The Real Reason Why Dealerships Don’t Want To Compete With Tesla

BEIJING, CHINA - OCTOBER 23: (CHINA OUT) Elon Musk, Chairman, CEO and Product Architect of Tesla Motors, addresses a press conference to declare that the Tesla Motors releases v7.0 System in China on a limited basis for its Model S, which will enable self-driving features such as Autosteer for a select group of beta testers on October 23, 2015 in Beijing, China. (Photo by Visual China Group via Getty Images/Visual China Group via Getty Images) VISUAL CHINA GROUP VIA GETTY IMAGES

When I was on a podcast with Connecticut State Senator Will Haskell and Will Cross from Tesla Owners Club of Connecticut, the senator said something that helped me understand exactly why dealerships are fighting so hard against Tesla and other EV manufacturers.

Senator Haskell pointed out that dealers feel as if they have the superior business model and that customers love going to dealerships.

“I personally don’t think that that’s true. I think that they are not necessarily in love with the car dealership experience, but maybe they’re right. And the point of living in a free market is allowing the customer to decide. If dealerships truly believe that they’re serving customers in a superior way; that they’re the preferable option, well then customers will likely continue to choose to buy their car at dealerships even if direct sales is an option.

“But by restricting the free market, I find it sort of confusing. It’s like the world is turned upside down. I’m a progressive democrat in Connecticut begging to allow businesses to come to Connecticut and to enable free market dynamics to do what they do best which is empower the consumer to make a choice that’s best for them.”

While listening to Senator Haskell’s remarks, my mind went back to that article by The Day that was practically begging Tesla to give up on direct sales in Connecticut. In that article, the editorial board wrote an op-ed that emphasized the desire of dealers and their supporters for Tesla to play by the dealership’s rules — the law as it stands, referring to the current state law that bans direct sales of EVs in Connecticut.

It’s About Control

And then it clicked. The reason why dealerships don’t want to compete with Tesla or any EV manufacture that sells directly to the customer is that they don’t want to have to fight for something they are used to getting easily.

Up until Tesla, the only way to buy a car was through a dealership. With Tesla and other EV manufacturers such as Rivian and Lucid coming to the States, dealerships are now having to fight or compete for something they are not used to having to fight for. They have to fight for their piece of the pie, so to speak.

Before Tesla, dealerships could get away with screwing customers over because if you wanted a car, you literally had no choice but to go to a dealership (unless you bought a used car from someone). If you wanted a new car, you go to the dealers. It’s always been this way.

Dealerships Would Rather Sue Tesla Than Compete For Customers

Many dealerships across the U.S. and their associated groups are lobbying state governments to ban Tesla and other automakers from selling directly to customers. In Connecticut, Hoffman Auto Group is suing Tesla because Tesla is opening a service center (where it will service the vehicles, not sell them) for its customers.

The dealership claimed that it is suing Tesla because Tesla will be allowed to open a facility and do business with its customers. In other words, the dealership is suing Tesla because it doesn’t want to compete with Tesla for customers. Imagine if Samsung sued Apple because it has to compete for customers.

Dealers Don’t Want The Status Quo To Change

The dealer model was the only way a customer could buy a new car. Until Tesla. Senator Haskell also mentioned that in his state, there was a poll that showed enabling direct sales in Connecticut was an extremely popular idea. The poll, which took place earlier this year, had high support — somewhere between 70% to 89% of residents supported the direct sales bill.

“That’s shocking because 88% of residents agree on nothing, but the fact that they think that EVs should be allowed to compete in a free-market manner I think is really encouraging. Support was strong among the Democratic Party and the Republican Party, but what struck me most, and this gets gets to your point about car dealerships, support was highest among women and among people of color. And I that that’s not a coincidence. It’s because those are two groups that consistently face higher prices and other forms of discrimination at car dealerships.

“So the car dealership model, which has existed for many, many decades — almost a century — it doesn’t work for everybody. The status quo isn’t working for everybody, and that is why I think this bill is so popular, especially among those groups.”

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