“You take a look at the weak economy, the overregulation….what we are seeing here is big government in practice,” said Rep. Paul Ryan of Wisconsin, the Republican nominee for vice president in 2012. Such complaints about an overbearing government are abstractions and are difficult to debate and discuss – unlike real instances where clearly the rules on persons and businesses are burdensome.
In 2014, consumers still cannot purchase a car online from General Motors, Ford, Toyota, and other automakers like they could an iPod from Apple. Telsa Motors has learned this recently as it has faced restrictions on its ability to sell cars directly to consumers, another way the maker of exclusively electric cars has tried to upend the auto industry. This is more than an abstraction.
Most states have laws which prohibit the sale of automobiles directly from manufacturers to consumers. The laws are so strict that in Texas, where Tesla has been forced to turn stores into showrooms only, employees cannot offer customers test drives, or even tell them where they can purchase the cars. Any literature in stores (my mistake, showrooms) on the product must be devoid of prices. And when Texas owners need a repair, they have to call the company’s headquarters in California.
There is no rhyme or reason for this. This rule does not protect consumers; it only protects the interests of auto dealerships.
For example, I have driven a Chrevolet Impala before. I like that car. If I had the income, and wanted to purchase the vehicle, and already knew what color I wanted it to be and what other specifications I wanted included, why couldn’t I order it online from General Motors?
The answer from auto dealerships is ridiculous. Such a departure from current practices they say would mean their profit margins would decrease, and therefore they’d have to donate less to charity. And auto dealerships are often involved in the communities where they’re located. However, their charity does not excuse economic inefficiency.
Auto dealerships should be showrooms, if they can sell a car, fantastic, but otherwise they should be where customers’ window shop or test drive cars. We shouldn’t be corralled there by the law. I trust Google more than I do a go-getter salesman who is likely to charge me more money. In fact, aside from the incentive for individual dealers to inflate the price for the sake of their own commission, auto dealerships themselves represent unnecessary middleman (who increase cost 10 to 20 percent). Quite simply, without this law, they do not matter. They’re not consequential to the business, nor should they be.
Michigan would be wise to allow automakers, Tesla in particular, the ability to sell their products directly to consumers. The company’s stock price has increased more than 50 percent year-to-date (March 18th), and will likely expand. And the Motor City could certainly house another automaker.
Moreover, state Republicans can prove whether or not their concern about overregulation stems from a real belief in free-markets or bloviating.
Auto dealerships are an entrenched interest, especially in the automotive state. Data from the Sunlight Foundation, a nonprofit which does the good work of tracking political donations, shows auto dealerships have contributed to both Democrats and Republicans. The Michigan Auto Dealers Association has donated $1.1 million to state Republicans, and $758,400 to state Democrats.
Terri Lynn Land, this year’s Republican candidate for the senate seat currently held by Carl Levin, has received $64,500. Levin will retire after his current term ends in 2015.
Randy Richardville, a Republican and majority leader in the State Senate, has received $17,100.
And as Upton Sinclair famously said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
Franchise laws should be repealed in every state they exist. They’re a clear example of overregulation; they’re a clear example of stupid rules – rules so blatantly stupid that the arguments in their favor fall to pieces with even the most lackadaisical examination.
The objective is not to eliminate auto dealerships as a business; rather it is to free up money, and to free up the market. Today, consumers can purchase food online, a computer, there are even private islands on sale online.
In the future, when we buy a car, it should be with the click of a mouse.