> The attempt by auto manufacturers to cut out the dealer would only result in higher prices and less customer service to the public,” he said. “The new car dealer is the customer’s advocate when it comes to warranty work and service on a manufacturer’s product, and this bill will protect that
So this is the reason given in the article, but what are good reasons, if any, to prevent direct-to-customer sales? I haven't bought a new car yet, but seems like every anecdotal story I get of people buying cars is always that their dealership tried to push every useless feature or additional warranty that they could.
Same goes for maintenance, I have had many more terrible experiences with dealerships than local garages as the former tends to have a more captive customer base whereas the local garage is incentivized to actually keep you satisfied or you'll just go elsewhere.
Use just a little bit more cynicism and the actual reasoning becomes clear.
Car dealership owners are one of the most reliable Republican constituencies. They make outrageous amounts of money through government-mandated rent-seeking and donate to Republican candidates 6-to-1. What we see here is nothing more than a quid-pro-quo, a handout to the dealership owners in exchange for their loyal monetary support over the years.
So yes, it's not about protecting the consumer. Dealerships are of course actually terrible, as everyone knows. This is about protecting the dealership owners.
I certainly don't mean to be defending either party, but the bill received bi-partisan support. Only 2 reps voted against it in the house, and it received unanimous support in the senate (which includes 12 democrats).
A lot of people pretend this isn't the case, but democrats also receive political donations from rich people and then pass legislation that is favorable to those rich people. But the underlying cynicism is correct. It's a racket.
required disclaimer: i don't like republicans either
The 6-1 ratio means that democrats are also getting a lot of money from dealership owners. Then, given that both the house and senate there are 60+% republican and all the republicans will vote for it, anyone voted against it is just symbolic and then is that symbol worth upsetting their own backers?
I think a better way of understanding how the two parties feel about regulation of specific industries is to look into how different states regulate those different industries. This doesn't work well for very regional industries (think coal or I guess logging, for example), but car dealerships are everywhere.
I'm trying to understand it the same. How is this different to them saying "you have to buy airline tickets via a travel-agent?", or "you cannot buy from Intel, only eBuyer?".
My understanding of the history of this system is that auto manufacturers wanted a way to dump their inventory reliably and so independent dealerships came into being. Then the dealership owners got rich and influential enough to essentially get themselves enshrined in state law in multiple states. But someone else can fill me in if that’s incomplete or not quite correct.
There used to be a very few number of car companies who held a lot of power over dealerships and used to abuse that power, which led to laws protecting dealers in ways that at least arguably made sense at the time, but don't anymore.
I think if we removed the dealership (sometimes called "franchise") laws that prevent manufacturers from selling directly to consumers, we could see more competition not just between existing players but also lowers the barrier for new entrants into the market.
Tesla and Rivian, for example, wouldn't even be able to exist without this, the cost of setting up new dealerships is enormous otherwise.
I'm not an expert in this topic, but coming naively to it, it strikes me that direct to consumer retail of all types was harder before the internet, which required more middle men to distribute goods.
Realtors provide a valuable service. We bought in a particularly desirable region in 2021. We put in eight offers before getting one accepted. Our realtor knew the necessary legal forms and requirements, and wrote each offer for us. They also had a background in flipping houses, and were able to give us advice on renovations, and which houses were just bad choices during tours, pointing out flaws we might not have noticed, and telling us when problems were probably easier to fix than we might expect.
Car dealerships are mostly useless. If you've done even cursory research, you probably know more about the car you're buying than the salesperson. Their only purpose is to extract money from you.
They probably got paid ~$50,000 for the service they provided for you. The service may have been valuable, but do you think it was $50,000 valuable? Do you think it should be very difficult to avoid paying that $50,000 if somebody doesn't want the service they provide?
Realtors provide a valuable service, I’ll agree, but I don’t think one in line with the price you’re paying, which is propped up by their cartel system.
I've had pretty universally bad experiences with dealerships, especially ironic in relation to what DeSantis has said here because I distinctly remember advocating myself that something should be covered under the manufacturers warranty, and the dealership said it wouldn't be, and I was very certain it would be, and I had to call the manufacturer (Kia) to get the dealership to play ball. They didn't want to go the warranty route because it turns out, it paid less for the repair.
Realtors on the other hand, I've had some good interactions there, the last 2 I used saved me money and got me more for my dollars, at least.
At least Realtors only become involved when you want them to be involved. There is no regulation that requires real estate transactions be conducted through a Realtor.
Around here, a lot of properties get listed and sold by the local law office. Granted, they don't put in the same kind of marketing effort that Realtors generally do, but when the market is hot buyers will search high and low to find your property for sale anyway.
Unless the market is weak and one needs someone working 24/7 to find a buyer, going straight to a lawyer to sell a property/buy a property is a no-brainer. You are going to need one anyway.
They do but in this day and age the information asymmetry is not that huge or isn't there anymore (depending on the customer). They put up a good face to hook you in. My experience is that they become less enthusiastic (to say the least) once they know that their "sales" force powers will not work on you.
No but having one who knows the law, all the little things to look for, and fights for you even while you are signing paperwork is worth it. (Our realtor was awesome and totally worth the money, at least as a first time buyer).
Historically, car manufacturers screwed dealerships. One of the ways was selling franchises then deciding that they could make more money selling directly to customers. Or that they needed some extra cash, so selling so many franchises that none of the dealerships could sell enough to break even.
Many of the laws about warranties were due to poor behavior of manufacturers. In the US, repair parts need to be available for at least 10 years for cars. In the past, the manufacturer could just decide that they didn't want to sell repair parts - just buy a new car.
The Great Depression reduced the number of car manufacturers by about 95%. Which brings me to a more important point. A number of laws were passed to prevent the Great Depression from happening again. Repealing several of them gave us the 2008 financial crisis. Making exceptions to the Securities Acts of the 1930s lets us all relearn the history of why those laws were passed in the first place with all the crypto scams. These laws exist for a very good reason and repealing them is only good for con artists and crooks. The rest of us get screwed.
Modern car dealerships in America are the embodiment of modern rent-seeking. Every department treats every other department as the enemy. Each department that touches an item (spare part, used car, tires, floormats, whatever) has to raise the price 30% to cover overhead and the need to be a profit center. Sears went through this exact same behavior as it crashed and burned. Jack Walsh used the same behaviors to make General Electric the darling of Wall Street.
> tried to push every useless feature or additional warranty that they could.
Every sales rep that works on commission works this way. Salaried sales reps don't. Any commissioned sales rep that refuses to work this way ends up quitting very very quickly.
Disclaimer: I used to work for General Motors which used to be the largest car manufacturer and the very reason that many of the dealership & warranty laws were passed in the first place.
Actually several reasons and overpriced, excessive, or unnecessary maintenance is one of them
The reason dealerships are surprisingly powerful politically is they are usually family owned and operated so they have much wider discretion over political donations and/or bribes.
I mean a dealership is often the biggest business in town. They’re big cheeses locally. And provincial elites often have a lot of resentment for national ones, which explains a lot about recurrent political conflicts.
> So this is the reason given in the article, but what are good reasons, if any, to prevent direct-to-customer sales?
because cars require service, someone needs to do that service, be trained and have master techs on that service. How do you handle lemon laws without dealerships?
Just look at the nightmare tesla has been for owners with years of bad repairs, delays, etc.
OEMs provide a bunch of stuff that is adhoc to making new crs like long life spans for part productions, having dealerships service recalls, and so on. there's a lot of non-new-sale-stuff that is done
That provides an explanation for why the consumer might choose to buy from a dealership, but not a reason for why they must. In fact, said bill still allows Tesla to sell direct-to-consumer, so the lawmakers couldn't even find a reason to not let consumers make a choice in the general case, only if buying from a set list of manufacturers.
> That provides an explanation for why the consumer might choose to buy from a dealership, but not a reason for why they must.
The same could be said of basically anything. Consumers could choose to do anything. Suppliers anything. Now we are anarchists. yay!
But we don't we live in a heavily regulated society, and what seems to work fairly well is having a dealership system. Now we could just remove the word dealership and require OEMs to provide everything that the dealership does, and I would be fine with that, but IMO this is a shorthand for that.
> But we don't we live in a heavily regulated society, and what seems to work fairly well is having a dealership system.
This is a simple just world fallacy. Most of the times the reason something exists is that it's the best available alternative, but there are definitely times when a systems exists because it is entrenched regulatory capture and rent-seeking, e.g. dealerships and healthcare insurance.
You have to critically evaluate complex systems on a case-by-case basis and see where the money flows to make a determination whether it's good for society as a whole.
The same is said about everything, although we recognize that the concentration of capital enabled by giving certain actors in the economy an unequal advantage is more efficient for the economy as a whole than it is for everyone to be equal.
But dealerships run contrary to that. They see distribution of capital away from the OEMs in an equalizing way. This is recognized and understood by lawmakers, which is why the Teslas of the world are still free to do as they please. The question is really: What's special about GM, Ford, etc.?
And yet nearly everything else you buy doesn’t require a dealer. Even in the rare opportunity of buying a new construction house you can buy from the developer (though with the possibility of being forced through a particular title agency).
Any time I need to go through a dealer for a product (unique appliances or equipment), I know I’m about to pay more than I should.
> because cars require service, someone needs to do that service, be trained and have master techs on that service.
My cars have had no trouble getting service at independent mechanics.
> How do you handle lemon laws without dealerships?
The same way we handle them with dealerships? The organization that sold you the car is responsible for the fixes, or refunding the vehicle if it can't be fixed.
> My cars have had no trouble getting service at independent mechanics.
Have you ever worked at an indy? We rely heavily on dealerships for anything from borrowing specialty tooling, local parts departments, knowledge and advise etc.
> The organization that sold you the car is responsible for the fixes, or refunding the vehicle if it can't be fixed.
Totally.
I think it's six of one half a dozen of the other. Car manufacturers generally coalesce around the efficiency of having new sales, parts departments, repair departments all in one building in many localities spread all over the place.
> We rely heavily on dealerships for anything from borrowing specialty tooling, local parts departments, knowledge and advise etc.
What makes it impossible for the manufacturer to provide such things?
If Ford chose to do away with dealerships, they couldn't provide regional parts and training facilities? (Hell, they'd probably already need to buy out a dealership or two for every major city or region already, anyways.)
Yes and then they'll need a place to store new cars, on lots, and people, to facilitate the handover of keys and handle loans and so forth. back to square one
That was always the case; Tesla has showroom and service facilities all over the place, and handles financing. That's the model the big traditional manufacturers want to move towards.
It's not back to square one; it removes a middleman layer, one that most folks hate dealing with. You buy a car at a set price that's the same for everyone from a salaried employee, not from an intermediary who'll make up a price and pocket a commission off screwing you if you're not good at haggling.
> I think it's six of one half a dozen of the other. Car manufacturers generally coalesce around the efficiency of having new sales, parts departments, repair departments all in one building in many localities spread all over the place.
Why exactly must this be an independent business motivated to collect rents on top of what the manufacturer is already making? Hard to see how that could do anything but drive prices up to keep more fingers in the pie.
Ah yes, having Tesla service come to my house and do repairs as needed in my garage while I'm working is a complete horror show.
It's absolute nightmarish when they don't try to upsell me or berate me for not knowing how cars work, like a RAM service center did to me in the past.
There are countless independent mechanics who service most cars. Teslas have other issues that make them difficult to service. I think this argument is a red herring.
Automobile dealers are separate business entities with different motivations from the manufactures. In particular, they have historically demanded access to training, access to parts, ability to negotiate price, trade ins, etc.
IMO danger of them disappearing is what we see with tech and luxury brands who go through a ton of effort to enforce their MAP and are not particularly motivated to make things repairable.
That being said, they are middlemen and there is defiantly a balance.
Last time I bought a car, I called around until I found a good deal then I went there and talked to them to get the actual number. Then I called the other dealers I'd spoken with and asked if they could beat that deal. I spent 8 hours going back and forth, but got my car for 20% off MSRP. I couldn't have done that if I'd been dealing directly with Ford.
Good for you? What if we had a free market approach where both options are available and we can see what happens? How is more competition not a good thing?
Dealership owners are a reliable Republican constituency. This kind of local bigwig was one of the most reliable Trump supporters and I'd guess the same is true for DeSantis. I mean you decide if that's a "good" reason but it is the real one.
Perhaps one of the wilder things I learned in this article is how many laws make it illegal for an automaker to set transparent prices. State mandated Three-Card Monte.
Isn't that welfare state with extra steps? Why don't you just increase taxes and deposit it into the dealership bank accounts? At least you will skip dealing with dealerships if you don't want to?
If there are other concerns(maybe availability of parts etc.), addressing those directly should be a better option, no
?
> The change confirms newer manufacturers like Tesla, Rivian and Lucid are authorized to hold a franchise dealer license for direct sales of EVs if they are not otherwise prohibited under federal law. That carve-out apparently does not extend to traditional manufacturers such as GM, Ford, Honda and Toyota, all of which now make battery-powered cars.
It's basically a protection racket for existing dealerships for traditional automakers, to ensure they don't get any bright ideas to avoid ~~middleman~~ dealership markups by directly selling the vehicles.
That and the 2024 Mustang, but it's online reservation-based; the dealerships are still ultimately the ones buying the cars and reselling them to the end-user. I've heard stories of $20k or more markups even for reservation holders, since they know they'll be able to sell it if the original buyer walks away.
"""
But as Florida Politics noted previously, lobbyists, including Taylor Biehl and Jeff Sharkey of Tallahassee-based Capitol Alliance Group, hammered out a deal adding language to the bill that should keep Tesla galleries open.
The change confirms newer manufacturers like Tesla, Rivian and Lucid are authorized to hold a franchise dealer license for direct sales of EVs if they are not otherwise prohibited under federal law. That carve-out apparently does not extend to traditional manufacturers such as GM, Ford, Honda and Toyota, all of which now make battery-powered cars.
"""
This really seems like late stage capitalism. The partnership between automakers and auto dealers has been celebrated over a 100 years. They are now employing politicians to legislate the business partnership over their shared interest.
They have been doing that for over a century. So, if so, the late stage of capitalism is dragging on a bit. I would challenge the notion that dealers have been “celebrated” by anyone but themselves.
I was trying to describe the celebration that went on between the auto makers and the dealers. I'm sure there were many get togethers at resorts all over the world for them to celebrate the relationship.
They are now in the same relationship but are using politicians to maintain the status quo relationship. It definitely is not a healthy sign for the efficiencies of business in the USA.
But that’s not exactly right. Going back to the 1920s dealerships were reaching for the lever of legislative action to protect their position and they’ve done it over and over since.
This article people have been passing around in the thread contains a bit of a history of the car dealership lobbying, which started during World War I when they feared being driven out of business by automakers converting entirely to war materiel production and cutting them out. https://slate.com/news-and-politics/2023/05/rich-republicans...
Florida has prohibited direct to consumer sales for over half a century with an especially stringent automobile dealer franchise law. The interesting point is the carve-out for Tesla.
Florida also recently passed a special law for SpaceX removing liability for launch related deaths of employees or something. A few weeks after the flight termination system failed for 40 seconds.
Do you think Elon Musk turned into a hardcore Republican just for the political favors? It just seems so blatant.
There has to be some kind of conflict of interest here. Elon was literally blasting out the DeSantis presidential announcement to his millions of Twitter followers, and he continues to act as a mouthpiece for Republican ideology.
Elon is a businessman and nothing more. Everything he says is bullshit just to further his business interests. Not just Elon, all billionaires do these things regularly. I don't fully understand the game they're playing, but no doubt so much of what the rich do or say is to manipulate public opinion, distract, or gain favor.
> Do you think Elon Musk turned into a hardcore Republican just for the political favors?
I think people with enough money to have major political influence play “teammates” with any party who gives them what they want.
Striking down the McCain-Feingold act was a major blow to American politics. Quid pro quo is only illegal if bribery can be proven, so it effectively has no teeth even though we can all witness the corruption in plain sight.
There’s hardly any serious politicians to vote for at the national stage, because winning is the only priority and corruption is how you win. McConnell stated this plainly when he went after the McCain-Feingold act.
"We do it because we'd like to win. We'd like to win. There's nothing inherently wrong with wanting to win," McConnell says.[1]
The single greatest politically backward thing in America is how the republican party has positioned itself as a pro free market party by, as best as I can tell, often championing precisely the opposite.
I live in Texas and we have the same laws but, yet, a "business friendly" reputation. There's no way to spin it, these kind of laws are the perfect example of an industry using bought politicians to block competition and protect their profits.
I mean it’s very pro-business to mandate that anyone who wants to buy a car has to give money to a business that’s not doing much of anything to deserve it. As long as you ignore idealistic notions of how markets work anyway.
It’s debatable where restriction should be placed, but a “western” market will always have some: trade in people, trade in arms, restricted trade of items to minors. Are there laws restricting commerce based on social restrictions that are not falling into one of those three categories?
I was thinking if you’re leaning toward restricting how people dress, what they call themselves, how they congregate, what entertainment they enjoy, those leanings stand in conflict with “free market”. For example the political war on gaming in the 90s — effectively seeking to restrict the gaming market due to ideological social restrictions. Now I see a similar trend with being anti-“woke” and therefore anti-“woke business”. A company selling drag accessories and drag entertainment will not find many friends in the GOP. The DeSantis conflict with Disney due to its “woke policies” etc. Not to mention tech. Josh Hawley wrote a book called “The Tyranny of Big Tech” claiming tech is dangerous because it’s woke and anti-conservative. Pretty out of band for a “free market” proponent.
The auto dealership lobby is one of the most powerful in America. It leans heavily Republican, and Republicans dutifully propose legislations which protect these wealthy -- but almost wholly unnecessary -- middlemen. Slate had an expose [1] recently about them that is very enlightening.
If it’s only Republicans why is it that heavily Democratic states like CA or NY also require dealerships in most cases? (CA is slightly better than NY but still doesn’t allow direct sales for 90% of vehicles)
> That first taste of triumph only whetted the appetite. By the 1930s, with another war effort in the works, dealers went state by state. “At that time, there was lots of attention being paid to small business as having inherent virtue and the need to protect mom-and-pop shops,” Daniel Crane, a professor at the University of Michigan Law School, told me. “They embraced that story, and were extremely successful at getting legislatures in all 50 states to strictly regulate how cars were sold.” In 17 states, it is outright illegal for car manufacturers to sell cars at all.
That’s the stupidity of people holding onto their party so loyally. Politicians are only loyal to those paying the bills, and most citizens are not contributing enough to their “campaigns” to matter.
Someone posted the other day about the (likely apocryphal) story of a California statesman who struggled to find a place to live in SF because of high rents and his limited resources. 10-15 years later that same politician is a multi-millionaire while making less than most starting engineers in SF and with none of the equity. It’s astounding how wealthy people get after becoming “public servants.” Ugh.
A unpopular view but… This is why overruling Lochner may not have been so great. We used to have “right to contract” and so the state couldn’t forbid me from purchasing an item that the seller wanted to sell me. But now it’s more like you get to participate in the economy only in the way that the legislature decides is acceptable.
Given that overruling Lochner lead to states actually being able to enact minimum wage laws I think the trade-off was worth it.
To reference a separate issue currently trending on HN -- were we still living in the "freedom to contract" era, there would be no way that states could ban non-compete agreements. At base, the problem inherent in the "freedom to contract" ideal is that in many situations the parties to a contract are not equal in bargaining power, and perverse results happen as a result of ignoring that reality.
I buy that dealerships are paying off state government officials as part of their lobbying efforts. Putting on my cynic hat, my question is, why aren't automakers? I mean, other than Tesla, Rivian, and Lucid, who presumably have no dealership footprint to protect. I know Ford also wants to sell direct-to-consumer, and I have no doubt they've got no ethical issue with lobbying politicians. So, why not shell out a few million?
One guess, dealerships are local and have a much stronger interest to support local candidates as opposed to auto manufacturers who have a national or global presence. Dealerships are also far greater in number, hundreds if not thousands in every state.
It may also not be such a big deal for most automakers like Ford, which have historically always sold through dealerships. It would likely cost more than a few million in lobbying to undermine these laws, and multiply that by 50 states, it may be a battle not worth fighting. Unlike Tesla, which has always sold direct-to-consumer, and has notably never paid for advertising, direct-to-consumer is very much their business model, so they have a much stronger interest in maintaining the status quo.
They have to also fight against the public opinion of putting “local family businesses” out of work. Meanwhile these families are likely the wealthiest in their locale and have stepped on anyone in town that tried to stop them from keeping their capture.
Although dealerships suck I’m not convinced that direct-to-consumer auto sales won’t also have their own special brand of fuckery, and I’m not exactly sure which business model will be better in the long run. I see potential for abuse like never before.
This thread involves both politics and Musk/Tesla, a cross-section of categories that often invites low-quality comments. It need only add cryptocurrency to achieve the trifecta.
I think the 'no pure politics discussion' rule is kind of out the window when the article is literally just about politics, from a site with "politics" in the literal name and url. :P
It's not a hard and fast rule, as many subjects have a political component. Even sites with "politics" in the name may discuss issues relevant to HN (in this case, direct sales of autos, a topic discussed here many times)
Sure, but this article is not a general discussion of the merits or demerits of direct sales, it's about a law being passed by a political frontrunner, for political reasons.
My first thought was how does this sit with Elon, after promoting DeSantis for President, and after a history of being against these state laws that protect dealers? Of course, the law has a carve-out for Tesla…
I think market should decide if it's useless, not government rule. I would never buy a car without trying it first. Italian dealers may take care of your old car, if you have one and don't want to sell it by yourself.
I feel that on a national level, politics is almost entirely captured by stunts and not by actual policy. So it doesn’t matter if his policies are corrupt, he’s owning the libs.
Florida is overall one of the best run states in the country. The public pensions are largely pre-funded and there's no state income tax. The biggest issue is the property insurance marketplace.
You're measuring success by spreadsheets, not quality of life. As a Florida resident for half a decade, the state is a dumpster fire. It is designed as a place for the very wealthy to live well at the expense of everyone else (with the tax framework built to be regressive vs progressive).
~26% of Florida drivers carry no auto insurance (raising prices for everyone else). Property insurance market is collapsing due to roofing fraud and climate change risk repricing. If you have kids, public school is not an option due to quality. Pedestrian deaths are higher than the national average. Despite transparency laws, there is still substantial corruption and nepotism in government. Electric rate increases exceed other areas due to primarily investor owned utilities regulatory capture and their heavy reliance on natural gas fired generation. There is an extreme shortage of healthcare workers and teachers currently (construction and agriculture aren't far behind due to recent legislation). The people of Florida elected Rick Scott for governor twice. Before he ran for governor, he was CEO of Columbia/HCA. The company presided over the biggest Medicare fraud in history, and the company had to pay a $1.7 billion fine. Rick Scott claimed he didn’t know anything about this fraud, but he had to plead the fifth ~75 times during the investigation. Rick Scott is now a Florida senator. You can also carry a concealed weapon with no concealed carry permit as of July 1st. There is an affordable housing crisis, with Florida ranking third for homelessness.
But yes, warm weather and no state income tax.
(I can provide citations for all of my assertions above but won't pollute the thread unnecessarily)
That's the issue. Florida's effective tax rate is about equal to Georgia which has a ~5.5% income tax. And it's going to continue to increase with homeowner's insurance prices even outside of the Miami metro area skyrocketing (which you pay for even if you rent, in terms of rent increases owners enact to cover costs).
So this is the reason given in the article, but what are good reasons, if any, to prevent direct-to-customer sales? I haven't bought a new car yet, but seems like every anecdotal story I get of people buying cars is always that their dealership tried to push every useless feature or additional warranty that they could.
Same goes for maintenance, I have had many more terrible experiences with dealerships than local garages as the former tends to have a more captive customer base whereas the local garage is incentivized to actually keep you satisfied or you'll just go elsewhere.