Automakers Say Franchise Laws Go Too Far

Automakers were once a neutral party in the Tesla vs. dealership fight. However, with more states trying to find a middle ground between allowing Tesla to sell cars and still keep the dealers happy, new laws are being drafted, like the one in Pennsylvania, that have automakers pushing back. The manufacturers are becoming increasingly frustrated with some of the legislation that they claim gives the dealerships too much power.

From Automotive News-

"At the request of local dealer groups, states set up a labyrinth of protectionist laws that make the car-buying experience difficult and costly for our customers," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, which represents 12 automakers but not Tesla.

"It's understandable why Tesla or future competitors would want a simpler sales process. When we look at the big picture, we may be at a tipping point. If dealer groups continue their push for more onerous franchise laws, we will be forced to keep an open mind about how best to serve new-car buyers in the future."

Emphasis mine, I think we can safely assume that automakers have been well aware for awhile that the dealership experience is not the most ideal way for customers to acquire product. Yet the manufacturers tolerated the system because, for the most part, it was mutually beneficial. But the legislative battles, specifically in NJ and PA, have brought in new language that automakers say are tipping the scales too far in the dealerships favor. A non-Tesla bill proposed in NJ is raising specific concern with car makers as they claim it "...would make changes in a number of areas, including warranty reimbursement and manufacturer incentives. The alliance charges the bill protects dealers at the expense of manufacturers and consumers."

Of course those representing the dealerships counter that these new laws are for the protection of the consumers and the provisions would reduce lawsuits and hold automakers more accountable to car-buyers. Speaking of car-buyers, it would seem that most of them would be comfortable not having the "protections" of the dealership-

In a poll of 5,000 consumers conducted by the alliance in April, 77 percent of respondents said all manufacturers should be allowed to sell directly.

This fight has now begun to escalate beyond a small California car company against a massive dealership lobby. If the dealerships continue to push more laws that narrowly protect their interests they may be lining up for a major battle with the auto manufacturers who have the financial capital to mount a serious lobbying effort of their own. It is going to be interesting to see how this plays out.

(image credit NPR)