Tesla Says GM Pushing Indiana Bill To Kill Direct-To-Consumer Tesla Sales

from the regulation-is-bad,-unless-it-helps-me dept

Thu, Feb 25th 2016 3:20am — Karl Bode

As we've documented extensively, the auto industry has worked tirelessly to erect barriers to Tesla's market entry. Legacy automakers have been engaged in sustained hysterics specifically regarding Tesla's direct-to-consumer sales model, which lets customers buy vehicles directly from Tesla online, with limited showrooms to view, touch and test drive the Tesla vehicles. Annoyed by this pesky Californian upstart, the auto industry has frequently tied draft legislation to campaign contributions to ban Tesla's successful model. Why compete when you can cheat?

Undaunted by criticism of this practice in numerous states, Tesla says GM is now trying the same thing in Indiana. In a new letter sent to Tesla "owners and enthusiasts" in the state, Tesla warns that Indiana's HB1254 would once again try to ban direct-to-consumer auto sales in the state:

We need your help. Yesterday, the Indiana Senate Committee on Commerce & Technology held a hearing on a bill that would shut down Tesla in the state. Authored and pushed by General Motors, HB1254 with amendment 3 would prohibit any manufacturer from being able to hold a dealer license after December 31, 2017. Existing law allows ANY manufacturer to apply for a dealer license without the use of independent franchised dealers.

Despite having a lawfully granted license to sell Tesla vehicles directly since 2014 at the Fashion Mall at Keystone; despite contributing over $42M to the state through the purchase of parts and components from Indiana suppliers; and despite plans underway to construct a 26,000 square foot Tesla Service facility that will employ approximately a dozen Indiana residents and serve our customers, GM is pushing the Senate Committee to shut out Tesla.

In other words, it's another legacy company deriding regulation at every opportunity -- except when it protects it from having to actually compete. While Tesla tells Ars Technica that it has no direct proof GM authored the bill, as we've seen in telecom, legacy companies all but own many state legislatures. Legislatures that are happy to shovel forth any and every bill (usually middle manned by groups like ALEC to present the feeblest attempt at propriety) provided the price is right. Tesla notes that GM could mirror Tesla's direct to consumer sales model, but would rather erect new barriers to entry than actually compete.

GM seems relatively unfazed by the fact that the FTC last year slapped Michigan for trying the same thing. Ask GM, of course, and the narrative changes dramatically. The legacy automaker tried to tell Ars that it's Tesla that's trying to craft special rules for itself, despite the fact that GM is the one pushing for the rule changes:

GM supports HB 1254. GM believes that all industry participants should operate under the same rules and requirements on fundamental issues that govern how we sell, service and market our products. A benefit of a nationwide network of thousands of dealerships is that General Motors customers never have to worry about driving to another state to buy, service or support their vehicles.

Tesla's insistence on special rules could result in multiple manufacturers competing with similarly capable vehicles and similar price points, yet operating under a different set of rules. Tesla could open a franchised dealership with an independent operator in Indiana today, but instead they insist that the State must first provide them with unique rules and special exceptions to suit their own business interests. In fact, Tesla was willing to agree to a dealer model in Virginia. The Indiana legislature shouldn't create a special exemption for them here.

Of course that's crap, and GM is turning logic on its head. Tesla has been operating a showroom in the Fashion Mall storefront since December 2013. It's GM that could follow Tesla's lead (like some Seattle Honda and Toyota dealers) and push for direct-from-manufacturer sales, but would rather use our broken legislative process to protect the status quo franchise dealership system. This has been an ongoing headache for Tesla in states like New Jersey, Texas, Arizona and especially Virginia, where auto-industry laws prohibited the company from opening a simple showroom.

Be it telecom or the auto industry, the fact that legacy industries can still write and buy anti-competitive state laws is a problem we simply refuse to fix.

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Filed Under: car dealerships, competition, indiana, innovation
Companies: gm, tesla

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That One Guy (profile), 25 Feb 2016 @ 3:54am

Enough whine to fill a lake
Tesla's insistence on special rules could result in multiple manufacturers competing with similarly capable vehicles and similar price points, yet operating under a different set of rules. Tesla could open a franchised dealership with an independent operator in Indiana today, but instead they insist that the State must first provide them with unique rules and special exceptions to suit their own business interests. In fact, Tesla was willing to agree to a dealer model in Virginia. The Indiana legislature shouldn't create a special exemption for them here.

What 'special rules' and 'special exceptions' would those be exactly? They're operating according to the law as it currently is, the only thing they're objecting to is a change to the law specifically designed to prohibit them from selling in a manner different than their competitors.

GM might have a point if Tesla were going around telling state politicians 'Yeah, if you want us to sell to customers within your state, you're going to need to change a few laws first', but as it stands GM is the one pushing for changing the laws, not Tesla.

Tesla's business model cuts out the middleman and provides competition to GM and others, and rather than doing what they can to show why people should go with a dealership rather than online purchase, GM is trying to remove them from the market entirely, or at the very least force Tesla to sell the same way they do, cutting out what makes their product and service different and leaving Tesla in a position where the field is significantly weighted against them.
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Anonymous Coward, 25 Feb 2016 @ 4:47am

If GM is successful you might expect retailers everywhere to make similar demands.

I can hear the Waltons whining already.
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Socrates, 25 Feb 2016 @ 5:10am

GM: competing with similarly capable vehicles
That's new to me. Nissan and Tesla seams to own the electric car market, and does so globally. GM does not seem able to compete.

The VW e-Golf sales in Norway is high though, it eclipsed Tesla and Nissan. It were the most sold car of any type there. 17,1% of all cars in Norway in 2015 were electric.

It is peculiar how much GM fuzz over Tesla. The US use fossil fueled cars almost exclusively. At least so far.

GM's ability to lean on dealers to hamper the transition to electric cars is minimized if citizens is able to buy cars the way they want. (And get a electric car delivered at the door step as just another package)
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Anonymous Coward, 25 Feb 2016 @ 5:40am

Attention: typo in the headline.
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Anonymous Coward, 25 Feb 2016 @ 5:43am

Re:
Only 24 Hours from Telsa

...now available on all GM car systems.
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jim, 25 Feb 2016 @ 6:10am

what?
I still say, the best of the electric car ideas, was the one made by black and decker. Electric drive, with gasoline lawnmower, so you could drive past the dead time of the battery. Right now, you can drive two hundred miles, same as then, but, what if your destination is two hundred an twelve miles, overnight? Or the delivery is four hundred miles away? Mail it? Or pay the gas charge?
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Anonymous Coward, 25 Feb 2016 @ 6:11am

despite plans underway to construct a 26,000 square foot Tesla Service facility that will employ approximately a dozen Indiana residents and serve our customers

WHOA! HOLD THE PHONES, PEOPLE! Tesla will employ a dozen Indiana residents? Does Tesla actually believe their employing 12 state residents believe that it will make an impact, considering how many people GM employs?
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nasch (profile), 25 Feb 2016 @ 6:45am

They tried
Tesla notes that GM could mirror Tesla's direct to consumer sales model, but would rather erect new barriers to entry than actually compete.

They tried before, and failed. Understanding their history with this issue may give a little more insight into GM's reaction to Tesla's model.

http://teslamondo.com/2014/04/30/ford-and-gm-tried-ditching-dealers/
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John Fenderson (profile), 25 Feb 2016 @ 7:11am

Re: what?
You're describing a hybrid car. I think Toyota is king of that market right now, but there are a couple of domestic models that are quite excellent.
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John Fenderson (profile), 25 Feb 2016 @ 7:14am

Re:
I rather suspect they think that the $42M figure that was mentioned in the first half of that sentence makes an impact.
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Anonymous Coward, 25 Feb 2016 @ 7:19am

Re:
It is probably a dozen more people than GM employs in Indiana.
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Anonymous Coward, 25 Feb 2016 @ 7:58am

Re:
Like the Waltons - and other businesses - haven't been demanding already???

How many WalMarts - or other businesses - enjoy tax breaks and/or 'tax holidays' just to set up shop in some towns or counties? How many businesses take advantage of "enterprise zones" even though they could (and sometimes would) be better off elsewhere? How many businesses complain about licensing that some jurisdictions have and others don't? How many businesses complain about the lack of skilled labor but insist on the local schools providing the training instead of the business? And so on and so on.
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Anonymous Coward, 25 Feb 2016 @ 8:15am

Re: Re: what?
Not quite a hybrid, more like the Chevy Volt. Hybrids run the gas motor when the electric motor isn't enough. Cars like the Volt (are there any besides the Volt) use a pure electric motor to run the car. It only runs the gas motor to charge batteries after the first 40 or so miles. Much like a diesel electric locomotive.
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Anonymous Anonymous Coward, 25 Feb 2016 @ 8:39am

Re: Re:
There are probably more than a dozen GM dealerships in Indiana, each of which likely has more than a dozen people in their service departments alone. When Tesla has a like number of vehicles in Indiana, then they will have a like number of service technicians as compared to GM. Or, they might have more or less, depending on build quality and how many parts go wrong, and how many are designed to wear in order to increase repair/maintenance business.

What they won't have is a like number of sales people, sleazy or not.
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Anonymous Coward, 25 Feb 2016 @ 9:03am

Re: Re: Re:
I'm pretty sure GM doesn't own any dealerships in Indiana. While there are undoubtedly many GM dealerships which employ many people they are probably "independent" dealerships, and where GM doesn't employ any of the people there.
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Anonymous Coward, 25 Feb 2016 @ 9:03am

Re: Re: Re:
And how many of those dealership technicians are actually employed by GM? ZERO

How many dealership employees and sales people are employed by GM? ZERO

Notice a trend, GM gets other to pay them to sell their produce and to service their product (tech's have to be GM certified, which they have to pay GM for, but they are employees of the dealership that hires them NOT GM).

While Tesla is actually opening showrooms and service centers with employees that actually work for Tesla, not some "licensed GM Dealer" who had to pay millions for the honor of being a GM dealer.

Fail harder next time...
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Anonymous Anonymous Coward, 25 Feb 2016 @ 9:41am

Re: Re: Re: Re:
Wow.

Is there a GM logo outside the businesses they work at?

Yes I realize they are independent and are just licensed to represent GM, but if you think it through without, GM they wouldn't be there at all. Without the dealership system none of the other 'distributors' would be there either. In the end there would likely be a similar number of vehicles and a similar number of service technicians. They just wouldn't have to pay the 'GM'. or 'Ford', or 'Chrysler' etc. licenses.

The difference is like the difference between music distribution with labels as middlemen, or music distribution without those middlemen. GM wants to keep the middlemen. Tesla want's a more open system. With like volume, service employment will be similar.
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Anonymous Coward, 25 Feb 2016 @ 9:46am

Re: Re: Re: what?
Nope: Source: Wikipedia: "From there its internal combustion engine powers an electric generator to extend the vehicle's range as needed. When the engine is running it may be periodically mechanically linked (by a clutch) to a planetary gear set, and hence the output drive axle, to improve energy efficiency."

In real life, when the gas motor is running, it is mechanically propelling the vehicle and re-charging the batteries is a side benefit.
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nasch (profile), 25 Feb 2016 @ 10:06am

Re: Re: Re: what?
The original design for the Volt was that the engine would never power the wheels, but that isn't how it ended up.
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nasch (profile), 25 Feb 2016 @ 10:07am

Re: Re: Re: Re: Re:
without, GM they wouldn't be there at all.

Possibly, or maybe it would be some other kind of dealership.
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Socrates, 25 Feb 2016 @ 10:25am

Plug in hybrid
John Fenderson: You're describing a hybrid car. I think Toyota is king of that market right now
They are, but they were the only corporation that sold EVs to the public instead of just a leasing option. That ended after a really odd trial when the NiMH battery chemistry patents was acquired by the oil industry, and the battery supplier stopped selling batteries to Toyota. Toyota lost, there were a secret settlement, and Toyota stopped making EVs.

Since then, they have sold no EVs, and seem to artificially reduce plug-in hybrid sales (PHEV).

AC: It only runs the gas motor to charge batteries after the first 40 or so miles
This is referred to as plug-in hybrid (PHEV). You can charge the battery from the mains, and the fossil fuel engine starts to provide extra power (if needed) or to extend range. The battery capacity is lower though.

AC: Much like a diesel electric locomotive
No. Diesel electric locomotives is a way to make a variable transmission for diesel locomotives. Hybrids and plug-ins also benefit from this effect, but it is used to lower the RPM's of the engine and using a higher throttle position, and it use a battery to averaging out the intermittent nature the power has to be delivered in a car. A locomotive engine deliver a steady high output.
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Anonymous Coward, 25 Feb 2016 @ 10:30am

who gives a damn...
I mean really? What right does the public have to tell a business that they have to first give their product to a 3rd party for sale?

Face it... America is not a free state, it is a fucking nanny nose all up in everyone's damn business!

If Tesla wants to be the ONLY one to sell their shit let them. Let GM, let NISSAN... let them ALL!

We Americans have literally blessed government high & low with the chains of tyranny and willingly stick our damn wrists out as the manacles fall onto them.
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Socrates, 25 Feb 2016 @ 10:49am

Re: Re: Re: Re: Re:
GM wants to keep the middlemen
Kind off, they want buyers to be dissuaded from buying electric cars by being forced to use the existing dealership structure. They are lousy EV salespeople. This suits GM well.

If Tesla is successful, GM needs the dealers. If Tesla fails GM will hurt the dealers. They have done so in the past, and they will do so in the future.
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Ed, 25 Feb 2016 @ 2:11pm

Let the bill pass
I say, let the bill pass. Then argue that all used car sales must now go through a dealer. See how long that lasts.
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