Car talk

Tesla’s direct-to-consumer model: Do we like it?

By Sarah Sidlow


Tesla Motors is a company that’s used to pushing the envelope. It’s laid the groundwork for an affordable, long-range electric car that Actually. Looks. Cool.

According to Business Insider, “The point was to make a car so awesome, so badass, so powerful that it would forever change what everybody thought about electric vehicles.”

The name honors Serbian-American electro-genius Nikola Tesla, the inventor of the AC induction motor that powers the company’s car.

But recently, Tesla has become synonymous with yet another challenge to the status quo: its direct-to-consumer sales model. Instead of relying on independent dealerships, Tesla’s model aims to take the car directly to the driver—with futuristic lighted displays that rival the Apple store. Is it time for the rest of the car industry to get an update, too?

Well, that would take a lot of work. No fewer than 48 states currently ban or limit direct sales of automobiles. Some allow Tesla to sell its cars through company-owned stores. Others allow Tesla to open showrooms, but not sell cars in them (in these instances, store associates are not allowed to talk about the car’s price, or even direct potential buyers to the appropriate website).

These laws have been on the books for a long time—their intent is to prevent “unfair competition” that could cut into the sales of locally owned car dealerships. The system was designed so that established carmakers already using franchises, like GM or Ford, couldn’t set up their own stores to compete with independent dealers. Those who favor the laws also argue that a hometown dealer is going to be more invested in its community (they surely pay more in state and local taxes) and the area’s customers. Allowing the manufacturer to go right to the driver, they argue, takes all of the local magic out of the equation, and if Tesla wants to share the market, they can do it right next to everyone else.

But Tesla and its supporters are saying it’s time for a change. They say the old laws just illustrate that government is deciding how consumers should act—something that should be left up to the customers themselves. They say there’s no reason to expect direct sellers like Tesla to mistreat their consumers, and consumers have already proven that the direct-to-consumer model is pretty darn popular (hello, Amazon). Tesla argues that selling cars in the traditional dealership manner is actually bad for their business—since most of those places make more money on service than car sales, and Teslas, by design, require very little service. Tesla CEO Elon Musk also said publicly that he thinks it’s “terrible” to make a profit on service, and he doesn’t intend to start now.

Tesla also has an ideological bone to pick with the dealership model. The company is opposed to the gas-guzzling philosophies of the older showroom stalwarts, and argues it shouldn’t be forced to share the stage with gassy cars and dealerships that don’t properly explain the advantage of electric vehicles.

The most high profile Tesla fight is currently taking place in Utah, where the automaker built a $3 million store in Salt Lake City, only to have it demoted to a gallery/service center two weeks before opening because of pressure from the area dealership association. As one Tesla official once asked, “How do you sell the future if your business depends on the present?”

Reach Dayton City Paper forum moderator Sarah Sidlow at

Multi-level philosophy sales

By Ben Tomkins

Car dealerships may be able to stop Tesla from selling directly to consumers in the short-term, but they will almost without question fail in the long-term. I would go so far as to say that if Tesla has already done enough research to invest in building dealerships, showrooms, or whatever the hell else you care to call them, the discussion is already over.

As an American, there’s nothing that makes a philosophy more right than to have it turned into 99 marshmallow rot luftballons to be consumed with the rest of the breakfast pablum that comprises our social Lucky Charms.

Generally speaking, the ship of industries in this country that have a lot of laws protecting their existence rather than protecting the consumer’s pleasure at their existence very quickly float out to sea when the winds of innovation puff at their sails. Uber is a perfect example of a company displacing a portion of the workforce when a new business model drives down consumer prices while maintaining the impression of acceptable public risk. The Uber app is easy, allows tons of people to make extra money on the side, and people were clearly willing to ignore risks a licensing process could minimize. I won’t list them. If you really want to think them up, do what Americans do and get to the second consumer question below before you waste your brain power.

The argument Uber made for its business model appeared to be the most “American” argument imaginable:

“Why should the government have a say in who’s car we ride in and under what terms?”

It seemed like a great question—and it was—but not for the reasons everybody thought. From a business perspective, there is no right or wrong answer. All that matters is which side of the argument (read: dollar sign) you are on, and then everything you say is obviously right. The sad reality is that it’s a proxy postulate designed to tease a particular answer from the mind of the average American, which appeals to the American public’s self-righteous infatuation and private desire. This is what Uber was really asking:

“If you really want to do something, no matter what the outcome, do you want to worry about why you shouldn’t?”

Essentially, Uber proved that Americans believe their parents were wrong when they told them it is never OK to get into the car of a candy-offering stranger. See why I told you to wait to think of reasons why licensing is good? What’s easier than finding a good reason to do something you want to do? Not looking for a reason not to do something you want to do.

So, now I have the question “Should [Tesla] be allowed to sell directly to the consumer?” thrown at me, which is formulating in my mind as “Does the appeal of buying a car like an iPhone seem like a good enough idea to not worry about the consequences?”

To be completely honest with you? Yep. I’d at least allow our country to be a lab zombie if they made it sufficiently mindless, and I feel self-righteous enough to claim I am speaking for the American people. Buying a car already requires too much thinking, and we’d rather know exactly how we’re being ripped off than put in the effort to not get ripped off.

Now, I have a lot of friends who raise the Chomskian index finger of outrage at this point and start railing against the American corporate “whatevers” like a bunch of furious squirrels angrily trying to gnash their way through a forest of petrified acorns. Eh. Have at it. Chomsky’s not selling anything…

…except he is. There’s a big market in this country for hubris, and whether he’s right or wrong, he’s certainly maintained his position on the lecture circuit and sold a few million books. I will repeat the general principle in this specific context: Americans on the whole don’t care if Chomsky is right or wrong about anything anymore than they care if Walmart is exploiting workers or Tesla will put dealerships out of business. Americans care if they can get what they want—in this case, intellectual validation—and it’s why James Madison’s philosophies on liberty that informed the Constitution need some updating.

In short, Madison had about as much faith in the average American when it came to social responsibility as I’ve given them here. His theory is that the check of the majority’s tyranny over the minority is that, in a large and diverse society, there will almost never be a group that agrees on many things all at once. If Wyoming is 100 percent pro-fracking, for example, those same people will probably disagree vociferously on Tesla selling cars directly to consumers. Therefore, the majority will forever be a churning sea of intermingling opinions. This is a brilliant idea with a single massive flaw: the majority of our species will always agree that it is easier to be lazy and full than hardworking and hungry. Unfortunately, that principle is also a fundamental principle of the tyrannical desire.

So Tesla? Go for it. You are right because my coffee is getting cold and I have stuff to do, and that’s only cynical if you believe the odds of direct sales going badly outweighs the possibility we will be at least indifferent to the change. That’s the American way.

Ben Tomkins is a violinist, teacher, journalist and critically acclaimed composer currently living in Denver, Colorado. He hates stupidity and generally believes that the volume of one’s voice is inversely proportional to one’s knowledge of an issue. For more of his work, visit Reach Ben Tomkins at


There are no free markets

By David H. Landon

Editor’s note: This debate side was published March 25, 2014; minor updates have been reflected. David H. Landon wrote on this then and has not changed his opinion since the issue was debated in Dayton City Paper two years ago. We were unable to find another writer to argue this side.

California-based automaker Tesla began selling its electric cars directly from two Ohio storefronts in 2014. Now, that number is three. This development doesn’t sit well with the 830 new-car franchise dealers across the Buckeye State.For years, Ohio law has distinguished between the roles of automotive manufacturers and auto dealers. Manufacturers could not directly sell their product. Dealerships must be privately owned. That’s why there is no GM store or Toyota store in Ohio. There have been rules in place for years, which prevent auto manufacturers from owning and operating auto dealerships. With the stroke of a pen at the Ohio BMV, those rules are out the window.

Dealership representatives argue the consumer is the beneficiary of the current arrangement, as the dealership serves as an advocate for the consumer. Dealerships want return customers and go to bat for the consumer when issues arise over the functioning of a new vehicle. The Tesla business model defies those rules by directly selling its product to customers from their storefront outlets. States including Arizona, Texas, Maryland, New Jersey, Virginia, Michigan, and Utah have refused the direct-sales model.

In Ohio, the 830 new-car dealers employ over 55,000 people in Ohio with a payroll that exceeds $2 billion. That’s 55,000 Ohio families benefiting from this industry. In addition, these dealerships have collected well over $1 billion annually in sales tax on behalf of the state. They also pay a considerable amount of real estate, CAT, and other business-related taxes. A healthy auto industry benefits all Ohioans through the tax dollars they pay. The variance by the Ohio Bureau of Motor Vehicles granting a license to Tesla to sell at retail locations without contracting with an independent dealer opens the door for all manufacturers to follow the same path.

The rules under which the dealerships operate were created years ago by the Ohio legislature.  Based on those rules, dealerships have invested millions of dollars in their businesses. Now, the business model is turned on its head, not by a change by the Ohio legislature, but by a faceless bureaucrat at the BMV who, by granting to Tesla the license to sell its vehicles, has changed the rules of how these businesses can operate.

It’s not the first time faceless government bureaucrats have affected the health of the auto industry. During the GM bailout, there was the arbitrary picking of winners and losers by the Obama administration when the government determined which dealerships would remain open and which would be closed. In what alternative universe can the government change rules mid-stream and close down a viable, legally established, functioning business? Obviously, the answer is here in the crony-capitalism world of Barack Obama.

So, our question for the forum debate this week is whether government is interfering with the free market place when it involves itself in issues such as those states which are blocking Tesla from direct sales. Here’s a news flash: the free market doesn’t exist. Please don’t insult our collective intelligence by arguing that restricting manufacturers of cars from directly selling those vehicles will cause a chasm in the free market. Every market has some rules and boundaries that restrict freedom of choice. Our American enterprise system looks free only because we are so conditioned to accept its underlying regulations, prohibitions, and restrictions we fail to see them. Our only hope is we can minimize the interference of government in our economic markets. As much as I strongly object to the government’s over-involvement in regulating business, once a regulation is in place and businesses have adapted their business models to comply with those regulations – sometimes at the cost of hundreds of thousands of dollars – the worst possible scenario is for a non-elected bureaucrat to change the rules businesses live under by bureaucratic fiat. That’s what has happened here in the Tesla direct sales situation. The change has the possibility to affect the health of an important component of the auto industry in Ohio and other states.


David H. Landon is the former Chairman of the Montgomery County Republican Party Central Committee. He can be reached at


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