An Electrifying Event

Column by Paul Hein.

Exclusive to STR

I’ll wager you don’t drive a Tesla, or know anyone who does. But you’ve probably heard of it--a pricey deluxe sedan powered by electricity, with a range of over 200 miles between charges. Tesla management wants to sell its cars direct to consumers, rather than to dealers who will then re-sell it to buyers, after adding their costs, plus profit, of course.

If you’re like me, it’s all a big yawn. Who cares? So what? Actually, it seems like a good idea--eliminating the middle man. Tesla would, as I understand it, maintain facilities for the maintenance and repair of the vehicles, but the car’s first owner would not be a dealer, but the person who would drive it—the consumer.

What makes this worth mentioning is that in several states--most recently Missouri--the rulers have decided that this should not be. The boys in Jefferson City snuck a bit of legislation into another bill forbidding auto manufacturers to sell directly to the public, thus repealing, in effect, a license previously granted Tesla to do business in Missouri. In the rush of legislating (i.e., expressing their wishes in writing), it is hoped that this bit of chicanery will pass unnoticed. Evidently it is not only in Washington that bills are passed without being read.

There would seem to be only two parties directly involved in Tesla’s desired arrangement: the manufacturer—Tesla—and the buyer. No one would be harmed in any way by Tesla’s sale directly to a customer. If no one is harmed by the direct maker-to-buyer program, who is benefited from its prohibition? Why, the automobile dealers, and their association, the Missouri Automobile Dealers Association. That organization spent nearly $50,000 since 2011 feeding and entertaining the law-makers. One of the legislators thus fed and entertained gave this statement to a newspaper: “You can’t have two sets of rules for the same type of business or industry. Our forefathers decided any car sold in the state of Missouri would be sold through a dealer. This new company is skating around these rules.” Gosh! Our forefathers! I can just visualize them, disembarking from the Mayflower, kneeling to pray in thanksgiving for a safe arrival, and declaring that automobiles, when invented, would be sold only by dealers. The legislator’s assumption that you can’t have “two sets of rules for the same type of business” is just that--an assumption. Why can’t there be two sets of rules? But much better: Why must there be rules at all, except those basic moral principles against stealing, cheating, tricking, or otherwise violating a customer’s rights?

Another legislator--himself a former automobile dealer--demanded to know why Tesla had been granted a license in Missouri, when Tesla’s proposed arrangement “is clearly designed to circumvent the traditional franchise model for the distribution and sale of new motor vehicles.” Well, I guess we daren’t circumvent traditional franchise models! Did the Founding Fathers realize what they were doing when they circumvented the traditional English franchise model for the colonies? These apparently sacrosanct “models” and “rules” are nothing more than the expressed wishes of the legislators--a group of 167 people in the Capitol whose wishes are “law.” Would anyone give them any special respect if they were not backed by force, and the implied use of violence to bring about obedience?

There is an interesting conflict of interest involved, however. Tesla had five states bidding for its manufacturing facility within their bailiwick. The contenders were California, Texas, Arizona, New Mexico, and Nevada. The company, in response to the most generous offer (dare we call it bribe?) would build a $5 billion factory in the winning state to manufacture batteries for its cars. This was sufficiently attractive to the legislators of Nevada that they offered incentives totaling $1 billion to win this prize. No doubt Missouri’s rulers would have liked to have this factory within the state, but how likely was that if the same rulers forbade the sale of Tesla automobiles directly to consumers in Missouri? Missouri’s refusal to allow Tesla sales in the state has no doubt pleased the Missouri Automobile Dealers Association, but by making itself anathema to Tesla, the state lost the jobs that the plant would provide--approximately 6500--possibly antagonizing the unions that would benefit from the plant’s operation in Missouri. So it’s not surprising that the Show Me state wasn’t a contender.

What a system! States compete to see who can make the most attractive bribe to the company--any company--considering locating within their borders. Within the state, one pressure group may see green, the other red, if the plant is built. The rulers must juggle the voting power and support of one organization against another.

But, of course, in making its decision, the Rulers have nothing in mind but the hallowed “common good!” You believe that, don’t you?

Your rating: None
Paul Hein's picture
Columns on STR: 133