or don't.
I think they made it 'special' to try and get it passed. The car dealers would probably commit every single cent they had to stop such a law if it allowed all dealers to sell direct.
Tesla would probably be fine with allowing everyone direct dealerships, but the dealerships are not.
I think that is the point. Change the law. Ford, Chevy, etc may not want to go the "dealer not required" route and continue to use dealers. But at least there would be options.
The original intent of the law was not to prohibit manufacturers from selling direct. The intent was to prevent manufacturers from competing against their own dealerships. Tesla has no dealerships.
I'm baffled. Who is arguing for Tesla to get special rules? They're simply not going to sell in markets that don't allow them to sell how they want to.
doesn't answer the question, why should Tesla be granted an exception not available to other automakers? Chrysler has had all sorts of problems with franchise law in California in regards to operating their own.
From a different perspective, what's wrong with car manufacturers operating their own dealerships? (I'm curious: there very well may be a down side, but I haven't thought of it yet.)
Early on, cars were sold by local dealers. Later, when manufacturers wanted to sell direct they learned that local politicians cared more about the business down the street than some giant company in Detroit. Therefore, all manner of state and local laws got passed to protect dealerships' turf.
In a lot of ways, car dealerships are perfectly suited to exercise power in state legislatures. No matter what poduck district a state lawmaker comes from there are probably several car dealers there. They're often some of the most locally famous people thanks to the amount of advertising their businesses do. I couldn't name my gradeschool teacher from 30 years ago but I sure could tell you who owned the largest car dealership in the area... and sing his radio jingle.
By contrast, few state lawmakers have a Ford or GM plant in their district.
I think the point is that other car manufacturers don't want to sell directly (just as the rich don't want or need to sleep under bridges), thus the law does not affect them.
It has less to do with money and more to do with interest.
And the law is stupid: it protects a method of sale which is altogether irrelevant to the economy, except in the sense that dealerships want the law because it prevents competition and secures their position in the market. Preventing competition is not in the best interest of the economy, the people, or the government, so the law should be changed.
If you're looking for the justifications, here's an explanation from a Cato article (pp. 3-6):
Why Restrictions on Online Auto Sales?
The franchise laws that inhibit the new business models for car sales from spreading online are defended as being important for protecting dealers and consumers from automobile manufacturers. Defenses of those laws, which became widespread in the 1950s, revolve around two arguments: first, that restrictive franchise laws are needed to protect consumers and, second, that such laws are needed to protect distributors from rapacious manufacturers[...]
They shouldn't. ALL manufacturers should be able to sell direct to their customers. We have this same problem here in NC, and I'd be somewhat opposed to a bill which carved out an exemption just for Tesla. But I'd wholeheartedly back a bill that approved "direct to customer" sales across the board.
Exactly. I agree with you that car manufacturers should be able to sell directly. I'd love to buy a BMW directly instead of dealing with a dealership. The laws prevent BMW and other car manufacturers from doing so. The laws need to be changed, but until that happens, IMO everyone should be following the same rules.
I suspect it would be better for everyone if special dealership regulations were broken down. But, given that Tesla is a new car company, without any historical dealership agreements, why should they be bound the inefficient legal infrastructure that essentially cropped up around private contractual agreements between other car companies and dealers.
Any of those dealers would love to sell Tesla cars, especially the higher-end ones that sell BMWs, Mercedes, Porsches, and Lexuses. Nothing is stopping Tesla from partnering with dealers to do so. Small Chinese car manufacturers don't get special treatment. Why should Tesla get them?
I know the dealership laws are awful, but IMO we should be focusing on changing those laws instead of giving special treatment to particular companies.
All your arguments divolve into this one statement: I know its awful, but we need to do the right thing.
The world does not work that way. You can not put off inventing transport just because you have not invented teleportation yet. Things work in small steps.
I don't think anyone is suggesting Tesla get special rules (except maybe Tesla). More likely is an interest in seeing existing automobile franchise and anit-trust laws reviewed and possibly changed to remain in line with consumer needs, interests, and the operation of a healthy market.
You do realize that manufacturers cannot sell directly as a result of dealerships lobbying & litigating to restrict and, ultimately, abolish the practice, right?
In response to the "why should Tesla get this when other automakers don't" angle:
Nobody is saying the law is at all fair to Ford, GM, Toyota, etc. It's not. They should be able to sell directly to consumers also. The law was lobbied for by dealers in Texas, and signed by America's greatest president, George W. Bush, when he was still governor of Texas. Bush was a true conservative who believed in free market principles, except for when he wasn't.
Let's not pretend this is Tesla vs. Ford/GM/Toyota. This is Tesla vs. the good old boy, rent-seeker network that is the auto dealer lobby.
Car dealerships are some of the last dynasty busineses. Ever wonder why most family run businesses eventually fail when an incompetent son/daughter takes over, but dealerships just stay around for 3 or 4 generations? Its because its a rigged market that requires no skill. The profits don't come from adding value. They come from gouging consumers.
Tesla is just a new reminder that we are being screwed, and they don't have the inventory to support the network of the dealership mafiosos and their fratboy progeny.
"Dude, my dad owns this dealership, so I totally know business bro......" (overheard at every frat party ever)
I believe the issue bob13579 is bringing up (in the least helpful and most aggravating way possible) is that these bills effectively single out Tesla. Read the amendment in section 1. I think it means that the exclusion would only apply to electric- or battery-only car manufacturers doing business in Texas on or before 3/1/2013. This is surely only Tesla.
My opinion is that the existing law should not exist. But it does, and (again, my opinion) if this bill had 'done the right thing' and tried to remove the protection for all dealers, it would have received even less consideration.
Is this protectionism something that can be tested for constitutionality in the courts? Has it been already? It seems like the sort of thing that ought to get litigated.
That doesn't make any sense. Are politicians born with a magic birthmark that allows one to differentiate them from non-politicians?
Politicians adapt themselves to the carrots and sticks of their environment, just like CEOs, blue-collar laborers, and everybody else. For better or worse, they are a reflection of their constituency.
I think he's pointing out that Louis CK also sells his product directly to his customers instead of going through a middleman like Ticketmaster/Dealership.
For the record, you also cannot sell dildos in Texas. I don't know why people are always crowing about how Texas is the land that respects individual rights and free enterprise. It's not. It's the land of unlimited corporate malfeasance, unchecked pollution, and a ban on fire codes.
Sure, by a federal court. The state, under the same governor who is still in office today, went to court and argued that Texas had a compelling interest in preventing people from having sex for reasons other than procreation.
Yeah, it's an example of government as envisioned by the founders working as intended - when someone at the state level overreaches, a federal court strikes it down (I'm hoping the same thing happens to this absurd law regarding dealer sales). This happens in more places than just Texas.
Doesn't change the fact that your first statement is not factual anymore. Given time I think we (Texans) can eventually stop / vote out all these morons who think legislating morality is their job - we've been headed that way last few elections anyway.
I don't live in Austin, and Austin isn't as special as it thinks it is. I will repeat myself - I live in the fourth largest city in the United States, which happens to be in Texas, is not Austin, and has a homosexual mayor, who is (all things considered) a fairly conservative Democrat. Some people are just pragmatic.
Glad to hear it. Just consider this poor bastard, who was recently sentenced by said morons to 50 years for the entirely non-violent act of shoplifting a package of ribs.
It seems he was sentenced not for stealing ribs, but because the threatened the store owner that confronted him, which is, in fact, a violent act. It also appears he was somewhat of a habitual offender, having been convincted of various violent and non-violent crimes many times previously.
The sentence is somewhat harsh (eligible for parole in 12.5), but your comparison to the Taliban is absurd.
EDIT:
somewhat harsh in relative comparison to normal American sentencing standards, since the goal is apparently to single out Texas as some horrible place where sentencing is too harsh. I will now point out draconian three-strikes laws in other more progressive states that would have had him in jail for life.
Make no mistake, I think American criminal courts and sentencing are too harsh in general and our prisons are horrible travesties of justice. But the singling out of this state is what I'm calling absurd - all of American criminal sentencing is broken.
The clarification here on the details is certainly nice to have.
However, are you seriously suggesting that 50 years imprisonment is only somewhat harsh?! Taking 12.5 years at the minimum before being eligible for parole for stealing $35 ribs and "threatening" someone?
By the way, saying "I've got a knife" and calling that a threat is both a stretch of what it means to threaten and what it means to call something a "violent act".
$35 food theft != 50 years imprisonment. That is fucking insane, not somewhat harsh.
(Shrug) I'm guessing the rest of us can get along OK without this enterprising young gentleman. It's not as if he's likely to cure cancer or start the next Google.
I would think the sentence reflects more his continuing criminal career than the immediate crime at hand.
I'm not sure about this case, but it could much like the three strike laws mentioned above. He only got five years for the robbery, five years for the threat, and forty years for his habitual criminal activity. As stated, in three-strike territory he possibly would have gotten life simply for the robbery of $35 worth of ribs.
I agree with the above, singling out Texas as some kind of outlier for this type of thing doesn't seem quite right.
I'm not picking on or singling Texas out. I don't care which state it is.
Life imprisonment for stealing $35 of food is bullshit. Repeat offender or not.
There's a fundamental problem with a society that is okay with an increasing prison population spending their entire adult lives there because of terminal sentences on the basis of recidivism.
Increasing sentences for recidivism itself is constitutionally debatable, I think, though I'm not sure if it has been challenged on that basis. This is America, though. It'd probably stand cos we like the idea of systemic incarceration as a means to low crime rates.
Not that I necessarily disagree with you, but some might complain there's little difference between stealing $1000 over ten criminal acts or all of it in one robbery.
I don't like to harp on things that have become politicized too often, but this particular case stands in such stark contrast to bankers who made off with billions, none of whom to my knowledge are spending the rest of their lives in a common prison.
That's why the howls of injustice, to quote another commenter. $35 in ribs, taken by repeat offender, is apparently a greater crime against society than the repeat offense of fleecing the entire society.
The charge was not shoplifting and that headline is preposterous.
When will people get the difference between theft and robbery through their heads? One is a property crime. The other is a violent crime.
But sure, just go ahead and say you'll get 50 years for shoplifting. You get more clicks and you can be seen as indignant and virtuous.
EDIT: Ok, so I'm wrong about Ward actually threatening the clerk. But he was a multiple felon, and the jury apparently believed the testimony that he had a knife (which would have been illegal for a multiple felon to carry).
My comments in general still apply to many, many stories that are presented the way I originally described.
Uh, you didn't actually read the article, did you?
If you did, you'd understand that yes, it was shoplifting. He was apprehended after the fact, at which point the shoplifting was discovered. When asked if he had anything else, he replied that he had a knife, but didn't actually show it.
In other words, there was no violence committed or even threatened in the course of the crime. There was no violence committed or credibly threatened after the fact. There was simply a statement, which could easily be seen as a confession, that he had a knife in his possession.
> Yeah, it's an example of government as envisioned by the founders working as intended - when someone at the state level overreaches, a federal court strikes it down
Jeffersonian democrats certainly were against that idea, as evidenced by nullification, which was in issue up until the civil war.
Maybe the federalists, but it sounds extreme even for them.
It sounds like something that the northern politicians had in mind in the late 19th century or maybe early 20th century.
Washington and Hamilton -- the Federalists you mentioned -- desperately wanted a strong federal gov't with supremacy over state laws. Washington wanted the powers of the federal gov't enumerated in the constitution (and many of them), and his desire was for a unicameral legislature with direct popular representation.
That our constitution ended up vague on these issues-- and the existence of the Senate with its state-appointed representitives-- is owed to negotiation and comprimise. Of course, Washington presided over the congress on these issues, he was not himself a delegate, so you don't have a lot of direct quotes on these topics but what we know has been pieced together over the years from his (limited) correspondence and 2nd party accounts.
I thought that was changed about 6 years ago? Prior to that you could sell things that were almost completely like dildos, but they were called "demonstrators" for educational use only. Interestingly enough, they were only illegal if marketed for vaginal use and not for use in other ways since the other ways weren't considered "sexual."
This doesnt contribute to the OP's discussion but i thought i'd mention it anyway.
Texas love executing people. Since 1976 Texas executed 498 people, the state in second place is Virginia with 110. Also, their supreme court does not hear criminal matters, only civil, because it makes the appeals process for executing people faster.
Texas has a little over 3x the population of Virginia with 4.5 times the number of executions. Keeping in mind that crime isn't necessarily consistent from place to place I don't think that is a drastically larger number proportionally.
That's assuming, of course, that Virginia is at all representative of the US as a whole. The median execution rate by state is about 1 per million residents since 1976. Texas's, while not the highest, is almost 1 per 50,000 residents. Its not the worst, but its still something of an outlier.
The worst, incidentally, is Oklahoma, at about 1 per 40,000 residents.
> Also, their supreme court does not hear criminal matters, only civil, because it makes the appeals process for executing people faster.
No. Texas simply has separate civil and criminal courts. The Court of Criminal Appeals is the supreme court for criminal cases. The Texas Supreme Court is the supreme court for civil cases. A convict can appeal through the intermediate appellate courts and then the Court of Criminal Appeals (and then perhaps later state-level collateral attack or even federal habeas). The criminal appellate process in Texas has as many steps in it as most states have.
People "come up with this crap" by being literate.
Texas Penal Code
43.21 DEFINITIONS
(7) "Obscene device" means a device including a dildo or artificial vagina, designed or marketed as useful primarily for the stimulation of human genital organs.
Sec. 43.23. OBSCENITY. (a) A person commits an offense if, knowing its content and character, he wholesale promotes or possesses with intent to wholesale promote any obscene material or obscene device.
Ah, I see. It's legal to own dildos, it's illegal to promote dildos (so that's, what, selling a dildo, or does telling people how awesome dildo are count as promotion too?), and if you've got more than six dildos, or two the same, that's too many for personal consumption and you must be an illegal dildo-dealer.
If I made this up, people would tell me it was laughably unrealistic :)
Funny how similar it is to the alcohol situation. Its illegal for a brewery to sell beer directly to the public in Texas, they have to go through a middleman (distributor) that doesn't really provide value.
Although in the last legislative session the rules got relaxed somewhat ( especially for brewpubs ), its still pretty similar.
This isn't just a car issue, it is a "protecting local business" issue. Every state has some industries that they mandate a middle man. They either do it through licensing or just straight up saying the manufacture cannot sell direct.
Shallow articles like the link don't really help the situation. We really need to start looking at removing the government from business models when there is no actual public safety aspect(1). This is a much wider problem.
1) I do believe Florida is one of the state that licenses interior designers on the theory poor interior design could kill someone. This too should be revoked as it is among the stupidest safety concerns ever.
If you talk to a Pennsylvanian about it, chances are they will tell you about how they have "Communist liquor" (and yes, the "communist" word there has all the negative connotations you might expect from such a rural state).
I suppose Pennsylvania does not quite have that same 'exceptionalist' attitude as Texas does.
> Its illegal for a brewery to sell beer directly to the public in Texas, they have to go through a middleman (distributor) that doesn't really provide value.
This is true in most states. It isn't a 'Texas' problem, it's a 'USA' problem.
Was there a mistake in the article? It said that the legislative body would not meet again until 2015? Also, I wonder what affect Big Oil had on the outcome?
Texas has a part-time legislature. There's also no need to go looking for pantomime villains; car dealers are hugely powerful in local and state politics. They're the rock that Tesla will founder on.
I'm of two minds. Is it really OK to have fundamental decisions about a system as large and complex as Texas' state government ultimately be decided by so unserious a group of people? Or would they just do more damage if they were around more?
I don't live in Texas, so I have no dog in the fight.
I don't live in Texas either (and I've been instructed to never mess with them) so I don't have a dog in the fight either. But it seems to me that if they meet every 2 years, the work load they would have during that meeting would be huge. Would attention to detail about what they are deciding on be hindered by having such a large volume of stuff? But maybe they do lots of stuff in between the meetings to prepare. It just seems odd to meet about stuff that might have been sitting there waiting for 2 years.
Well its both a reference to bab5 and to the French tendency to pick and support national champions conveniently ignoring the EU treaty's when it suits them.
eg it was US multinationals that got raided over the 35 hour week
Tesla said it best: "Tesla will sell its cars the way it wants. If some states don't allow that, then Tesla will simply sell them elsewhere."
When a piece of a neural network becomes corrupt and entrenched beyond repair, (cancerous) the tumor or cancer fights to protect itself, there are two solutions to these kinds of problems.
1. One solution is what Musk is doing, treat the dealerships as a cancerous growth in the mind, and pathways are built to bypass it, route around it. Don't fight it, don't fix it, don't interact with it. Establish as many barriers to its growth as possible and starve it so it doesn't grow. Eventually the superior paths created by Musk are the preferred ones to use, and the defective paths are garbage collected. The cancer will seeks to prevent the growth of new pathways because it does not want to be garbage collected.
2. Remove the growth. When the surgeon finds a tumor or cancer in your brain, it doesn't try to coax it to become better or try to "enhance it" to be better. A hole is cut in the head, and lasers and scalpels are used to physically remove the cancer.
These are the only two options to deal with cancerous growths working only to maintain its take on the system.
The metaphor is cute, but maybe overstated. Tesla isn't doing this because it's what a self healing network would do.
Tesla is doing this because it's a rapidly-growing startup whose production facilities are heavily oversubscribed already. They have no net downsides to giving up the "Texas" market for now, because they don't have enough cars to sell even without Texas (and the handful of other such states).
Eventually that won't be true. Once ramped up, they'll want that Texas market. And at that point someone will have to bend. Musk's bet is that at that point Texas will cave because they don't want to deny their voters the chance to purchase this great new car. Texas's "bet" (really the dealership lobbyists' bet) is that Tesla ultimately won't be successful and that by holding their ground here they will discourage other manufacturers from trying the same thing.
IMHO, things make much more sense when you argue in fact instead of metaphor.
>Once ramped up, they'll want that Texas market. And at that point someone will have to bend.
My money is on Tesla coming out on top here. Musk strikes me as the type of person that would rather give up sales while holding a huge "Fuck Texas" sign than to give in.
Edit: Added the parent comment I was responding to. Yes, Tesla is playing nice right now. That puts them in a better public opinion. But eventually they'll either step up their game or walk away from Texas. I don't see them giving in. But only time will tell here.
If the Texas Auto dealers were smart, they would buy some lobbyists to give extra incentives to Tesla to bring them on board with the corrupt system. For example, the dealerships selling the Tesla vehicle at no cost, or maybe even provide an additional $3000-7000 tax credit only for Texans. Or perhaps giving Tesla a bushel of cash for every Tesla sold (temporally) through dealerships.
Then when Musk is on board and massive profits streaming, the credits will revert back to burdens on Texans. The cancerous dealer network remains with us for another few decades until the next chance at a disruptive technology to remove it.
Car Dealerships should go the way of newspapers. Imagine if newspapers used their financial might to squish the Internet when it was just a wire between two research facilities? If newspapers hired lobbyists to create laws making it illegal to route around newspapers, then could they how long could they have delayed the internet?
That's really the operative phrase isn't it? I think we've already established that some people aren't above burning down their own house to evict an unwanted guest. As it has already been pointed out though, Texans are good at one more thing: Voting people out.
You're getting to the real heart of the problem though. The dealers are taking the retro-futuristic approach the newspapers didn't take with the internet. But then the newspapers didn't know just how disruptive that wire will become either.
> IMHO, things make much more sense when you argue in fact instead of metaphor.
This is true. However, are you actually arguing in fact? Your statements read as an outside agent judging the intentions and motivations of other agents. Perhaps you're part of one of the groups and actually possess insider knowledge here?
Another potential outsider's reading of the bets and motivations at play (this taken from nearly 4 years working with auto dealerships):
The dealers have built up reliance on a system that allows them to screw over consumers in myriad ways that make them very good money every time a consumer needs a vehicle. They've already seen sales erode due to the economy, as well as the rise of internet-powered sales channels like craigslist, ebay, etc. While they cannot do anything about the former, the latter has been generally approached with dealers getting involved in listing their vehicles on the internet in an effort to constantly re-inject themselves into once private p2p marketplaces.
The dealers no doubt want Tesla to be successful as a manufacturer, they just do not want to allow a new precedent to establish wherein they are not standing as the gatekeepers between consumers and they cars they want. This has been a lucrative business model for them for a very long time. Everybody knows consumers hate it, and yet there's no other way to get your hands on a brand new car. Tesla has a fair amount of consumer interest, and dealers recognize this. So they want to make money off it, which will lead to even higher prices for consumers.
If Tesla succeeds, it's going to establish a manufacturer-operated dealership that vies directly with the existing model, leading to a situation where consumers may value that relationship higher than the one they've had to deal with for so long. Tesla will have an interesting-to-watch dynamic develop between its customers because the relationship will be direct -- right now, every other manufacturer establishes indirect relationships through the dealer proxy. In the Tesla-operated model, there will be no way for dealers to compete with the Tesla dealerships being the only one's with the new cars--this isn't like competing with the Honda dealership across town.
If the Tesla dealerships succeed and consumers take note, dealers would rightly fear other manufacturers following in its footsteps and setting up some trial direct dealerships. If that succeeds ... well, we can all see where that will lead. However, despite that kind of hopeful scenario, I think it is an irrational fear. Most manufacturers rely on dealers to more evenly distribute the risk of producing and selling expensive assets that require a lot of space (floorplan isn't free, and it's a significant dealer cost (which is why you should always buy the oldest car on the lot (measured in # days it has been in dealer inventory))). I seriously doubt automakers are very interested in taking on the work and headache of setting up more distribution networks and doing all of the various things dealers do now that actually serve their local markets. It seems more likely that they're trying to put out the wrong fire here.
Lastly, I'm not sure if this is what you were getting at, so apologies if it's just a longer stating of what you meant. Your comment was ambiguous as to what kind of success you think the Texas dealers are concerned with--ramping up the production facilities successfully so Tesla has enough cars to sell into the Texas market, or winning the fight to sell directly to consumers.
That was a very well written explanation of what the dealers are doing (and why). Thanks for laying it out so clearly.
| [F]loorplan isn't free, and it's a significant dealer cost
| (which is why you should always buy the oldest car on the
| lot (measured in # days it has been in dealer inventory)).
I realize this is a little off topic, but can you go into more detail of why this matters? If a dealer has N cars taking up space, why do they care whether I take the one that came in yesterday versus the one that came in a month ago? Selling either seems like it would free up the same space, so how is it different? Are there financial incentives that are at play for them, or is it more that they tend to consider the sunk costs?
More importantly, is that information I can find out and use to my advantage when negotiating?
In it's simplest form, non-excessively peppered with financial terminology and equations:
Floorplan is a line of credit dealers use to purchase their retail inventory. Each vehicle on the lot subjects the dealer to finance charges that begin accruing from the moment the dealer takes possession of the vehicle. So, say that the floorplan fees and interest are $100/day per vehicle (for simplicity's sake). The longer a car sits on the lot, the more profit the dealer is losing on that vehicle per day. Make sense?
Why do dealers care?
If you're being charged by the number of days a car is sitting on the lot, and a customer comes in an looks at a brand new, green car that arrived yesterday, and there is an identical twin in every way that is 400 days old, the salesman is going to push you to check out the older one and say they can make a special deal on it for some reason or another (sometimes they'll just say it's because it's been on the lot for a long time if they're really desperate). If you're paying interest on every product by the day, you want to get that out of your inventory as quickly as possible, because that's where you maximize your profit potential.
Often, you can find vehicles on lots that are marked down lower than other similar/identical cars. This is almost always due to floorplan age (I'm assuming we are only talking about new cars here, because used cars bring in a lot of other variables).
Some dealers operate in a way that they seek to capitalize on volume sales vs individual car sales as a way to both be more competitive and mitigate floorplan costs. These are often the best dealers to purchase from (and these are almost never luxury brand dealers) because they will typically sell every single vehicle at invoice price (or several hundred above), and build their profits instead around manufacturer incentives that pay out to the dealer $N per type of car in a graduated fashion where the payout increases as #s of types of cars sold increases. If you have a dealer in your area that advertises (and shows you the proof) that they sell at or near invoice, especially if that is their standard practice, you can safely assume they are a volume dealer. The salespersons are going to be focused on selling as many cars as they can because they are also making their income based on the number of cars sold, not a percentage of per-sale profits.
Can you use this on the lot to your advantage? Sure. Just ask the dealer/salesperson how long the car has been on the lot.
Is the floorplan cost flat? I ask because if you take into account both sunk costs and the fact that two identical models would have the same floorplan cost per day, why would they care to sell the older car first?
Let's say you have two cars on the floor:
Car A - just arrived
Car B - sitting for 100 days
The cost of the floorplan is $10/day (let's say)
If a customer comes in and buys car A and then car B sits for another 10 days, how is that different than a customer coming in and buying car B and letting car A sit for 10 days? In the end it should cost the dealership the same. It's all about moving inventory, not necessarily moving specific inventory.
I assume I'm missing something here, can you explain?
Well, floorplan financing is a finance vehicle like any other, so terms are different among participating providers. Also, I'm a bit unsure of what you mean by "sunk costs".
Each vehicle ordered into inventory is an advance on the line of credit that has repayment fees and interest. Each vehicle sold then translates into paying the floorplan provider the advance amount + fees.
In your example, I'm unsure of how you fail to see that Car B is already costing the dealership more money. But let's work it out anyway.
Car A just arrived. Car B has been sitting for 100 days.
Car A cost $20,000 and is on the lot for 0 days @ $10/day.
Total repayment? $20,000.
Car B cost $20,000 and is on the lot for 110 days @ $10/day.
Total repayment? $21,100.
If you were the dealer, would you want to lose that additional $1,100? I'm willing to bet it would matter to you.
Complex case:
You're in a floorplan agreement that requires repayment of advances in full (including accrued interest and fees) in n days. You damn well better sell enough specific inventory to cover this without losing profit. The longer specific inventory stays on the lot when you're repaying each period, the more screwed up your numbers become.
It is about both moving inventory and moving specific inventory when that inventory is costing the dealer as much money as 10 other cars that sit on the lot for 20 days each.
Moreover, the typical expected time-on-lot tends to be between 30-90 days. Floorplan terms are usually negotiated for these typical cycles. If a dealer is in a floorplan setup that is built for a 90-day max turnaround, and then has vehicles that sit around for 200+ days, that can add up to significantly higher fees per old car that eats into the profit margin. This is especially important with dealers who are selling based on a profit-per-vehicle basis, as opposed to the profit-per-level basis in use by volume dealers. Last thing you want to do (as a dealer) is strike a deal on a 200-day-old car that you had to strip to invoice price or below to sell, and then repay a floorplan advance + fees that exceed the sales price. It happens, but you still don't want it to happen.
More important still, if a dealer is unable to keep moving inventory off their lot (whether through consumer sales, fleet sales, or dealer trades), then they have more inventory eating up their floorplan, diminishing the amount of inventory they can continue to purchase to replenish supply.
Now, to balance all this out and try to create new profit centers that both put more cash in the bank and provide another opportunity to make money off a potentially negative car sale, we have the Dealer Finance Officer. An absolutely disgusting professional. But that is a different kind of discussion. You may already be familiar with how finance officers help increase dealer profits-per-sale.
> Car A just arrived. Car B has been sitting for 100 days.
> Car A cost $20,000 and is on the lot for 0 days @ $10/day. > Total repayment? $20,000.
> Car B cost $20,000 and is on the lot for 110 days @
> $10/day. Total repayment? $21,100.
I still don't know if I see the difference between the two. We're at Day N (where Car A has been there 0 days and Car B has been there for 110 days). If we sell Car A but not Car B, on Day N+1 we will pay an additional $10 in financing. If we sell Car B but not Car A, on Day N+1 we will pay an additional $10 in financing.
It doesn't matter which bucket we put the additional marginal cost of keeping a single car on the lot, it's the same overal expense to the dealership. Unless the marginal cost increases for a car over time, which, for all I know, it might.
The point is that it matters very much to a dealership and they see a significant difference between the two.
Dealer staff aren't usually trying to look at overall expenses--that's for the accountants to bother with--but the profit/loss per vehicle. This is enforced by nearly everyone's income (on the sales and finance side of the business) being determined on a per-sale basis.
Simplistically, each car on the lot represents a loan. The longer it sits there, the higher the fees & interest paid. Dealers want to move each unit as quickly as possible to keep the repayment fees as low as possible, and to prevent eating up dealer holdback, floorplan assistance, and other incentives. Nearly all of these are calculated on a per-car basis. If it did not matter to dealers, they (and their salespeople) would not know how long the cars stay on the lot--because it directly tells them how much money they're losing per day on that vehicle. Moreover, nearly every salesperson and manager at the dealership know exactly which cars are the oldest cars on the lot, in rough (if not exact) order of age.
The various ways dealers make money--holdbacks, incentives, rebates, floorplan assistance, inflated MSRPs, documentation fees, etc.--all exist to offset the expected costs of doing business--floorplans, commissions, taxes, regulatory fees, etc.
When Car A hits the lot on Day N, the dealer is sitting on 100% profitability from the sale (let's just assume 0 haggling & they get sticker price + all their fees, etc.). Each day the car sits on the lot, they drop further from 100%. The dealer and salespeople are highly incentivized to sell for as close to 100% as they can.
Beyond that, a dealer is in a very unhappy position when the cost of having Car B on the lot is high enough that it begins decreasing the profitability of other cars sold. How does occur? In simplest terms: Car B is on the lot long enough that it's actually eaten through all the cash assistance available to the dealer for Car B, and is now eating through the cash available on Car A.
Let's say the dealer loses 1% profit per day on the lot. It takes 100 days to reach 0, obviously. On day 101, the dealer is now at -1% profit, and that has to come from another car on the lot. It's not unheard of for a car to be on the lot for 300-400 days. I've rarely seen much over 400, but it happens (especially with oddly configured models). In our simple, imaginary scenario, that 400-day-old car has eaten through not only its own profit, but that of 3 other cars.
When you arrive on Day N and Car B has already been there for 100 days, the dealer is significantly further from 100%, and is going to be more willing to bend further to move Car B than s/he is to move Car A, which is sitting on 100%, and whose profit the dealer is strongly interested in preserving.
There are further factors often at play here, as well. Say you are a Sales Manager at the dealership. You have a salary, but on top of that, let's suppose you are paid bonuses based not only on number of cars sold (like salespeople), but also on average days-on-the-lot. The better you are at moving your inventory, the more you make. Have a few cars sitting on the lot significantly longer than the others? Well, now your bonus is fucked up.
The longer a car has been sitting on the lot, the higher your possible chances of working out a better deal purchasing that car. Once a car hits a certain age on the lot, the dealers may even dip into their holdback and other assistance dollars to get the thing moved.
Note: I am not attempting to suggest that the dealers are behaving entirely rationally. I'm just pointing out that these things matter to dealers, who typically look at everything on a profitability-per-car basis.
Disclosure: I know enough about bonuses from selling the oldest cars on the lot to feel confident in saying that lot age matters very much to dealers in a number of ways--enough so that they're willing to pay a salesperson more to sell the 400-day-old car than the 20-day-old ca...
If a car has been on the lot a long time, then there's not a lot of interest in it. The dealer is more likely to accept any offer just to get it off the lot. For a car that's newly arrived, there's a greater likelihood (or at least a greater expectation) that several customers may be interested, so the dealer is better off waiting to see if someone is willing to pay more.
>This is true. However, are you actually arguing in fact?
The whole point of arguing in fact is that you can prove someone wrong! The poster makes specific claims and you rebut them -- if I cared enough, I could do some investigation and see who is correct.
That's not true when an argument consists entirely of a metaphor.
And the whole point of my question (re: arguing in fact) was that the parent was not arguing with facts, but was advancing suppositions with no provided factual basis. I was not rebutting any claims made.
To that end, and as I stated clearly, I did the same, offering guesses at what might be going on in the dealer opposition based on experience working with dealerships before. But, ultimately, even my surmising lacks evidence, and so neither of us are arguing with facts--we're simply not advancing a metaphor.
EDIT: Attempting to clarify that my comment was not intended to dispute anything the parent said, but to add another potential view. Apparently I misunderstood the parent's meaning of the phrase "argue in fact".
Good grief. I said "argue in fact", not "with facts". The point is to have a discussion about reality, using concepts from reality. Clearly you see the value in that becuase as shardling points out that's exactly what you did.
I don't see why you are willing to discuss the specifics of car dealership gamesmanship in Texas yet demand that I do so within the framework of an analogy to self-healing neural networks.
Basically: you're strawmaning like crazy. Stop it.
Seriously? Strawmaning like crazy? How so and where? I've set up no straw man here.
Your phrasing "argue in fact" was ambiguous to my reading, which is why I asked what you meant. And yet I didn't dispute or oppose anything you said. All I did was point out that, just as I was about to do, you were making some guesses at bets/motivations as an outsider. Since I'm not refuting anything you say, how can I be proposing a straw man?
Relax, friend. I made no demands that you discuss anything within the framework of an analogy to a self-healing neural network. Moreover, I was replying to shardling's comments that there specific (implicitly factual) claims made that could be determined correct or not with some investigation if he cared--to which I simply pointed out there were no factual claims made, but that we were both positing potentialities and guesses, not factual claims.
Can we take a step back and see there was an apparent misunderstanding of intention? We were not having a disagreement.
Maybe I am not understanding the meaning of "massively oversubscribed" but I thought it meant that the demand significantly exceeds the supply. 2 months to deliver a car is a decent stretch of time considering you can go to just about any dealer and drive away with the car you want. And if they don't have it on the lot, they'll find it and trade with another dealer within a day or 2. They all have inventory. I take it that Tesla doesn't keep a lot of inventory on hand.
Elon has said that demand will outstrip supply for the next several years--but six to eight weeks is pretty much normal for any custom built car from Ford, MINI, BMW, Mercedes, etc.
Such absolutist, black and white descriptions of these situations are, quite frankly, terrible.
I mean, you take business and politics and compare it to a life or death struggle against cancer. Could you be any less fair to the interests of the other side?
You could, extremely easily, reverse the tables and let the massive automotive industry and the millions upon millions of people in it's employ describe Musk and his electric startups as a cancer on one of the backbones of American industry. That his "I won't come to the table" policies of "my way or the highway" are disease on a century old industry that has provided for multiple generations of American's livelihoods.
I don't see how your ridiculous demagoguery does anything but turn this into a "us vs them" false dichotomy.
I support Musk and Tesla but comments like this are just ridiculous. The guy is selling a few thousand $80000 ultra-luxury sportscars. Let's not decry the end of a century old industry _quite_ yet with such dramatic language, eh?
Oh dear god, this is overwrought. Elon Musk is not the righteous cause, and everyone opposing him is not the devil, and this is not some dramatic showdown (to paraphrase a line from Serenity). I support changes to the dealer system, but when you start the arguement by suggesting your opponent is akin to a cancer, you're not showing any interest in that. If the dealer system changes, it should do so for everyone, not just Tesla.
The dealer system cannot be salvaged, it is using the law to subvert Justice. You are part of the cancer by suggesting we try to massage the cancer instead of removing it as the useless appendage it is that only hassles customers and provides no useful service other than putting up a barrier to buying cars at the expense of people who want to buy them.
When I see a thug standing by the pool of water, and punching everyone who comes and gets water for their lunch money, I don't enter a dialog with the thug for proposed changes. I remove it, for the good of all.
This is simply ridiculous. I won't even dare to imagine what our country will be like if our president is from that idiotic state. oh wait, it has happened, and it got us into shitty wars and trillions of dollars in debt.
This is Interstate Commerce, pure and simple. What would be really nice is for Congress to pass a law saying these state laws are illegal and suddenly the floodgates would open.
Of course all of the car manufacturers will protest that, and their lobbyists are more powerful than Tesla's.
But the real plan is for Tesla to make cars and sell them where it can. In time as people see more and more of them being sold and winning awards, they will ask why they can't buy them. Tesla has to lay the groundwork for that now in as many states as it can, but at the moment production seems like more of a bottleneck for them than marketing and sales.
First of all, smart companies understand that the key to profit margins is to have barriers to entry. The need to develop a dealer network is a huge barrier to entry, and car manufacturers have an interest in preserving that.
Secondly, choosing to expand vertically can be a fast route to chaos. For instance suppose that Ford decided to get into running its own dealerships. All existing Ford dealers would get nervous, many would switch brands, and others already sell multiple brands and would direct their customers away from Ford. Therefore Ford would have to be very, very careful about opening its own dealerships.
Thirdly, even if car manufacturers want to get rid of the dealership model, none want to say this where any dealers might hear. Because of fear of the same kind of chaos as before.
So for all three reasons, there is no way that Tesla is getting any support for this from other manufacturers.
Manufacturers would love to sell directly. They're doing it in Europe and aren't trying to enact protectionist dealership laws to protect their interests from upstart competitors. Dealers are notorious for bad service, and you can't shut underperforming ones without large buyout fees.
This article is misleading - Tesla can and does sell cars in Texas (online), their "physical stores" just can't sell them. Also, Tesla wasn't denied the right, their bill was not voted on (an omission rather than an action). They'll undoubtedly bring it back up next session.
It's kind of silly, but people here think that annual legislative sessions will lead to a larger government. It's a real problem for budgeting, however.
This article is somewhat misleading. This is not a "Texas vs. Tesla" issue, this is a "car dealerships want a monopoly" problem. This issue has been around long before Tesla came on the scene.
Please. Tesla will sell it over the internet and ship it. How many models do they have? They can have showrooms that don't engage in any sales. Where people can just go to look, test drive. This is such a non issue for them. Hope TX is forcing every one that sells over the internet to her citizens to pay her tax or else they will be missing those tax revenues too.
I keep waiting for someone to mention that the Texas law is virtually identical to the laws on the books in 48 other states. Also, Ford went to the Supreme Court over this in 2001 and got the back of their hand.
The law is on the books for real consumer protection reasons beyond putting money in dealers' pockets ( though, putting money in dealers' pockets is a plus too ).
In this case, I think an exemption for the staggeringly different service model of Tesla would be appropriate, while leaving on existing rules.
Playing devil's advocate... I'd love if Google were forced to have a physical presence after it started talking my money. I'm still using a phone with several flaws that i tried to return/complain several times but never found a phone number or email address that went answered. They just took my money and run.
Now imagine that for a 60k car.
Maybe it's just reasonable that the state protects it's citizens and demand at least one customer care or repair facility in its borders.
Imagine having to drive to California to a recall. If course that would be hard given Tesla reputation, but without enforcing a local presence, how can you be sure?
I'm sure there's no law requiring that, say, a Land Rover dealer exist in your state. This has nothing to do with whether a dealer exists or not but whether a manufacturer can directly own and operate a dealership.
I was in The Galleria mall in Houston Sunday, and they have a "showroom" with 2-3 cars in it (they were closing so I didn't have time to stop and look). I wonder what the point was, and if they have any pending orders here.
Given the history of bankruptcies in the car manufacturing space, it would be interesting to see how the effect of mandated dealerships affected the overall profit margins and viability of the car manufacturers.
Think about it for a second. Requiring a car manufacturer to sell cars through a dealership network naturally reduces profit margins for the car manufacturer thus affecting their long-term viability.
182 comments
[ 2.6 ms ] story [ 242 ms ] threadI could be wrong, I've never bought a new car & my current vehicles were both gifts from a family member which only carried a flat $10 tax.
Texas auto sales tax info: http://www.window.state.tx.us/taxinfo/mtr_veh/mv_su.html
http://stateimpact.npr.org/texas/2013/04/24/tesla-has-eyes-f...
http://www.teslamotors.com/houstongalleria
How does this work in light of the law in Texas outlawing this?
Interestingly enough, there should be a supercharger between Dallas and Austin by Q4 2013.
Edit: there is a service center in one of the burbs just blocks north of Dallas proper: http://www.teslamotors.com/service/dallas
This information is based on what I remember of reading various posts in the teslamotorsclub.com forums.
Tesla buyers are not average Joes, they are people with money. People with money have connections, often political. Annoy just a few rich people and it is like magic, the legal and lobbying wheels start spinning.
2) What's stopping Tesla from partnering with Toyota dealers?
3) With its $10B valuation, Tesla could build 10 very nice dealerships for 1% of its valuation.
But, if the regulation was a big problem for the corporate interests? The regulations would definitely not still be here. When it comes to money and regulations, I like to picture water acting on rock over time -- they get carved away a little bit at a time.
My guess is Tesla not wanting to slap a bunch of dealer costs on top of the cost of the cars.
> Tesla could build 10 very nice dealerships for 1% of its valuation.
As I understand it, Tesla owning those dealerships would be just as illegal. If Tesla doesn't own the dealerships, they're either going to share the profits of the sold cars with the dealership or deal with the dealers markup and dealers fees increasing the costs of the cars.
Also I don't see why being able to sell directly to consumers should be count as a "special rule". On the contrary, being forced to find a dealer in the "network" to work between you and your consumer is.
Tesla would probably be fine with allowing everyone direct dealerships, but the dealerships are not.
Tesla has no existing dealer network, and therefore has no need to have said non-existed dealer network protected from them.
Laws are laws. Either change the law or enforce it. That's fair. Not cronyism.
Tesla shouldn't get special rules. Tesla probably advocates a non-special-rule model.
-Anatole France
Early on, cars were sold by local dealers. Later, when manufacturers wanted to sell direct they learned that local politicians cared more about the business down the street than some giant company in Detroit. Therefore, all manner of state and local laws got passed to protect dealerships' turf.
In a lot of ways, car dealerships are perfectly suited to exercise power in state legislatures. No matter what poduck district a state lawmaker comes from there are probably several car dealers there. They're often some of the most locally famous people thanks to the amount of advertising their businesses do. I couldn't name my gradeschool teacher from 30 years ago but I sure could tell you who owned the largest car dealership in the area... and sing his radio jingle.
By contrast, few state lawmakers have a Ford or GM plant in their district.
It has less to do with money and more to do with interest.
And the law is stupid: it protects a method of sale which is altogether irrelevant to the economy, except in the sense that dealerships want the law because it prevents competition and secures their position in the market. Preventing competition is not in the best interest of the economy, the people, or the government, so the law should be changed.
Why is this (I'm not familiar with the way it works in the US)?
If you're looking for the justifications, here's an explanation from a Cato article (pp. 3-6):
Why Restrictions on Online Auto Sales?
The franchise laws that inhibit the new business models for car sales from spreading online are defended as being important for protecting dealers and consumers from automobile manufacturers. Defenses of those laws, which became widespread in the 1950s, revolve around two arguments: first, that restrictive franchise laws are needed to protect consumers and, second, that such laws are needed to protect distributors from rapacious manufacturers[...]
http://www.cato.org/sites/cato.org/files/pubs/pdf/bp58.pdf
http://www.npr.org/blogs/money/2013/02/19/172402376/why-buyi...
I suspect it would be better for everyone if special dealership regulations were broken down. But, given that Tesla is a new car company, without any historical dealership agreements, why should they be bound the inefficient legal infrastructure that essentially cropped up around private contractual agreements between other car companies and dealers.
I know the dealership laws are awful, but IMO we should be focusing on changing those laws instead of giving special treatment to particular companies.
The world does not work that way. You can not put off inventing transport just because you have not invented teleportation yet. Things work in small steps.
Nobody is saying the law is at all fair to Ford, GM, Toyota, etc. It's not. They should be able to sell directly to consumers also. The law was lobbied for by dealers in Texas, and signed by America's greatest president, George W. Bush, when he was still governor of Texas. Bush was a true conservative who believed in free market principles, except for when he wasn't.
Let's not pretend this is Tesla vs. Ford/GM/Toyota. This is Tesla vs. the good old boy, rent-seeker network that is the auto dealer lobby.
Car dealerships are some of the last dynasty busineses. Ever wonder why most family run businesses eventually fail when an incompetent son/daughter takes over, but dealerships just stay around for 3 or 4 generations? Its because its a rigged market that requires no skill. The profits don't come from adding value. They come from gouging consumers.
Tesla is just a new reminder that we are being screwed, and they don't have the inventory to support the network of the dealership mafiosos and their fratboy progeny.
"Dude, my dad owns this dealership, so I totally know business bro......" (overheard at every frat party ever)
ftp://ftp.legis.state.tx.us/bills/83R/billtext/html/senate_bills/SB01600_SB01699/SB01659I.htm ftp://ftp.legis.state.tx.us/bills/83R/billtext/html/house_bills/HB03300_HB03399/HB03351I.htm
The above are linked from here:
http://www.teslamotors.com/advocacy_texas
I believe the issue bob13579 is bringing up (in the least helpful and most aggravating way possible) is that these bills effectively single out Tesla. Read the amendment in section 1. I think it means that the exclusion would only apply to electric- or battery-only car manufacturers doing business in Texas on or before 3/1/2013. This is surely only Tesla.
My opinion is that the existing law should not exist. But it does, and (again, my opinion) if this bill had 'done the right thing' and tried to remove the protection for all dealers, it would have received even less consideration.
Is this protectionism something that can be tested for constitutionality in the courts? Has it been already? It seems like the sort of thing that ought to get litigated.
So depending on your view of government, that's either a really great thing or really terrible one.
Politicians adapt themselves to the carrots and sticks of their environment, just like CEOs, blue-collar laborers, and everybody else. For better or worse, they are a reflection of their constituency.
Doesn't change the fact that your first statement is not factual anymore. Given time I think we (Texans) can eventually stop / vote out all these morons who think legislating morality is their job - we've been headed that way last few elections anyway.
www.huffingtonpost.com/2013/05/31/willie-smith-ward-rib-theft_n_3365554.html
That's "justice", Texas style. Better than the Taliban's, I suppose. But not by much.
The sentence is somewhat harsh (eligible for parole in 12.5), but your comparison to the Taliban is absurd.
EDIT:
somewhat harsh in relative comparison to normal American sentencing standards, since the goal is apparently to single out Texas as some horrible place where sentencing is too harsh. I will now point out draconian three-strikes laws in other more progressive states that would have had him in jail for life.
Make no mistake, I think American criminal courts and sentencing are too harsh in general and our prisons are horrible travesties of justice. But the singling out of this state is what I'm calling absurd - all of American criminal sentencing is broken.
However, are you seriously suggesting that 50 years imprisonment is only somewhat harsh?! Taking 12.5 years at the minimum before being eligible for parole for stealing $35 ribs and "threatening" someone?
By the way, saying "I've got a knife" and calling that a threat is both a stretch of what it means to threaten and what it means to call something a "violent act".
$35 food theft != 50 years imprisonment. That is fucking insane, not somewhat harsh.
Why in the fuck does that have anything to do with the severity of the sentence?
Should we start valuing people based on their probability to cure cancer or start the next Google?
I'm not sure about this case, but it could much like the three strike laws mentioned above. He only got five years for the robbery, five years for the threat, and forty years for his habitual criminal activity. As stated, in three-strike territory he possibly would have gotten life simply for the robbery of $35 worth of ribs.
I agree with the above, singling out Texas as some kind of outlier for this type of thing doesn't seem quite right.
Life imprisonment for stealing $35 of food is bullshit. Repeat offender or not.
There's a fundamental problem with a society that is okay with an increasing prison population spending their entire adult lives there because of terminal sentences on the basis of recidivism.
Increasing sentences for recidivism itself is constitutionally debatable, I think, though I'm not sure if it has been challenged on that basis. This is America, though. It'd probably stand cos we like the idea of systemic incarceration as a means to low crime rates.
I don't like to harp on things that have become politicized too often, but this particular case stands in such stark contrast to bankers who made off with billions, none of whom to my knowledge are spending the rest of their lives in a common prison.
That's why the howls of injustice, to quote another commenter. $35 in ribs, taken by repeat offender, is apparently a greater crime against society than the repeat offense of fleecing the entire society.
When will people get the difference between theft and robbery through their heads? One is a property crime. The other is a violent crime.
But sure, just go ahead and say you'll get 50 years for shoplifting. You get more clicks and you can be seen as indignant and virtuous.
EDIT: Ok, so I'm wrong about Ward actually threatening the clerk. But he was a multiple felon, and the jury apparently believed the testimony that he had a knife (which would have been illegal for a multiple felon to carry).
My comments in general still apply to many, many stories that are presented the way I originally described.
If you did, you'd understand that yes, it was shoplifting. He was apprehended after the fact, at which point the shoplifting was discovered. When asked if he had anything else, he replied that he had a knife, but didn't actually show it.
In other words, there was no violence committed or even threatened in the course of the crime. There was no violence committed or credibly threatened after the fact. There was simply a statement, which could easily be seen as a confession, that he had a knife in his possession.
Well we can't all have the outstanding records of quality policing of places like California...
Jeffersonian democrats certainly were against that idea, as evidenced by nullification, which was in issue up until the civil war.
Maybe the federalists, but it sounds extreme even for them.
It sounds like something that the northern politicians had in mind in the late 19th century or maybe early 20th century.
i know its OT, but could you expand on that idea?
That our constitution ended up vague on these issues-- and the existence of the Senate with its state-appointed representitives-- is owed to negotiation and comprimise. Of course, Washington presided over the congress on these issues, he was not himself a delegate, so you don't have a lot of direct quotes on these topics but what we know has been pieced together over the years from his (limited) correspondence and 2nd party accounts.
Texas love executing people. Since 1976 Texas executed 498 people, the state in second place is Virginia with 110. Also, their supreme court does not hear criminal matters, only civil, because it makes the appeals process for executing people faster.
But yeah, the law is a strange thing.
The worst, incidentally, is Oklahoma, at about 1 per 40,000 residents.
Median 1
Texas 20
Ok 25
No. Texas simply has separate civil and criminal courts. The Court of Criminal Appeals is the supreme court for criminal cases. The Texas Supreme Court is the supreme court for civil cases. A convict can appeal through the intermediate appellate courts and then the Court of Criminal Appeals (and then perhaps later state-level collateral attack or even federal habeas). The criminal appellate process in Texas has as many steps in it as most states have.
Texas Penal Code 43.21 DEFINITIONS (7) "Obscene device" means a device including a dildo or artificial vagina, designed or marketed as useful primarily for the stimulation of human genital organs.
Sec. 43.23. OBSCENITY. (a) A person commits an offense if, knowing its content and character, he wholesale promotes or possesses with intent to wholesale promote any obscene material or obscene device.
http://www.statutes.legis.state.tx.us/Docs/PE/htm/PE.43.htm
If I made this up, people would tell me it was laughably unrealistic :)
Although in the last legislative session the rules got relaxed somewhat ( especially for brewpubs ), its still pretty similar.
Shallow articles like the link don't really help the situation. We really need to start looking at removing the government from business models when there is no actual public safety aspect(1). This is a much wider problem.
1) I do believe Florida is one of the state that licenses interior designers on the theory poor interior design could kill someone. This too should be revoked as it is among the stupidest safety concerns ever.
Hard to tell if you're trolling or showing what wrong-headed arguments are used by the industry to justify anti-competive laws.
EDIT: Typo, correct 'marker' to 'market'.
The car dealer, alcohol and sex laws are all from a long time ago. The alcohol and sex laws are being changed rapidly here.
If only place Texas politics gets really weird is with education and schoolbooks where a small, vocal group concentrates its effort.
[1] http://www.com.ohio.gov/liqr/docs/liqr_HB243highlights2012.p...
I suppose Pennsylvania does not quite have that same 'exceptionalist' attitude as Texas does.
This is true in most states. It isn't a 'Texas' problem, it's a 'USA' problem.
I don't live in Texas, so I have no dog in the fight.
eg it was US multinationals that got raided over the 35 hour week
When a piece of a neural network becomes corrupt and entrenched beyond repair, (cancerous) the tumor or cancer fights to protect itself, there are two solutions to these kinds of problems.
1. One solution is what Musk is doing, treat the dealerships as a cancerous growth in the mind, and pathways are built to bypass it, route around it. Don't fight it, don't fix it, don't interact with it. Establish as many barriers to its growth as possible and starve it so it doesn't grow. Eventually the superior paths created by Musk are the preferred ones to use, and the defective paths are garbage collected. The cancer will seeks to prevent the growth of new pathways because it does not want to be garbage collected.
2. Remove the growth. When the surgeon finds a tumor or cancer in your brain, it doesn't try to coax it to become better or try to "enhance it" to be better. A hole is cut in the head, and lasers and scalpels are used to physically remove the cancer.
These are the only two options to deal with cancerous growths working only to maintain its take on the system.
Tesla is doing this because it's a rapidly-growing startup whose production facilities are heavily oversubscribed already. They have no net downsides to giving up the "Texas" market for now, because they don't have enough cars to sell even without Texas (and the handful of other such states).
Eventually that won't be true. Once ramped up, they'll want that Texas market. And at that point someone will have to bend. Musk's bet is that at that point Texas will cave because they don't want to deny their voters the chance to purchase this great new car. Texas's "bet" (really the dealership lobbyists' bet) is that Tesla ultimately won't be successful and that by holding their ground here they will discourage other manufacturers from trying the same thing.
IMHO, things make much more sense when you argue in fact instead of metaphor.
My money is on Tesla coming out on top here. Musk strikes me as the type of person that would rather give up sales while holding a huge "Fuck Texas" sign than to give in.
Edit: Added the parent comment I was responding to. Yes, Tesla is playing nice right now. That puts them in a better public opinion. But eventually they'll either step up their game or walk away from Texas. I don't see them giving in. But only time will tell here.
Then when Musk is on board and massive profits streaming, the credits will revert back to burdens on Texans. The cancerous dealer network remains with us for another few decades until the next chance at a disruptive technology to remove it.
Car Dealerships should go the way of newspapers. Imagine if newspapers used their financial might to squish the Internet when it was just a wire between two research facilities? If newspapers hired lobbyists to create laws making it illegal to route around newspapers, then could they how long could they have delayed the internet?
You're getting to the real heart of the problem though. The dealers are taking the retro-futuristic approach the newspapers didn't take with the internet. But then the newspapers didn't know just how disruptive that wire will become either.
This is true. However, are you actually arguing in fact? Your statements read as an outside agent judging the intentions and motivations of other agents. Perhaps you're part of one of the groups and actually possess insider knowledge here?
Another potential outsider's reading of the bets and motivations at play (this taken from nearly 4 years working with auto dealerships):
The dealers have built up reliance on a system that allows them to screw over consumers in myriad ways that make them very good money every time a consumer needs a vehicle. They've already seen sales erode due to the economy, as well as the rise of internet-powered sales channels like craigslist, ebay, etc. While they cannot do anything about the former, the latter has been generally approached with dealers getting involved in listing their vehicles on the internet in an effort to constantly re-inject themselves into once private p2p marketplaces.
The dealers no doubt want Tesla to be successful as a manufacturer, they just do not want to allow a new precedent to establish wherein they are not standing as the gatekeepers between consumers and they cars they want. This has been a lucrative business model for them for a very long time. Everybody knows consumers hate it, and yet there's no other way to get your hands on a brand new car. Tesla has a fair amount of consumer interest, and dealers recognize this. So they want to make money off it, which will lead to even higher prices for consumers.
If Tesla succeeds, it's going to establish a manufacturer-operated dealership that vies directly with the existing model, leading to a situation where consumers may value that relationship higher than the one they've had to deal with for so long. Tesla will have an interesting-to-watch dynamic develop between its customers because the relationship will be direct -- right now, every other manufacturer establishes indirect relationships through the dealer proxy. In the Tesla-operated model, there will be no way for dealers to compete with the Tesla dealerships being the only one's with the new cars--this isn't like competing with the Honda dealership across town.
If the Tesla dealerships succeed and consumers take note, dealers would rightly fear other manufacturers following in its footsteps and setting up some trial direct dealerships. If that succeeds ... well, we can all see where that will lead. However, despite that kind of hopeful scenario, I think it is an irrational fear. Most manufacturers rely on dealers to more evenly distribute the risk of producing and selling expensive assets that require a lot of space (floorplan isn't free, and it's a significant dealer cost (which is why you should always buy the oldest car on the lot (measured in # days it has been in dealer inventory))). I seriously doubt automakers are very interested in taking on the work and headache of setting up more distribution networks and doing all of the various things dealers do now that actually serve their local markets. It seems more likely that they're trying to put out the wrong fire here.
Lastly, I'm not sure if this is what you were getting at, so apologies if it's just a longer stating of what you meant. Your comment was ambiguous as to what kind of success you think the Texas dealers are concerned with--ramping up the production facilities successfully so Tesla has enough cars to sell into the Texas market, or winning the fight to sell directly to consumers.
More importantly, is that information I can find out and use to my advantage when negotiating?
Floorplan is a line of credit dealers use to purchase their retail inventory. Each vehicle on the lot subjects the dealer to finance charges that begin accruing from the moment the dealer takes possession of the vehicle. So, say that the floorplan fees and interest are $100/day per vehicle (for simplicity's sake). The longer a car sits on the lot, the more profit the dealer is losing on that vehicle per day. Make sense?
Why do dealers care?
If you're being charged by the number of days a car is sitting on the lot, and a customer comes in an looks at a brand new, green car that arrived yesterday, and there is an identical twin in every way that is 400 days old, the salesman is going to push you to check out the older one and say they can make a special deal on it for some reason or another (sometimes they'll just say it's because it's been on the lot for a long time if they're really desperate). If you're paying interest on every product by the day, you want to get that out of your inventory as quickly as possible, because that's where you maximize your profit potential.
Often, you can find vehicles on lots that are marked down lower than other similar/identical cars. This is almost always due to floorplan age (I'm assuming we are only talking about new cars here, because used cars bring in a lot of other variables).
Some dealers operate in a way that they seek to capitalize on volume sales vs individual car sales as a way to both be more competitive and mitigate floorplan costs. These are often the best dealers to purchase from (and these are almost never luxury brand dealers) because they will typically sell every single vehicle at invoice price (or several hundred above), and build their profits instead around manufacturer incentives that pay out to the dealer $N per type of car in a graduated fashion where the payout increases as #s of types of cars sold increases. If you have a dealer in your area that advertises (and shows you the proof) that they sell at or near invoice, especially if that is their standard practice, you can safely assume they are a volume dealer. The salespersons are going to be focused on selling as many cars as they can because they are also making their income based on the number of cars sold, not a percentage of per-sale profits.
Can you use this on the lot to your advantage? Sure. Just ask the dealer/salesperson how long the car has been on the lot.
Is the floorplan cost flat? I ask because if you take into account both sunk costs and the fact that two identical models would have the same floorplan cost per day, why would they care to sell the older car first?
Let's say you have two cars on the floor: Car A - just arrived Car B - sitting for 100 days
The cost of the floorplan is $10/day (let's say)
If a customer comes in and buys car A and then car B sits for another 10 days, how is that different than a customer coming in and buying car B and letting car A sit for 10 days? In the end it should cost the dealership the same. It's all about moving inventory, not necessarily moving specific inventory.
I assume I'm missing something here, can you explain?
Each vehicle ordered into inventory is an advance on the line of credit that has repayment fees and interest. Each vehicle sold then translates into paying the floorplan provider the advance amount + fees.
In your example, I'm unsure of how you fail to see that Car B is already costing the dealership more money. But let's work it out anyway.
Car A just arrived. Car B has been sitting for 100 days.
Car A cost $20,000 and is on the lot for 0 days @ $10/day. Total repayment? $20,000.
Car B cost $20,000 and is on the lot for 110 days @ $10/day. Total repayment? $21,100.
If you were the dealer, would you want to lose that additional $1,100? I'm willing to bet it would matter to you.
Complex case:
You're in a floorplan agreement that requires repayment of advances in full (including accrued interest and fees) in n days. You damn well better sell enough specific inventory to cover this without losing profit. The longer specific inventory stays on the lot when you're repaying each period, the more screwed up your numbers become.
It is about both moving inventory and moving specific inventory when that inventory is costing the dealer as much money as 10 other cars that sit on the lot for 20 days each.
Moreover, the typical expected time-on-lot tends to be between 30-90 days. Floorplan terms are usually negotiated for these typical cycles. If a dealer is in a floorplan setup that is built for a 90-day max turnaround, and then has vehicles that sit around for 200+ days, that can add up to significantly higher fees per old car that eats into the profit margin. This is especially important with dealers who are selling based on a profit-per-vehicle basis, as opposed to the profit-per-level basis in use by volume dealers. Last thing you want to do (as a dealer) is strike a deal on a 200-day-old car that you had to strip to invoice price or below to sell, and then repay a floorplan advance + fees that exceed the sales price. It happens, but you still don't want it to happen.
More important still, if a dealer is unable to keep moving inventory off their lot (whether through consumer sales, fleet sales, or dealer trades), then they have more inventory eating up their floorplan, diminishing the amount of inventory they can continue to purchase to replenish supply.
Now, to balance all this out and try to create new profit centers that both put more cash in the bank and provide another opportunity to make money off a potentially negative car sale, we have the Dealer Finance Officer. An absolutely disgusting professional. But that is a different kind of discussion. You may already be familiar with how finance officers help increase dealer profits-per-sale.
I still don't know if I see the difference between the two. We're at Day N (where Car A has been there 0 days and Car B has been there for 110 days). If we sell Car A but not Car B, on Day N+1 we will pay an additional $10 in financing. If we sell Car B but not Car A, on Day N+1 we will pay an additional $10 in financing.
It doesn't matter which bucket we put the additional marginal cost of keeping a single car on the lot, it's the same overal expense to the dealership. Unless the marginal cost increases for a car over time, which, for all I know, it might.
Dealer staff aren't usually trying to look at overall expenses--that's for the accountants to bother with--but the profit/loss per vehicle. This is enforced by nearly everyone's income (on the sales and finance side of the business) being determined on a per-sale basis.
Simplistically, each car on the lot represents a loan. The longer it sits there, the higher the fees & interest paid. Dealers want to move each unit as quickly as possible to keep the repayment fees as low as possible, and to prevent eating up dealer holdback, floorplan assistance, and other incentives. Nearly all of these are calculated on a per-car basis. If it did not matter to dealers, they (and their salespeople) would not know how long the cars stay on the lot--because it directly tells them how much money they're losing per day on that vehicle. Moreover, nearly every salesperson and manager at the dealership know exactly which cars are the oldest cars on the lot, in rough (if not exact) order of age.
The various ways dealers make money--holdbacks, incentives, rebates, floorplan assistance, inflated MSRPs, documentation fees, etc.--all exist to offset the expected costs of doing business--floorplans, commissions, taxes, regulatory fees, etc.
When Car A hits the lot on Day N, the dealer is sitting on 100% profitability from the sale (let's just assume 0 haggling & they get sticker price + all their fees, etc.). Each day the car sits on the lot, they drop further from 100%. The dealer and salespeople are highly incentivized to sell for as close to 100% as they can.
Beyond that, a dealer is in a very unhappy position when the cost of having Car B on the lot is high enough that it begins decreasing the profitability of other cars sold. How does occur? In simplest terms: Car B is on the lot long enough that it's actually eaten through all the cash assistance available to the dealer for Car B, and is now eating through the cash available on Car A.
Let's say the dealer loses 1% profit per day on the lot. It takes 100 days to reach 0, obviously. On day 101, the dealer is now at -1% profit, and that has to come from another car on the lot. It's not unheard of for a car to be on the lot for 300-400 days. I've rarely seen much over 400, but it happens (especially with oddly configured models). In our simple, imaginary scenario, that 400-day-old car has eaten through not only its own profit, but that of 3 other cars.
When you arrive on Day N and Car B has already been there for 100 days, the dealer is significantly further from 100%, and is going to be more willing to bend further to move Car B than s/he is to move Car A, which is sitting on 100%, and whose profit the dealer is strongly interested in preserving.
There are further factors often at play here, as well. Say you are a Sales Manager at the dealership. You have a salary, but on top of that, let's suppose you are paid bonuses based not only on number of cars sold (like salespeople), but also on average days-on-the-lot. The better you are at moving your inventory, the more you make. Have a few cars sitting on the lot significantly longer than the others? Well, now your bonus is fucked up.
The longer a car has been sitting on the lot, the higher your possible chances of working out a better deal purchasing that car. Once a car hits a certain age on the lot, the dealers may even dip into their holdback and other assistance dollars to get the thing moved.
Note: I am not attempting to suggest that the dealers are behaving entirely rationally. I'm just pointing out that these things matter to dealers, who typically look at everything on a profitability-per-car basis.
Disclosure: I know enough about bonuses from selling the oldest cars on the lot to feel confident in saying that lot age matters very much to dealers in a number of ways--enough so that they're willing to pay a salesperson more to sell the 400-day-old car than the 20-day-old ca...
The whole point of arguing in fact is that you can prove someone wrong! The poster makes specific claims and you rebut them -- if I cared enough, I could do some investigation and see who is correct.
That's not true when an argument consists entirely of a metaphor.
To that end, and as I stated clearly, I did the same, offering guesses at what might be going on in the dealer opposition based on experience working with dealerships before. But, ultimately, even my surmising lacks evidence, and so neither of us are arguing with facts--we're simply not advancing a metaphor.
EDIT: Attempting to clarify that my comment was not intended to dispute anything the parent said, but to add another potential view. Apparently I misunderstood the parent's meaning of the phrase "argue in fact".
I don't see why you are willing to discuss the specifics of car dealership gamesmanship in Texas yet demand that I do so within the framework of an analogy to self-healing neural networks.
Basically: you're strawmaning like crazy. Stop it.
Your phrasing "argue in fact" was ambiguous to my reading, which is why I asked what you meant. And yet I didn't dispute or oppose anything you said. All I did was point out that, just as I was about to do, you were making some guesses at bets/motivations as an outsider. Since I'm not refuting anything you say, how can I be proposing a straw man?
Relax, friend. I made no demands that you discuss anything within the framework of an analogy to a self-healing neural network. Moreover, I was replying to shardling's comments that there specific (implicitly factual) claims made that could be determined correct or not with some investigation if he cared--to which I simply pointed out there were no factual claims made, but that we were both positing potentialities and guesses, not factual claims.
Can we take a step back and see there was an apparent misunderstanding of intention? We were not having a disagreement.
I mean, you take business and politics and compare it to a life or death struggle against cancer. Could you be any less fair to the interests of the other side?
You could, extremely easily, reverse the tables and let the massive automotive industry and the millions upon millions of people in it's employ describe Musk and his electric startups as a cancer on one of the backbones of American industry. That his "I won't come to the table" policies of "my way or the highway" are disease on a century old industry that has provided for multiple generations of American's livelihoods.
I don't see how your ridiculous demagoguery does anything but turn this into a "us vs them" false dichotomy.
I support Musk and Tesla but comments like this are just ridiculous. The guy is selling a few thousand $80000 ultra-luxury sportscars. Let's not decry the end of a century old industry _quite_ yet with such dramatic language, eh?
"Nothing here is what it seems. You are not the plucky hero, the Alliance is not an evil empire, and this is not the grand arena."
followed by Inara saying "And that's not incense."
When I see a thug standing by the pool of water, and punching everyone who comes and gets water for their lunch money, I don't enter a dialog with the thug for proposed changes. I remove it, for the good of all.
Of course all of the car manufacturers will protest that, and their lobbyists are more powerful than Tesla's.
But the real plan is for Tesla to make cars and sell them where it can. In time as people see more and more of them being sold and winning awards, they will ask why they can't buy them. Tesla has to lay the groundwork for that now in as many states as it can, but at the moment production seems like more of a bottleneck for them than marketing and sales.
First of all, smart companies understand that the key to profit margins is to have barriers to entry. The need to develop a dealer network is a huge barrier to entry, and car manufacturers have an interest in preserving that.
Secondly, choosing to expand vertically can be a fast route to chaos. For instance suppose that Ford decided to get into running its own dealerships. All existing Ford dealers would get nervous, many would switch brands, and others already sell multiple brands and would direct their customers away from Ford. Therefore Ford would have to be very, very careful about opening its own dealerships.
Thirdly, even if car manufacturers want to get rid of the dealership model, none want to say this where any dealers might hear. Because of fear of the same kind of chaos as before.
So for all three reasons, there is no way that Tesla is getting any support for this from other manufacturers.
But once the system is in place, it isn't in their interests to rock the boat.
Sure... in 2015. That is between 1.5 and 2.5 years away. That they don't meet again until 2015 is really crappy. How do they ever get stuff done?
Who would have guessed.
http://www.motherjones.com/politics/2009/02/why-you-cant-buy...
The law is on the books for real consumer protection reasons beyond putting money in dealers' pockets ( though, putting money in dealers' pockets is a plus too ).
In this case, I think an exemption for the staggeringly different service model of Tesla would be appropriate, while leaving on existing rules.
Now imagine that for a 60k car.
Maybe it's just reasonable that the state protects it's citizens and demand at least one customer care or repair facility in its borders.
Imagine having to drive to California to a recall. If course that would be hard given Tesla reputation, but without enforcing a local presence, how can you be sure?
Think about it for a second. Requiring a car manufacturer to sell cars through a dealership network naturally reduces profit margins for the car manufacturer thus affecting their long-term viability.