August 6, 2015 • 41 mins
In this episode, Ben gets revenge on Scott with a mystery show of his own. Listen in to hear how Scott holds up.
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Episode Transcript
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Speaker 1 (00:02):
Go behind the wheel, under the hood and beyond with
car stuff from house stuff Works dot com. I welcome
to car Stuff on Scott and I am Ben. We
are here with our superproducer as always, ladies and gentlemen.
Nol the Nebulous Brown, the Nebulus. I'm looking up synonyms
(00:26):
for mysterious no All, seat of the pan, brown, no Shot,
and dark brown. Yeah this Nole the dark horse brown.
Like we're using up all the good ones now, I don't.
We need to back it down. So the reason that
we're using up all of these good nicknames for Noel,
and the reason that maybe we made a misstep using
(00:49):
all those good ones at once, because some of those
are really good, uh, is because this is one of
our continuing series of mystery shows wherein one of us
will surprise the other one. So one of us will
have a topic prepared in hand and the other one
has no idea, nothing but kiss. That's me today. That
(01:11):
is you, my friend, and uh, I've got I've got
an interesting thing for you here. You know, sometimes I
come in when I think I'm prepared and I still
have buckets. Yeah, I just I heard the word bupp
gets earlier. This weekend, and I made a conscious decision said,
I'm going to use that more See where was the
less Was it maybe in uh? Are you thinking of
(01:31):
like maybe a movie like Uncle Buck or something like
that term that he would use, Yeah, yeah, or a
mel Brooks term or something. I think it was maybe
a mel Brooks movie. The memory escapes me. But this
was also the same weekend I decided to use the
phrase for the birds more often. Yeah, as we record this,
it is as a Monday, and my girlfriend is officially
(01:53):
sick of it, that that's don't just like two or
three days of it and she's done with it. Well,
I told her that banning raises is what for the birds. Anyhow,
we digress. I did take some time to bring not one,
but two topics, yes, both of which are mysterious. Pressed
what way do we cover in two in one episode? No? No, no,
(02:15):
We're gonna pick a number one or two. Oh my gosh,
this is even tougher alright, surprise in the surprise episode.
So so I'm just supposed to pick a number, yeah,
pick a number two. Okay. As as the templar said
to Indiana Jones, you, my friend, have chosen wisely. I
(02:36):
am suspect of your methodology, right, because you could just
choose whatever you want, right, yeah, right? Like yeah, they
will choose a color game, pick a number. Right, it's
a trust faulty. So here is today's question. Why can't
consumers in the US buy a car directly from the
(02:59):
auto manufacture? I'll love the Tesla model, correct, yes, yeah,
because this is something that you know, listeners, you've probably
heard some of this in the waves. Elon Musk and
his Tesla company are shaking up a lot of things, right, Uh,
some for better, some debatably for worse, which is a
side note will get to at the end. But what
(03:21):
what do you mean when you say the Tesla method? Well,
I mean that's where they have just a storefront and
a local mall, say, and they have a vehicle parked inside,
and there's very it's very small. You can't really go
for a test drive unless they have a vehicle on
the lot. You know that that they are allowing people
to go out and drive. I suppose, um, But they
can describe to you all these systems and the operations,
and they can talk you through what it's like, you know,
(03:43):
to to own one of these and why you might
want one of those versus another conventional type vehicle. Uh,
they can, you know, they have they have people on
hand that are that are very knowledgeable about the product
and they can answer any questions you have. They can
talk with you about financing and all that stuff right there.
And then you get delivery vehicle somewhere else, not from
the dealership there. You can't bring it back there for
(04:04):
service or anything like that. So um, it's really just
a storefront where they're selling one product right nail on
the head, Scott. And this has been enormously controversial in
some states here in the US the and this is
because the practice of buying a vehicle from an independent
(04:24):
licensed dealer, by which we mean someone who maybe they
only sell Fords at their dealership, but they themselves are
not part of Ford. They just have an agreement with Ford,
right like a franchise on like a franchise exactly. And
this practice has been so ingrained in US culture that
most people in our age range don't remember it any
(04:49):
other way. I mean, the only other option is to
go to a used car lot or to buy used
car directly from someone else, sir. So it's actually illegal
in some states, which we'll get to in a second.
It's actually illegal in some states for an auto manufacturers
to sell a car directly to an end user. Isn't
(05:10):
this crazy? It's it's it's strange to me how it's
illegal for them to do that. It seems like that
would eliminate a lot of costs too, if they were
able to operate on the same model as Tesla is
right now, on a on a grand scale, a large,
large scale, you know every state, you know, several locations
in that state. It seems like the consumer would be
the winner in this case, as would the manufacturer, because
(05:30):
they'd be able to sell more product or a lower cost,
yet keep more of the profit. Well, here's a little
bit of the history. Okay, so you know, cast your
memory back there, lord Van Morrison style. In the very
beginning of the twentieth century, these kinds of dealerships were
relatively rare. The way you would buy a car at
that time would be to order it through a department store, right,
(05:55):
order it the catalog, or you would have a traveling
as indoor to door car salesman. Oh that's strange, isn't it.
That is strange. I mean, it doesn't seem like an
item that you would just nonchalantly say, yeah I could
I could use one of those as so, you know,
and somebody just wandered up to your house and said,
it's not like the fuller brushman you know that walked
up and knocked on the door, And you're like, well,
(06:16):
I guess they could use another another brush or vacuum
sales sure, or I fixed this pot for me or something. Yeah, yeah, exactly.
I mean, it doesn't seem like a service or product
that you buy like that. But I wonder how door
to door car or car sales actually went. I mean
it was it Was it successful? Maybe not because they
don't do it anymore. Did they drive up and get
(06:36):
stranded if they made a sale or was it sort
of yeah exactly or was it sort of successful? But
this is one of you know, maybe one of the
reasons that it was kind of shut down is that
we're going to try to push it in a different
different direction. Maybe yeah, I don't know. Well, in eighteen
a guy named William E. Metzker started what historians today
(06:57):
believe to be the first legit card dealership. It was
a General Motors franchise and uh, this so this practice
goes way back. Now. Now, while Metzger may have been
the first, he was one of a rare few for
while the very beginning. Yeah, he saw he saw a
(07:20):
future in it, I guess, and it looks like he
was right. And today, as we said, there are franchise
laws requiring that caught new cars only be sold to
these dealerships. Anybody who has questions about how a dealership
works can refer to our earlier podcasts, you know, where
you can hear some really interesting information about the time
(07:42):
calculations and how they move these vehicles. But let me
go ahead and say some of the things that defend
that people say in defense of this practice, right, Okay,
So first, clearly there's the advantage of there's advantage of
preserving a piece of the economy, right automobile franchisees, so
(08:05):
not just the sales folks, but also the mechanics, all
even down to the people are working in the car wash.
There are a lot of jobs there because we would
presume that the vast majority of these independent dealers don't
have the economic heft to compete with manufacturers like with
the Big three. Just jumping right in the second idea,
(08:28):
and I can I can see some sand to this.
One is that if you are a car buyer, having
an independent salesperson, a middleman who knows what they're talking about,
can can sell you on your guide you rather toward
a different model or make of car, Whereas you would
(08:48):
need to in the days before the Internet, you would
need to do some extensive research on your own right,
a lot of reading. So maybe the digital age changes
some of this. But the while those are two of
the big things, the other side of the controversial alleges
that this is pretty much just lobbying to preserve a
(09:09):
corrupt practice. And a corrupt practice well a h an
unfair ultimately unbeneficial to the consumer. Okay, um, And and
this is you know, I gotta tell you man, I
I have never sold, uh were never sold cars or
worked as a dealer, But it seems like it's such
(09:31):
an ingrained thing now it seems normal to me, you know,
I I had not really thought about it until teslay
came out. And also, you know, granted, as longtime listeners know,
I have never bought a new car and probably never will.
Well that's the thing, like I mean, if you don't
have the the you know, the the background, I guess
of going onto the used car lot of the new
(09:52):
car lot to buy a vehicle, it's not typically something
to really think about because when you you do trade
vehicles with somebody else, you know, I mean, I mean
that you know, you buy one from Craigslift, you buy
one from eBay or something. You're dealing with an individual,
and that's closer to what you would receive or the
the treatment that you would receive at the Tesla showroom.
I mean in a way. I mean, you're just talking
(10:13):
with somebody about a product that they're not really going
to sell you. I mean they are, they're not. It's
the factory that's gonna sell it to You're gonna buy
it from the company itself. Um. It's almost like, can
you trust that person more than you can use car
salesman who's on commission or a new car salesman's on commission.
I'm just not quite sure how to look at this,
(10:33):
I mean, because it's so it's so dramatically different from
anything that you and I have ever really used in
the past. And even we're not that um adept at
dealing with car salesman either, I mean a little bit,
but not a whole lot. Well, you know, it's interesting
you mentioned that Scott the Consumer Federation of America wrote
a paper called a Roadblock on the Information super Highway,
(10:55):
anti competitive restrictions on automotive markets. Uh, and that was
back a back in two thousand one, so the stuff
about Tesla hadn't really hit yet. Uh. They found that
the practice of buying through dealerships the franchises rather from
directly to manufacturer, uh, costs around hundred per vehicle. That's
(11:20):
what they the price they put on. So not insignificant. No, no,
that's quite a bit. And uh and it adds up
right or more than twenty billion per year. Well no way, okay,
so just we're talking so yeah, but but how much
per year? Twenty billions so billion dollars. That's a huge,
(11:42):
huge increase, right. With their studies, they found potential savings
of at least six percent per vehicle. I'm reading this
here from the paper at today's prices and volumes. Remember
again there's two thousand one. The potential savings are on
the order of fifteen hundred per vehicle, or more than
twenty billion per year based on vehicles. So so this
argument is something that has continued, and Tesla, as we
(12:04):
mentioned from the top, because you saw exactly where I
was going, Tesla said they didn't want to play ball
with this. They wanted to sell directly to the consumer
and tradition be darned. So well, is that tradition be darned?
Is that going back to the way it was? And
it's another way to look at it. It's like, you know,
(12:24):
it's not it's before all these these dealership franchises in
the superstores, you know, where they had a thousand cars
on the lot. I mean, it's going back to something
like a simpler time almost, that's true. I don't know.
I mean, so it is is it going back to
the tradition or is it tradition be damn like you said, yeah,
I guess I would say that it depends on how
we measure tradition. Is tradition the thing that happened first,
(12:47):
or the thing that happened for the longest amount of time?
You're right, you know, probably the longest amount of time.
I think you're looking at it in a more correct
way than I am. Because traditionally, you do go to
the dealership by a vehicle. You don't go to a
storefront in the mall and buy a vehicle, you know.
I mean, I understand that was a version of what
you would do in the past, but that was a
(13:07):
short lived practice. And then and then you know, the
whole dealership thing came out. By the way, I've got
a question for you, Okay, I hate to ask you
this right here on air live and everything, but you
mentioned for the guy with the dealership, right, I think
General Motors didn't come around until nineteen o eight, So
I wonder if he was selling vehicles for a different
brand and then picked up and then picked up a
(13:29):
General Motors brand or in nineteen o eight. Right in
the beginning, something about the number just didn't seem right here.
I quickly looked it up, and uh, and I don't know,
I'm guessing that this it was Metzger, right, I think
me t z G E. R. I would bet that
Metzger probably got in early with um, you know, some
some other auto manufacturer, whoever that might be, like maybe
(13:52):
Ransom Olds or somebody like that. Um, because even even
Henry Ford wasn't around until it was it nineteen o
two or nineteen o three, really selling his his product,
I mean, on a large scale or large enough that
you could get a dealership. You know what, that's a
really great point, because that's really that's a really good
point because if I recall correctly, yes, and thank you
(14:14):
for atting this. He did not open as a General
Motors franchise. He became the first General Motors franchise. But
when he opened, he was selling Waverley electric cars, and uh,
he opened the nineteen excuse me, he added steamers and
(14:34):
then he didn't add gas powers and gas power cars
until after that. Interesting. So this guy, he was early on,
he was early on with the idea that, yeah, the
motor car is here to stay. But he started out
with of course, what we knew at the time was
electric and then steam. Yeah. Then so he followed exactly
the progression of the way we talked about it in
our podcast for the last seven years. He met Ransom
(14:56):
Olds in eighte and later went on to sell the
first Oldsmobile. Okay, well there you go. Probably the curved
dashvilles Wobile, the one that the very first I'm just guessing,
but that would be a right around that time. And uh,
it makes more sense now for him to be, you know,
the first General Motors you know, franchise, I guess, franchise dealership.
(15:17):
That's a pretty big deal. Yeah, it is a big deal,
but it's also it gives us, you know, a couple
of big questions too, like how much of a role
did he play in the development? We could we could
do a podcast just on Metzker. He is in the
auto Hall of fame, right, and now if we fast
forward past the age of Metzker, past the age in
(15:38):
which you and I and Nol and you also listeners live,
we come upon this, this proposal buying things direct from
the manufacturer. Now, Alon Musk himself has a pretty interesting
argument about this, and I know that we probably have
some auto dealers in the audience, so I'd like to
(16:01):
hear what you all think of this. Tesla's uh Tesla
as a company, the entire business practice of selling directly
to consumers is apparently one more of self preservation, at
least from muscas perspective, than it is of Yeah, that's
tough to say, mustages. It's tougher from Alan's perspective. I
(16:23):
guess now he and I are a first name basis too.
To be a new car company and to work within
this current system. He wrote a He wrote a letter
about this in uh in a couple of different places.
It has been published in a couple of different places.
But let me just read a section of this. Okay,
(16:45):
the evidence is clear. When has an American startup auto
company ever succeeded by selling through auto dealers. The last
successful American car company was Chrysler, which was founded almost
a century ago, and even they went bankrupt a few
years ago along with General Motors. Since the founding of Chrysler,
there have been dozens of failures, Tucker and DeLorean being
(17:07):
simply the most well known. In recent years, electric car
startups such as the Fisker, Coda and many others attempted
to use auto dealers and all failed. And even bigger
conflict of interest with auto dealers is that they make
most of their profit from service, but electric cars require
much less service than gasoline cars. I don't know about that.
(17:29):
I don't know. Yeah, he says. There are no oil
spark plug or fuel filter changes, no tune ups, no
small checks needed for an electric car. Also, all Tesla
model S vehicles are capable of over the air updates
upgrade software just like your phone or computer, so no
visit to the service center is required. Going a step further,
I've made it a principle within Tesla that we should
(17:51):
never attempt to make servicing a profit center. It does
not seem right to me that companies try to make
a profit off customers when their product breaks. So he
goes on, and I think you can tell. I think
you can tell just from the tone of the last
few lines there that this is more than just subtle jabs.
(18:11):
This is also, you know, kind of back backyard complimenting
or himself for backdoor compliments himselves. Well, sure it is,
but you know a couple of things that he mentions.
Though you can always look at the other side of
that as well, you can say, well, it's it's in
a way comforting to know that, you know, there's a
Tesla dealer right down the block from me that I
could I could take my car back to if there's
a problem. Um, he's saying, Oh, don't worry about that.
(18:33):
We'll just wirelessly update your vehicle from you know, over
the year. You don't have to worry about that at all.
Just plug it in tomorrow morning, it'll be fine. Um,
there's all there's just some amount of comfort to know
that you can go to a place and talk with
somebody about what it's doing. What what you know, you
can take him out for a drive, Um, say, you
know it's it's it's reacting this way when I do this. Yeah,
(18:53):
and you can. They can drive it and see it
and feel it, and and you hand it to them.
I know you're you're still paying the money at the
service department. All that, and a lot people don't like
going to the service department or the dealership. Let's have
the warranty and action. Yeah, well even then, you know,
they don't like taking the car back in. It's just difficult,
time consuming to do and trying to get it fit
in your schedule and all that. Well, here's another good
(19:13):
point though. Yeah, a dealership, especially if you have a
car that is not the most common, the dealership from
which you purchase the car is probably gonna have the
parts you need. True, that is true. Yeah, they're gonna
have the genuine, authentic parts you're gonna need. But he's
his argument is that you won't really need that. This
is all a software update. You know, when we build
the car, it's complete, everything's there. You don't need that.
(19:35):
That level should even be there. But on the other hand,
if they're talking about creating all these these stations where
they're gonna swap batteries and then they're gonna end up
being service centers as well. While that is a service
center because you're gonna have to pull into a bay
where they remove that thousand pound battery from underneath the
car and replace it with something else, that's a service.
That's a type of service of course. Um. It seems
like at the same time as you say, you know,
(19:56):
I'm missing one of my lug nuts on the left room,
can you please, you know, find one for me. I
was changing a tire and I left it on the
roadside or something. Can you add one of it? It's
it's the same. It serves the same purpose as a
like a I guess am as dealership service station. Um.
But I don't know if that's the right way to
put it or not, Ben, because it would be minor,
(20:18):
minor things that you'd be asking for. Um. Perhaps, But
but I see, like I see what you're saying, is
well the idea here that the idea feels a little
air brushed to say that an electric car just by
virtue of being electric is not going to need work. True. Uh,
and and of course what he mentioned specifically in this
(20:41):
piece are are things that would apply specifically to an
I C E. Right. Okay, well, okay, I keep going back,
but let's say that let's say you've got something that's like,
you know, not an engine problem, not not a battery problem.
I guess I can say that you've got switches that
don't work like a door, like a door window switch, right. Yeah,
that's something that you would maybe go to a dealership
(21:03):
for you. I don't think you would go to a
parts place unless it's out of warranty and you know
you're not gonna get that part replaced for free. You
might go to like a NAPPER or someplace like ship
and see if they've got a replacement. But if you're
under warranty, and this is the kind of this is
a unique vehicle, I don't I don't know if you
would go to NAPPA to get a Tesla window switch,
right yeah, or any I doubt it. Any electrical issues anyway,
(21:26):
you know, and even on even on typically gas power cars,
you know, there are a lot of garages that will
say we don't do electric. So so that's something you
could go to a dealer for I don't know, I'm
probably looking at this too, like going back and forth,
probably into narrow the scope. I'm sure that you know,
there's a there's a this is the way to do it. Probably, Well,
(21:50):
I think this may end up. You know, it's tough
to make the predictions about how this ends up. But
what we can say is, right now, it's going state
by state. So in some states and and Tesla is
like either the poster child for this or public enemy
number one, depending on what's a side of the story
(22:11):
you fall on. So in New York state allowed Tesla
to continue selling its cars directly to its consumers. And
that's big because you know, New Yorkers like Tesla. There
are a lot of New Yorkers are by in Tesla.
Not a lot of real estate available for them to
build a dealership right or to franchise out right, enjoying
(22:34):
the system. Uh. Tesla also got a different deal in Ohio,
same one or similar, you know, but it's been banned
from selling these things in a couple of different states.
In Texas, there's an interesting law and they had let's see,
they had a short reprieve where uh the deal was
(22:55):
that if Tesla sold more than five thousand cars a year,
I think then they would become subject to the franchise laws. Yeah. Uh,
it was how spill thirty three fifty one. Uh that said,
if Tesla sells more than five thousand cars a year
in Texas, it's subject to the franchise That's a big state.
It's like five thousand would be something that's uh readily
(23:19):
accessible to Tesla to sell that many vehicles in in Texas.
So I mean that's, uh, that's a little tough on them.
I mean, if you get to think over that, and
so I wonder if it's if I wonder just the
logistics of this that's exactly five thousand, or if they
have to sell five thousand one Yeah, yeah, I just
wonder how that works. But um, yeah, I could completely
(23:40):
see them selling at least five thousand in Texas. I
mean that's a giant state with a lot of people. Um,
Texas is larger than a lot of countries, have a
lot of money there too, And and I don't know,
this is a weird This is a weird thing for
Texas to do. I don't know why. I feel like, um,
for them to restrict someone who's trying to get in,
you know, do this business on their own, you know,
(24:00):
without the franchise set up, you know, the typical way
of doing things. It seems like Texas would be the
place to do something like that. Well, the tech the
Texas UM, I believe there's a there are a couple
of different Texas auto dealer associations or trade groups who
have you know, argued vociferously against this. Tesla is also
(24:22):
banned from this kind of sale in Arizona, Virginia, and
possibly New Jersey, four states right now. Uh yeah, you know,
I think there's another one too, but I can't remember
which one it is, like Alaska, Hawaii like that, so
roughly for I mean we're talking at least in the
lower forty eight here, and UM, it could be more.
(24:44):
We don't know, We're not sure, but but like to
to ban the sale of this, I mean this this
makes you wonder like what what are the dealers, what
are the dealers arguing against? Like why are they saying
that it's a um, it's not a good idea to
do this or why do they why do they fight
against this? Why they rebelling of this idea? Well, uh,
they say that. Okay, here here is something from the
(25:04):
Washington Post. Uh. They in also in two thousand thirteen,
so before some of this went to ground. Uh during
the debate over North Carolina and Tesla. And you know,
North Carolina being home to Asheville, has a lot of
people who would be into electric vehicles and stuff like that. So, uh,
(25:25):
auto dealers argue, accordin to this Watching Post article that
they're protecting consumers because they need to have a license
dealer around to fix their car if it's a lemon,
and to help them through the purchase process. Uh. There's
a message that they quote from a guy named John
Zwitcher z w I A c h e. R. Who's
(25:46):
chairman of the Texas Auto Dealers Association at the time.
And here's their quote. In addition to providing essential transportation,
Texas Dealers employee over seventy thousand employees with an annual
payroll of four point lillion, and our a three billion
dollar annual revenue source for the state budget, Texas Dealers
service community volunteers and leaders in every capacity and are
(26:09):
essential to the daily lives of every Texan. The North
Carolina Dealers Association said, oh, you tell me that these
guys are also going to support the little leagues and
the y m c A and Robert Glazer uh, president
of the North Carolina Automotive Dealers Association, and this Washington
Post article, the journalist doesn't agree with them, but the
(26:36):
the the idea also here goes back to this concept
of local economy, right, you know, And there's a there's
a valid argument to be made there, but overall, the
question of the question of which side is right I
think falls into some philosophical territory m perhaps, but there's
(27:01):
there's no denying that Tesla is the new kid on
the block and that that company is fighting what an
entrenched group of trade interest see as an existential threat.
So that is why, in conclusion, that's why you and
(27:22):
I knowl and you out there listeners can't get up today,
flip your phone if you have a flip phone, or
you know, call or email General Motors or Honda directly
and say, I, you know, just send over a civic right. Yeah,
that's a strange idea, is and that that you could
do that you could do that, and I guess in
(27:43):
a way that's kind of what you could do with Tesla.
But it's probably a little more complex than that. Imagine,
sure you still do the paperwork and everything through the
well maybe online you can also do something through the
gallery with the with the representative. I'm sure. But we've
really got to get to a Tesla dealership and just
figure out exactly how this whole thing works, because I'm
really really curious, like if you're you going with you know,
(28:05):
let's say cash in hand, and you really want to
get one the suitcase of cash, how are they going
to how are they going to show you what the
product can do? Do they have it? Do they have
a test run site, because it would you think that
they would have one there, you know that somebody would say,
come on out of the parking lot, I got mine
parking on you know, level two on the deck, and
we can just drive around the block or something. Um,
not necessarily that that's the company, you know, show car
(28:27):
or whatever. And you're not taking the one out of
the out of the storefront obviously that's they're on permanent
display in the mall. Although that would be a fun test.
Do you think, yeah, do you think that's a great lot?
Do you think you could get a discount for taking
the demo version? I don't know. I mean, and what
do you want to that's the other thing, because they
have hinges. Oh yeah, yeah, never buy never buy a
(28:48):
demo with a hinge. But the yeah, that's you know,
that's a good point. And looking through this, I really
wanted to hear your perspective because this, this is something
that is ongoing, and you know, we have to ask
ourselves for kids who were born, you know, this year, right,
(29:12):
what kind of vehicle are they going to buy? Or
that's maybe that's too far in the future. For kids
who are I don't know, fourteen now right, Uh, in
a few years, they'll probably still buy a used car
from dealer, get one from their parents. Probably. I mean,
I don't see that system going away by any means.
And I don't I don't know if the Tesla model
is one that will really overtake the United States, you know,
(29:35):
as far as the way things are done or the
world the way things are done. I think that maybe
they can co exist, they can live together, and that
you know, um, in the same community, but have different
approaches to the whole thing. Yeah, I mean I understand
that you know, there's this, uh, this this friction between
the two of them, like, you know what about the
local economy and the community and the support and all that.
(29:55):
I understand all those arguments. So I think there's a
place for the locals all town dealer, and there's also
a place for um, you know what Tesla storefront in
in the local mall. I think they can both work together, right,
And also a further point now I'm just thinking about it,
A further point in favor of groups of independent franchise
(30:17):
dealers is that they will do trade ins and there
maybe more competition. So it could be I guess if
there were just direct from manufacturer purchasing, right, and everybody
wants Nifflin fifty, but Ford says this is the only
(30:37):
price for nef one fifty. There are no negotiations too,
So some of these used Teslas are going to wind
up on local dealer lots anyway, that's true. I mean
there's always going to be a place for the small
time dealer. I mean used new all that. And I
get it if everybody switched over to one version of
this or the other, that's missing out. I think like
(30:58):
you would, you'd miss out on, you know, the benefits
of the Tesla system has you would also miss out.
If it went the other way, you would lose out
on some of the small town And I keep going
back to small town, you know, you know, the big
town is also a bit sure, you know, like you said,
the sponsorship of the local bowling team or the little
league or whatever. Um, the the events where they have
(31:18):
kids come in and trick or treat and you know, Halloween,
and it's community, community jobs and all that. I get.
I totally get all that. But to work together if
they if there's both systems in place, I don't really
see a problem with that, which is interesting because Tesla
has actually said the same thing. Alon Musk himself as
has argued that the strategy now is just to get
(31:43):
the company itself on better economic footing. That's what they use,
or that's their language they use, and they say that
they're open to working with the system once they're a
better thing. They consider the selling direct to the consumer
also important because people aren't familiar with electric cars and
they need somebody who is knowledgeable, like back of the
(32:06):
hand level, knowledgeable to explain it in understandable terms. But
the idea like here, he said he would be open
to a discussion of a dual retail network, just like
you're talking about Scott a combination a Tesla owned and
independently owned dealerships. When Testlas sales reach one per cent
of the new car sales market in the US. So
(32:27):
are we still calling Tesla start up at this point
or is it? Is it really a full fledged competitor
now with everybody else. I don't know this. This marks
definitely a sea change of sorts, right, Uh, this this idea,
But let me before we conclude, can I can I
give you a little uh comparison historical tale. I read
(32:49):
long ago as some commencement speech, but it was impressive.
And listeners, please if you remember who wrote this right in,
let me know because I'd love to hear it. We're
on Facebook, Twitter, where card stuff, eh s W, both
of those where you consider this an email. We've got
the address at the end of every episode. So long
time ago. Uh In, let's just say New England, New England,
(33:13):
maybe as far down as New York. Uh. There were
these companies that would ship ice because before refrigeration of ice, right,
blocks of ice, big blocks of ice, that's right, And
so you know, in the in the fancy high dollar places,
you would want to have your freshly chopped ice, and
(33:35):
I don't know where your tuxedos and talk about cricket,
I don't know whatever, and uh and yeah, crickets good
and so uh. These companies were integrated such that they
owned the areas where they were taking where they were
taking the ice, and they owned the trucks right, and
(33:56):
they owned the farms that made the straw that they
would put over the ice and real ice monopoly and
ice monopoly, yes, sir. And so what they would do
is they would get up and they would drive all
the way out to wherever the ice was, which was
in Canada probably somewhere imagine, and then drive all the
way back, uh like blazes, so that they got there
(34:20):
without the ice melting, chop it, chop it up, and
then sell it to people and then low him the hole.
Someone starts using this gadget to freeze ice in in
the area, like in the States, in the city, someone's
just freezing ice right there in your own home or business,
(34:41):
right there in your own home or business potentially. So
the ice truck Monopolies, which is not their official name,
but just for the sake of argument, Uh, they see
this and they know there's trouble brewin and smell something
ill in the wind. And let's say they have a
chance to work with the refrigeration people to maybe even
(35:03):
buy them out, right there, startup, I'm just starting, and
this is weird. Who's going to use this freaky gadget
in their house anyway? So they could buy them out
and just do away with the technology, or they could
buy them out and use the technology, you know. But
what they do instead is they invest in faster trucks,
more strong. They're looking at it the wrong way, political
(35:25):
political maneuvering to make it difficult. And again this is
just a story I heard in commencement speech. But today,
despite all of their efforts, odds are you have a
refrigerator in your house and not an ongoing contract with
a truck you have to deliver straw packed ice from
(35:46):
Canada somewhere? Right? And uh, you know when I hear
about regulation, because we're seeing some of the same stuff
too with cable companies right, or internet service providers and
things like Google Fiber or states a little you know,
like towns trying to start their own municipal broadband. And
it makes me wonder if this is a thing where
(36:10):
these dealership models will be reconciled or if it's gonna
be a direct to the manufacturer thing. And then it's
not something I really have an answer to again because
of those points about the jobs, the economic heft really
and the uh, you know, I think that argument about
(36:31):
community is valid. But also if I could save fift
on a new car, that's true. There's always the flip
side of the coin, no matter which way you look
at this. I mean, there's always the there's always the positive,
and then there's there's always there's always gonna be a
negative as well. Sure, it depends on which side do
you favor. I mean, as you would you rather save
money or would you rather have that local dealer that
(36:52):
you've trusted for twenty years that you can go to
and and buy a car from and take a back
for service, etcetera. Right, right, that sponsors your kids baseball whatever,
that that whole that buys out the community center for
the local v A and stuff. Sure, yeah, that does
a lot of good for the community. I mean which,
but but which you prefer? It kind of depends on
(37:13):
you know, well, it depends on your own personal situation,
and that doesn't match up with everybody obviously, So there's
gonna be a lot of different opinion with the community,
a lot of in fighting, I guess, um, And of
course you know there's gonna be I would guess there's
gonna be a what was the group you said, the
Texas Auto Dealers Association, and there's something like that. Associations
(37:35):
and unions and all that could come into play and
it becomes very very messy quick. And I think that's
exactly what TESLA is dealing with dealing with right now.
I mean, is all these little nuances that we don't
really think of until something like this comes in and
then they realize, wait a minute, that's taking that's undercutting
what we're doing here. But maybe it's a better way
to do it. Maybe I'd like to hear what our
(37:58):
listeners think. And I'm gonna be completely honest with you guys,
because I don't really have a horse in the race,
or shall I say, Tesla in the race. I uh,
I'm still going back on fourth on what what is
better in the long term for the buyers or for
the community, for the economy, etcetera. And and I'd like
(38:18):
to hear your thoughts. I for the record, if I
owned a dealership, or if I, you know, my family
owned a dealership and I was in line for the
throne or something, then I would absolutely fight tooth and
nail against it. Yeah, you would feel threatened by this, Yeah, yeah,
so I I understand that. But if you or your
(38:39):
dad was a salesman and had been for thirty years
and is looking at retirement. Now, oh yeah, but but
that model, that the historic model is again being threatened
by this new new kid on the block. That's that's
tough to deal with. That really is I mean, how
do you how do you weigh all this? Again? It
comes back down to where you are, you know, personally, right, Yeah,
I mean it really is just a an individual um decision,
(39:02):
I guess. I mean that you have to make it,
and and someone someone is someday going to pass down
some legislation that will either outlaw this or we'll say
this is the way we're gonna do it, and most
places are going to adapt. But um, oh man, I
don't know. This is a good question. This is really
has a lot of angles to it, doesn't it. I mean, right,
I like I like talking about all these little, u
little questions. Yeah, I really do like this so a
(39:25):
good topic. Oh thanks man, and we hope you enjoyed
it as well, listeners. We hope that we have been
as fair as possible with this. I know it's a
loaded topic for a lot of people because there you know,
there are other people will say, well that there are
people who will argue for and against dealerships based on
(39:46):
a common principle like the free market. You know, like
a dealership creates more of a free market because that
system allows more competition or it restricts it. You know,
people go back and forth, as you said, So let
us know what you think if you would like to
hear more about dealerships in general, and you have not
checked out our episodes on let's see on dealership Things
(40:10):
to watch out for, things to notice when you're buying
a newer used car. We have a bunch of a
lot of them to deal with buying and selling used
and new vehicles. And it's just I think we've got
a pretty good UM catalog now with material that goes
back seven years and at some point we've probably covered
just about everything in a dealership. I'm sure there's others
(40:31):
that we can we can hit on, but UM and
over the years. We've definitely talked about dealership is quite
a bit, you know, the pro exam and if you
want to check those out, you can find those along
with every other podcast we've ever done, on our website,
car stuff Show dot com. If you have any idea
and you'd like to write to us directly, we'd love
to hear from you. Our addresses our stuff at how
(40:53):
stuff works dot com. For more on this and thousands
of other topics, This at how stup works dot com.
Let us know what you think, Send an email to
podcast at how stup works dot com. Mm hmmmm mm
Go behind the wheel, under the hood and beyond with
car stuff from house stuff Works dot com. I welcome
to car Stuff on Scott and I am Ben. We
are here with our superproducer as always, ladies and gentlemen.
Nol the Nebulous Brown, the Nebulus. I'm looking up synonyms
(00:26):
for mysterious no All, seat of the pan, brown, no Shot,
and dark brown. Yeah this Nole the dark horse brown.
Like we're using up all the good ones now, I don't.
We need to back it down. So the reason that
we're using up all of these good nicknames for Noel,
and the reason that maybe we made a misstep using
(00:49):
all those good ones at once, because some of those
are really good, uh, is because this is one of
our continuing series of mystery shows wherein one of us
will surprise the other one. So one of us will
have a topic prepared in hand and the other one
has no idea, nothing but kiss. That's me today. That
(01:11):
is you, my friend, and uh, I've got I've got
an interesting thing for you here. You know, sometimes I
come in when I think I'm prepared and I still
have buckets. Yeah, I just I heard the word bupp
gets earlier. This weekend, and I made a conscious decision said,
I'm going to use that more See where was the
less Was it maybe in uh? Are you thinking of
(01:31):
like maybe a movie like Uncle Buck or something like
that term that he would use, Yeah, yeah, or a
mel Brooks term or something. I think it was maybe
a mel Brooks movie. The memory escapes me. But this
was also the same weekend I decided to use the
phrase for the birds more often. Yeah, as we record this,
it is as a Monday, and my girlfriend is officially
(01:53):
sick of it, that that's don't just like two or
three days of it and she's done with it. Well,
I told her that banning raises is what for the birds. Anyhow,
we digress. I did take some time to bring not one,
but two topics, yes, both of which are mysterious. Pressed
what way do we cover in two in one episode? No? No, no,
(02:15):
We're gonna pick a number one or two. Oh my gosh,
this is even tougher alright, surprise in the surprise episode.
So so I'm just supposed to pick a number, yeah,
pick a number two. Okay. As as the templar said
to Indiana Jones, you, my friend, have chosen wisely. I
(02:36):
am suspect of your methodology, right, because you could just
choose whatever you want, right, yeah, right? Like yeah, they
will choose a color game, pick a number. Right, it's
a trust faulty. So here is today's question. Why can't
consumers in the US buy a car directly from the
(02:59):
auto manufacture? I'll love the Tesla model, correct, yes, yeah,
because this is something that you know, listeners, you've probably
heard some of this in the waves. Elon Musk and
his Tesla company are shaking up a lot of things, right, Uh,
some for better, some debatably for worse, which is a
side note will get to at the end. But what
(03:21):
what do you mean when you say the Tesla method? Well,
I mean that's where they have just a storefront and
a local mall, say, and they have a vehicle parked inside,
and there's very it's very small. You can't really go
for a test drive unless they have a vehicle on
the lot. You know that that they are allowing people
to go out and drive. I suppose, um, But they
can describe to you all these systems and the operations,
and they can talk you through what it's like, you know,
(03:43):
to to own one of these and why you might
want one of those versus another conventional type vehicle. Uh,
they can, you know, they have they have people on
hand that are that are very knowledgeable about the product
and they can answer any questions you have. They can
talk with you about financing and all that stuff right there.
And then you get delivery vehicle somewhere else, not from
the dealership there. You can't bring it back there for
(04:04):
service or anything like that. So um, it's really just
a storefront where they're selling one product right nail on
the head, Scott. And this has been enormously controversial in
some states here in the US the and this is
because the practice of buying a vehicle from an independent
(04:24):
licensed dealer, by which we mean someone who maybe they
only sell Fords at their dealership, but they themselves are
not part of Ford. They just have an agreement with Ford,
right like a franchise on like a franchise exactly. And
this practice has been so ingrained in US culture that
most people in our age range don't remember it any
(04:49):
other way. I mean, the only other option is to
go to a used car lot or to buy used
car directly from someone else, sir. So it's actually illegal
in some states, which we'll get to in a second.
It's actually illegal in some states for an auto manufacturers
to sell a car directly to an end user. Isn't
(05:10):
this crazy? It's it's it's strange to me how it's
illegal for them to do that. It seems like that
would eliminate a lot of costs too, if they were
able to operate on the same model as Tesla is
right now, on a on a grand scale, a large,
large scale, you know every state, you know, several locations
in that state. It seems like the consumer would be
the winner in this case, as would the manufacturer, because
(05:30):
they'd be able to sell more product or a lower cost,
yet keep more of the profit. Well, here's a little
bit of the history. Okay, so you know, cast your
memory back there, lord Van Morrison style. In the very
beginning of the twentieth century, these kinds of dealerships were
relatively rare. The way you would buy a car at
that time would be to order it through a department store, right,
(05:55):
order it the catalog, or you would have a traveling
as indoor to door car salesman. Oh that's strange, isn't it.
That is strange. I mean, it doesn't seem like an
item that you would just nonchalantly say, yeah I could
I could use one of those as so, you know,
and somebody just wandered up to your house and said,
it's not like the fuller brushman you know that walked
up and knocked on the door, And you're like, well,
(06:16):
I guess they could use another another brush or vacuum
sales sure, or I fixed this pot for me or something. Yeah, yeah, exactly.
I mean, it doesn't seem like a service or product
that you buy like that. But I wonder how door
to door car or car sales actually went. I mean
it was it Was it successful? Maybe not because they
don't do it anymore. Did they drive up and get
(06:36):
stranded if they made a sale or was it sort
of yeah exactly or was it sort of successful? But
this is one of you know, maybe one of the
reasons that it was kind of shut down is that
we're going to try to push it in a different
different direction. Maybe yeah, I don't know. Well, in eighteen
a guy named William E. Metzker started what historians today
(06:57):
believe to be the first legit card dealership. It was
a General Motors franchise and uh, this so this practice
goes way back. Now. Now, while Metzger may have been
the first, he was one of a rare few for
while the very beginning. Yeah, he saw he saw a
(07:20):
future in it, I guess, and it looks like he
was right. And today, as we said, there are franchise
laws requiring that caught new cars only be sold to
these dealerships. Anybody who has questions about how a dealership
works can refer to our earlier podcasts, you know, where
you can hear some really interesting information about the time
(07:42):
calculations and how they move these vehicles. But let me
go ahead and say some of the things that defend
that people say in defense of this practice, right, Okay,
So first, clearly there's the advantage of there's advantage of
preserving a piece of the economy, right automobile franchisees, so
(08:05):
not just the sales folks, but also the mechanics, all
even down to the people are working in the car wash.
There are a lot of jobs there because we would
presume that the vast majority of these independent dealers don't
have the economic heft to compete with manufacturers like with
the Big three. Just jumping right in the second idea,
(08:28):
and I can I can see some sand to this.
One is that if you are a car buyer, having
an independent salesperson, a middleman who knows what they're talking about,
can can sell you on your guide you rather toward
a different model or make of car, Whereas you would
(08:48):
need to in the days before the Internet, you would
need to do some extensive research on your own right,
a lot of reading. So maybe the digital age changes
some of this. But the while those are two of
the big things, the other side of the controversial alleges
that this is pretty much just lobbying to preserve a
(09:09):
corrupt practice. And a corrupt practice well a h an
unfair ultimately unbeneficial to the consumer. Okay, um, And and
this is you know, I gotta tell you man, I
I have never sold, uh were never sold cars or
worked as a dealer, But it seems like it's such
(09:31):
an ingrained thing now it seems normal to me, you know,
I I had not really thought about it until teslay
came out. And also, you know, granted, as longtime listeners know,
I have never bought a new car and probably never will.
Well that's the thing, like I mean, if you don't
have the the you know, the the background, I guess
of going onto the used car lot of the new
(09:52):
car lot to buy a vehicle, it's not typically something
to really think about because when you you do trade
vehicles with somebody else, you know, I mean, I mean
that you know, you buy one from Craigslift, you buy
one from eBay or something. You're dealing with an individual,
and that's closer to what you would receive or the
the treatment that you would receive at the Tesla showroom.
I mean in a way. I mean, you're just talking
(10:13):
with somebody about a product that they're not really going
to sell you. I mean they are, they're not. It's
the factory that's gonna sell it to You're gonna buy
it from the company itself. Um. It's almost like, can
you trust that person more than you can use car
salesman who's on commission or a new car salesman's on commission.
I'm just not quite sure how to look at this,
(10:33):
I mean, because it's so it's so dramatically different from
anything that you and I have ever really used in
the past. And even we're not that um adept at
dealing with car salesman either, I mean a little bit,
but not a whole lot. Well, you know, it's interesting
you mentioned that Scott the Consumer Federation of America wrote
a paper called a Roadblock on the Information super Highway,
(10:55):
anti competitive restrictions on automotive markets. Uh, and that was
back a back in two thousand one, so the stuff
about Tesla hadn't really hit yet. Uh. They found that
the practice of buying through dealerships the franchises rather from
directly to manufacturer, uh, costs around hundred per vehicle. That's
(11:20):
what they the price they put on. So not insignificant. No, no,
that's quite a bit. And uh and it adds up
right or more than twenty billion per year. Well no way, okay,
so just we're talking so yeah, but but how much
per year? Twenty billions so billion dollars. That's a huge,
(11:42):
huge increase, right. With their studies, they found potential savings
of at least six percent per vehicle. I'm reading this
here from the paper at today's prices and volumes. Remember
again there's two thousand one. The potential savings are on
the order of fifteen hundred per vehicle, or more than
twenty billion per year based on vehicles. So so this
argument is something that has continued, and Tesla, as we
(12:04):
mentioned from the top, because you saw exactly where I
was going, Tesla said they didn't want to play ball
with this. They wanted to sell directly to the consumer
and tradition be darned. So well, is that tradition be darned?
Is that going back to the way it was? And
it's another way to look at it. It's like, you know,
(12:24):
it's not it's before all these these dealership franchises in
the superstores, you know, where they had a thousand cars
on the lot. I mean, it's going back to something
like a simpler time almost, that's true. I don't know.
I mean, so it is is it going back to
the tradition or is it tradition be damn like you said, yeah,
I guess I would say that it depends on how
we measure tradition. Is tradition the thing that happened first,
(12:47):
or the thing that happened for the longest amount of time?
You're right, you know, probably the longest amount of time.
I think you're looking at it in a more correct
way than I am. Because traditionally, you do go to
the dealership by a vehicle. You don't go to a
storefront in the mall and buy a vehicle, you know.
I mean, I understand that was a version of what
you would do in the past, but that was a
(13:07):
short lived practice. And then and then you know, the
whole dealership thing came out. By the way, I've got
a question for you, Okay, I hate to ask you
this right here on air live and everything, but you
mentioned for the guy with the dealership, right, I think
General Motors didn't come around until nineteen o eight, So
I wonder if he was selling vehicles for a different
brand and then picked up and then picked up a
(13:29):
General Motors brand or in nineteen o eight. Right in
the beginning, something about the number just didn't seem right here.
I quickly looked it up, and uh, and I don't know,
I'm guessing that this it was Metzger, right, I think
me t z G E. R. I would bet that
Metzger probably got in early with um, you know, some
some other auto manufacturer, whoever that might be, like maybe
(13:52):
Ransom Olds or somebody like that. Um, because even even
Henry Ford wasn't around until it was it nineteen o
two or nineteen o three, really selling his his product,
I mean, on a large scale or large enough that
you could get a dealership. You know what, that's a
really great point, because that's really that's a really good
point because if I recall correctly, yes, and thank you
(14:14):
for atting this. He did not open as a General
Motors franchise. He became the first General Motors franchise. But
when he opened, he was selling Waverley electric cars, and uh,
he opened the nineteen excuse me, he added steamers and
(14:34):
then he didn't add gas powers and gas power cars
until after that. Interesting. So this guy, he was early on,
he was early on with the idea that, yeah, the
motor car is here to stay. But he started out
with of course, what we knew at the time was
electric and then steam. Yeah. Then so he followed exactly
the progression of the way we talked about it in
our podcast for the last seven years. He met Ransom
(14:56):
Olds in eighte and later went on to sell the
first Oldsmobile. Okay, well there you go. Probably the curved
dashvilles Wobile, the one that the very first I'm just guessing,
but that would be a right around that time. And uh,
it makes more sense now for him to be, you know,
the first General Motors you know, franchise, I guess, franchise dealership.
(15:17):
That's a pretty big deal. Yeah, it is a big deal,
but it's also it gives us, you know, a couple
of big questions too, like how much of a role
did he play in the development? We could we could
do a podcast just on Metzker. He is in the
auto Hall of fame, right, and now if we fast
forward past the age of Metzker, past the age in
(15:38):
which you and I and Nol and you also listeners live,
we come upon this, this proposal buying things direct from
the manufacturer. Now, Alon Musk himself has a pretty interesting
argument about this, and I know that we probably have
some auto dealers in the audience, so I'd like to
(16:01):
hear what you all think of this. Tesla's uh Tesla
as a company, the entire business practice of selling directly
to consumers is apparently one more of self preservation, at
least from muscas perspective, than it is of Yeah, that's
tough to say, mustages. It's tougher from Alan's perspective. I
(16:23):
guess now he and I are a first name basis too.
To be a new car company and to work within
this current system. He wrote a He wrote a letter
about this in uh in a couple of different places.
It has been published in a couple of different places.
But let me just read a section of this. Okay,
(16:45):
the evidence is clear. When has an American startup auto
company ever succeeded by selling through auto dealers. The last
successful American car company was Chrysler, which was founded almost
a century ago, and even they went bankrupt a few
years ago along with General Motors. Since the founding of Chrysler,
there have been dozens of failures, Tucker and DeLorean being
(17:07):
simply the most well known. In recent years, electric car
startups such as the Fisker, Coda and many others attempted
to use auto dealers and all failed. And even bigger
conflict of interest with auto dealers is that they make
most of their profit from service, but electric cars require
much less service than gasoline cars. I don't know about that.
(17:29):
I don't know. Yeah, he says. There are no oil
spark plug or fuel filter changes, no tune ups, no
small checks needed for an electric car. Also, all Tesla
model S vehicles are capable of over the air updates
upgrade software just like your phone or computer, so no
visit to the service center is required. Going a step further,
I've made it a principle within Tesla that we should
(17:51):
never attempt to make servicing a profit center. It does
not seem right to me that companies try to make
a profit off customers when their product breaks. So he
goes on, and I think you can tell. I think
you can tell just from the tone of the last
few lines there that this is more than just subtle jabs.
(18:11):
This is also, you know, kind of back backyard complimenting
or himself for backdoor compliments himselves. Well, sure it is,
but you know a couple of things that he mentions.
Though you can always look at the other side of
that as well, you can say, well, it's it's in
a way comforting to know that, you know, there's a
Tesla dealer right down the block from me that I
could I could take my car back to if there's
a problem. Um, he's saying, Oh, don't worry about that.
(18:33):
We'll just wirelessly update your vehicle from you know, over
the year. You don't have to worry about that at all.
Just plug it in tomorrow morning, it'll be fine. Um,
there's all there's just some amount of comfort to know
that you can go to a place and talk with
somebody about what it's doing. What what you know, you
can take him out for a drive, Um, say, you
know it's it's it's reacting this way when I do this. Yeah,
(18:53):
and you can. They can drive it and see it
and feel it, and and you hand it to them.
I know you're you're still paying the money at the
service department. All that, and a lot people don't like
going to the service department or the dealership. Let's have
the warranty and action. Yeah, well even then, you know,
they don't like taking the car back in. It's just difficult,
time consuming to do and trying to get it fit
in your schedule and all that. Well, here's another good
(19:13):
point though. Yeah, a dealership, especially if you have a
car that is not the most common, the dealership from
which you purchase the car is probably gonna have the
parts you need. True, that is true. Yeah, they're gonna
have the genuine, authentic parts you're gonna need. But he's
his argument is that you won't really need that. This
is all a software update. You know, when we build
the car, it's complete, everything's there. You don't need that.
(19:35):
That level should even be there. But on the other hand,
if they're talking about creating all these these stations where
they're gonna swap batteries and then they're gonna end up
being service centers as well. While that is a service
center because you're gonna have to pull into a bay
where they remove that thousand pound battery from underneath the
car and replace it with something else, that's a service.
That's a type of service of course. Um. It seems
like at the same time as you say, you know,
(19:56):
I'm missing one of my lug nuts on the left room,
can you please, you know, find one for me. I
was changing a tire and I left it on the
roadside or something. Can you add one of it? It's
it's the same. It serves the same purpose as a
like a I guess am as dealership service station. Um.
But I don't know if that's the right way to
put it or not, Ben, because it would be minor,
(20:18):
minor things that you'd be asking for. Um. Perhaps, But
but I see, like I see what you're saying, is
well the idea here that the idea feels a little
air brushed to say that an electric car just by
virtue of being electric is not going to need work. True. Uh,
and and of course what he mentioned specifically in this
(20:41):
piece are are things that would apply specifically to an
I C E. Right. Okay, well, okay, I keep going back,
but let's say that let's say you've got something that's like,
you know, not an engine problem, not not a battery problem.
I guess I can say that you've got switches that
don't work like a door, like a door window switch, right. Yeah,
that's something that you would maybe go to a dealership
(21:03):
for you. I don't think you would go to a
parts place unless it's out of warranty and you know
you're not gonna get that part replaced for free. You
might go to like a NAPPER or someplace like ship
and see if they've got a replacement. But if you're
under warranty, and this is the kind of this is
a unique vehicle, I don't I don't know if you
would go to NAPPA to get a Tesla window switch,
right yeah, or any I doubt it. Any electrical issues anyway,
(21:26):
you know, and even on even on typically gas power cars,
you know, there are a lot of garages that will
say we don't do electric. So so that's something you
could go to a dealer for I don't know, I'm
probably looking at this too, like going back and forth,
probably into narrow the scope. I'm sure that you know,
there's a there's a this is the way to do it. Probably, Well,
(21:50):
I think this may end up. You know, it's tough
to make the predictions about how this ends up. But
what we can say is, right now, it's going state
by state. So in some states and and Tesla is
like either the poster child for this or public enemy
number one, depending on what's a side of the story
(22:11):
you fall on. So in New York state allowed Tesla
to continue selling its cars directly to its consumers. And
that's big because you know, New Yorkers like Tesla. There
are a lot of New Yorkers are by in Tesla.
Not a lot of real estate available for them to
build a dealership right or to franchise out right, enjoying
(22:34):
the system. Uh. Tesla also got a different deal in Ohio,
same one or similar, you know, but it's been banned
from selling these things in a couple of different states.
In Texas, there's an interesting law and they had let's see,
they had a short reprieve where uh the deal was
(22:55):
that if Tesla sold more than five thousand cars a year,
I think then they would become subject to the franchise laws. Yeah. Uh,
it was how spill thirty three fifty one. Uh that said,
if Tesla sells more than five thousand cars a year
in Texas, it's subject to the franchise That's a big state.
It's like five thousand would be something that's uh readily
(23:19):
accessible to Tesla to sell that many vehicles in in Texas.
So I mean that's, uh, that's a little tough on them.
I mean, if you get to think over that, and
so I wonder if it's if I wonder just the
logistics of this that's exactly five thousand, or if they
have to sell five thousand one Yeah, yeah, I just
wonder how that works. But um, yeah, I could completely
(23:40):
see them selling at least five thousand in Texas. I
mean that's a giant state with a lot of people. Um,
Texas is larger than a lot of countries, have a
lot of money there too, And and I don't know,
this is a weird This is a weird thing for
Texas to do. I don't know why. I feel like, um,
for them to restrict someone who's trying to get in,
you know, do this business on their own, you know,
(24:00):
without the franchise set up, you know, the typical way
of doing things. It seems like Texas would be the
place to do something like that. Well, the tech the
Texas UM, I believe there's a there are a couple
of different Texas auto dealer associations or trade groups who
have you know, argued vociferously against this. Tesla is also
(24:22):
banned from this kind of sale in Arizona, Virginia, and
possibly New Jersey, four states right now. Uh yeah, you know,
I think there's another one too, but I can't remember
which one it is, like Alaska, Hawaii like that, so
roughly for I mean we're talking at least in the
lower forty eight here, and UM, it could be more.
(24:44):
We don't know, We're not sure, but but like to
to ban the sale of this, I mean this this
makes you wonder like what what are the dealers, what
are the dealers arguing against? Like why are they saying
that it's a um, it's not a good idea to
do this or why do they why do they fight
against this? Why they rebelling of this idea? Well, uh,
they say that. Okay, here here is something from the
(25:04):
Washington Post. Uh. They in also in two thousand thirteen,
so before some of this went to ground. Uh during
the debate over North Carolina and Tesla. And you know,
North Carolina being home to Asheville, has a lot of
people who would be into electric vehicles and stuff like that. So, uh,
(25:25):
auto dealers argue, accordin to this Watching Post article that
they're protecting consumers because they need to have a license
dealer around to fix their car if it's a lemon,
and to help them through the purchase process. Uh. There's
a message that they quote from a guy named John
Zwitcher z w I A c h e. R. Who's
(25:46):
chairman of the Texas Auto Dealers Association at the time.
And here's their quote. In addition to providing essential transportation,
Texas Dealers employee over seventy thousand employees with an annual
payroll of four point lillion, and our a three billion
dollar annual revenue source for the state budget, Texas Dealers
service community volunteers and leaders in every capacity and are
(26:09):
essential to the daily lives of every Texan. The North
Carolina Dealers Association said, oh, you tell me that these
guys are also going to support the little leagues and
the y m c A and Robert Glazer uh, president
of the North Carolina Automotive Dealers Association, and this Washington
Post article, the journalist doesn't agree with them, but the
(26:36):
the the idea also here goes back to this concept
of local economy, right, you know, And there's a there's
a valid argument to be made there, but overall, the
question of the question of which side is right I
think falls into some philosophical territory m perhaps, but there's
(27:01):
there's no denying that Tesla is the new kid on
the block and that that company is fighting what an
entrenched group of trade interest see as an existential threat.
So that is why, in conclusion, that's why you and
(27:22):
I knowl and you out there listeners can't get up today,
flip your phone if you have a flip phone, or
you know, call or email General Motors or Honda directly
and say, I, you know, just send over a civic right. Yeah,
that's a strange idea, is and that that you could
do that you could do that, and I guess in
(27:43):
a way that's kind of what you could do with Tesla.
But it's probably a little more complex than that. Imagine,
sure you still do the paperwork and everything through the
well maybe online you can also do something through the
gallery with the with the representative. I'm sure. But we've
really got to get to a Tesla dealership and just
figure out exactly how this whole thing works, because I'm
really really curious, like if you're you going with you know,
(28:05):
let's say cash in hand, and you really want to
get one the suitcase of cash, how are they going
to how are they going to show you what the
product can do? Do they have it? Do they have
a test run site, because it would you think that
they would have one there, you know that somebody would say,
come on out of the parking lot, I got mine
parking on you know, level two on the deck, and
we can just drive around the block or something. Um,
not necessarily that that's the company, you know, show car
(28:27):
or whatever. And you're not taking the one out of
the out of the storefront obviously that's they're on permanent
display in the mall. Although that would be a fun test.
Do you think, yeah, do you think that's a great lot?
Do you think you could get a discount for taking
the demo version? I don't know. I mean, and what
do you want to that's the other thing, because they
have hinges. Oh yeah, yeah, never buy never buy a
(28:48):
demo with a hinge. But the yeah, that's you know,
that's a good point. And looking through this, I really
wanted to hear your perspective because this, this is something
that is ongoing, and you know, we have to ask
ourselves for kids who were born, you know, this year, right,
(29:12):
what kind of vehicle are they going to buy? Or
that's maybe that's too far in the future. For kids
who are I don't know, fourteen now right, Uh, in
a few years, they'll probably still buy a used car
from dealer, get one from their parents. Probably. I mean,
I don't see that system going away by any means.
And I don't I don't know if the Tesla model
is one that will really overtake the United States, you know,
(29:35):
as far as the way things are done or the
world the way things are done. I think that maybe
they can co exist, they can live together, and that
you know, um, in the same community, but have different
approaches to the whole thing. Yeah, I mean I understand
that you know, there's this, uh, this this friction between
the two of them, like, you know what about the
local economy and the community and the support and all that.
(29:55):
I understand all those arguments. So I think there's a
place for the locals all town dealer, and there's also
a place for um, you know what Tesla storefront in
in the local mall. I think they can both work together, right,
And also a further point now I'm just thinking about it,
A further point in favor of groups of independent franchise
(30:17):
dealers is that they will do trade ins and there
maybe more competition. So it could be I guess if
there were just direct from manufacturer purchasing, right, and everybody
wants Nifflin fifty, but Ford says this is the only
(30:37):
price for nef one fifty. There are no negotiations too,
So some of these used Teslas are going to wind
up on local dealer lots anyway, that's true. I mean
there's always going to be a place for the small
time dealer. I mean used new all that. And I
get it if everybody switched over to one version of
this or the other, that's missing out. I think like
(30:58):
you would, you'd miss out on, you know, the benefits
of the Tesla system has you would also miss out.
If it went the other way, you would lose out
on some of the small town And I keep going
back to small town, you know, you know, the big
town is also a bit sure, you know, like you said,
the sponsorship of the local bowling team or the little
league or whatever. Um, the the events where they have
(31:18):
kids come in and trick or treat and you know, Halloween,
and it's community, community jobs and all that. I get.
I totally get all that. But to work together if
they if there's both systems in place, I don't really
see a problem with that, which is interesting because Tesla
has actually said the same thing. Alon Musk himself as
has argued that the strategy now is just to get
(31:43):
the company itself on better economic footing. That's what they use,
or that's their language they use, and they say that
they're open to working with the system once they're a
better thing. They consider the selling direct to the consumer
also important because people aren't familiar with electric cars and
they need somebody who is knowledgeable, like back of the
(32:06):
hand level, knowledgeable to explain it in understandable terms. But
the idea like here, he said he would be open
to a discussion of a dual retail network, just like
you're talking about Scott a combination a Tesla owned and
independently owned dealerships. When Testlas sales reach one per cent
of the new car sales market in the US. So
(32:27):
are we still calling Tesla start up at this point
or is it? Is it really a full fledged competitor
now with everybody else. I don't know this. This marks
definitely a sea change of sorts, right, Uh, this this idea,
But let me before we conclude, can I can I
give you a little uh comparison historical tale. I read
(32:49):
long ago as some commencement speech, but it was impressive.
And listeners, please if you remember who wrote this right in,
let me know because I'd love to hear it. We're
on Facebook, Twitter, where card stuff, eh s W, both
of those where you consider this an email. We've got
the address at the end of every episode. So long
time ago. Uh In, let's just say New England, New England,
(33:13):
maybe as far down as New York. Uh. There were
these companies that would ship ice because before refrigeration of ice, right,
blocks of ice, big blocks of ice, that's right, And
so you know, in the in the fancy high dollar places,
you would want to have your freshly chopped ice, and
(33:35):
I don't know where your tuxedos and talk about cricket,
I don't know whatever, and uh and yeah, crickets good
and so uh. These companies were integrated such that they
owned the areas where they were taking where they were
taking the ice, and they owned the trucks right, and
(33:56):
they owned the farms that made the straw that they
would put over the ice and real ice monopoly and
ice monopoly, yes, sir. And so what they would do
is they would get up and they would drive all
the way out to wherever the ice was, which was
in Canada probably somewhere imagine, and then drive all the
way back, uh like blazes, so that they got there
(34:20):
without the ice melting, chop it, chop it up, and
then sell it to people and then low him the hole.
Someone starts using this gadget to freeze ice in in
the area, like in the States, in the city, someone's
just freezing ice right there in your own home or business,
(34:41):
right there in your own home or business potentially. So
the ice truck Monopolies, which is not their official name,
but just for the sake of argument, Uh, they see
this and they know there's trouble brewin and smell something
ill in the wind. And let's say they have a
chance to work with the refrigeration people to maybe even
(35:03):
buy them out, right there, startup, I'm just starting, and
this is weird. Who's going to use this freaky gadget
in their house anyway? So they could buy them out
and just do away with the technology, or they could
buy them out and use the technology, you know. But
what they do instead is they invest in faster trucks,
more strong. They're looking at it the wrong way, political
(35:25):
political maneuvering to make it difficult. And again this is
just a story I heard in commencement speech. But today,
despite all of their efforts, odds are you have a
refrigerator in your house and not an ongoing contract with
a truck you have to deliver straw packed ice from
(35:46):
Canada somewhere? Right? And uh, you know when I hear
about regulation, because we're seeing some of the same stuff
too with cable companies right, or internet service providers and
things like Google Fiber or states a little you know,
like towns trying to start their own municipal broadband. And
it makes me wonder if this is a thing where
(36:10):
these dealership models will be reconciled or if it's gonna
be a direct to the manufacturer thing. And then it's
not something I really have an answer to again because
of those points about the jobs, the economic heft really
and the uh, you know, I think that argument about
(36:31):
community is valid. But also if I could save fift
on a new car, that's true. There's always the flip
side of the coin, no matter which way you look
at this. I mean, there's always the there's always the positive,
and then there's there's always there's always gonna be a
negative as well. Sure, it depends on which side do
you favor. I mean, as you would you rather save
money or would you rather have that local dealer that
(36:52):
you've trusted for twenty years that you can go to
and and buy a car from and take a back
for service, etcetera. Right, right, that sponsors your kids baseball whatever,
that that whole that buys out the community center for
the local v A and stuff. Sure, yeah, that does
a lot of good for the community. I mean which,
but but which you prefer? It kind of depends on
(37:13):
you know, well, it depends on your own personal situation,
and that doesn't match up with everybody obviously, So there's
gonna be a lot of different opinion with the community,
a lot of in fighting, I guess, um, And of
course you know there's gonna be I would guess there's
gonna be a what was the group you said, the
Texas Auto Dealers Association, and there's something like that. Associations
(37:35):
and unions and all that could come into play and
it becomes very very messy quick. And I think that's
exactly what TESLA is dealing with dealing with right now.
I mean, is all these little nuances that we don't
really think of until something like this comes in and
then they realize, wait a minute, that's taking that's undercutting
what we're doing here. But maybe it's a better way
to do it. Maybe I'd like to hear what our
(37:58):
listeners think. And I'm gonna be completely honest with you guys,
because I don't really have a horse in the race,
or shall I say, Tesla in the race. I uh,
I'm still going back on fourth on what what is
better in the long term for the buyers or for
the community, for the economy, etcetera. And and I'd like
(38:18):
to hear your thoughts. I for the record, if I
owned a dealership, or if I, you know, my family
owned a dealership and I was in line for the
throne or something, then I would absolutely fight tooth and
nail against it. Yeah, you would feel threatened by this, Yeah, yeah,
so I I understand that. But if you or your
(38:39):
dad was a salesman and had been for thirty years
and is looking at retirement. Now, oh yeah, but but
that model, that the historic model is again being threatened
by this new new kid on the block. That's that's
tough to deal with. That really is I mean, how
do you how do you weigh all this? Again? It
comes back down to where you are, you know, personally, right, Yeah,
I mean it really is just a an individual um decision,
(39:02):
I guess. I mean that you have to make it,
and and someone someone is someday going to pass down
some legislation that will either outlaw this or we'll say
this is the way we're gonna do it, and most
places are going to adapt. But um, oh man, I
don't know. This is a good question. This is really
has a lot of angles to it, doesn't it. I mean, right,
I like I like talking about all these little, u
little questions. Yeah, I really do like this so a
(39:25):
good topic. Oh thanks man, and we hope you enjoyed
it as well, listeners. We hope that we have been
as fair as possible with this. I know it's a
loaded topic for a lot of people because there you know,
there are other people will say, well that there are
people who will argue for and against dealerships based on
(39:46):
a common principle like the free market. You know, like
a dealership creates more of a free market because that
system allows more competition or it restricts it. You know,
people go back and forth, as you said, So let
us know what you think if you would like to
hear more about dealerships in general, and you have not
checked out our episodes on let's see on dealership Things
(40:10):
to watch out for, things to notice when you're buying
a newer used car. We have a bunch of a
lot of them to deal with buying and selling used
and new vehicles. And it's just I think we've got
a pretty good UM catalog now with material that goes
back seven years and at some point we've probably covered
just about everything in a dealership. I'm sure there's others
(40:31):
that we can we can hit on, but UM and
over the years. We've definitely talked about dealership is quite
a bit, you know, the pro exam and if you
want to check those out, you can find those along
with every other podcast we've ever done, on our website,
car stuff Show dot com. If you have any idea
and you'd like to write to us directly, we'd love
to hear from you. Our addresses our stuff at how
(40:53):
stuff works dot com. For more on this and thousands
of other topics, This at how stup works dot com.
Let us know what you think, Send an email to
podcast at how stup works dot com. Mm hmmmm mm
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