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Bans on Direct Auto Sales Inconvenience Consumers

Tesla has to fight Missouri lawmakers, yet again, in order to continue business in the state. On Aug. 31, a judge ruled that Tesla can no longer bypass local dealerships and sell to customers directly. In 2014, legislators attempted to pass a bill that banned direct auto sales in Missouri. The business model that Tesla […]

Bans on Direct Auto Sales Inconvenience Consumers
Tesla has to fight Missouri lawmakers, yet again, in order to continue business in the state. On Aug. 31, a judge ruled that Tesla can no longer bypass local dealerships and sell to customers directly.

In 2014, legislators attempted to pass a bill that banned direct auto sales in Missouri. The business model that Tesla founder Elon Musk believes in, argues that the middle man is no longer necessary in the digital age. By marketing to consumers online directly, there is one less set of hands on the vehicle and less capital needed to front for huge showrooms.

After Tesla owners protested by parking their electric cars in front of the Missouri Capitol building, the bill died.

Since companies like Ford, Chevrolet, Toyota, and more need to provide showrooms for their vehicles, they believe it’s not fair to allow Tesla to continue marketing straight to the consumer. As a result, Missouri lawmakers vowed to protect the interests of the dealerships, by pushing another bill banning direct auto sales. This time, they succeeded.

The ban on direct sales protects franchise dealerships, but the Federal Trade Commission argues that the law hurts both competitors and consumers.

Buying cars from a dealership often comes with hidden costs and fluctuating prices. The concept of dealerships came around when Henry Ford went into business, and it made more sense for a network of authorized dealers to sell the vehicles for him, increasing clientele. Now, the essence of Fordism has disintegrated, and the consumer no longer controls the way the cars are marketed: the lobbyists do.

Buying a vehicle is extremely expensive. In fact, 43% of drivers finance their vehicles. Purchasing a vehicle through a dealership comes with hidden costs, while if one were to purchase from a dealership directly, there are no inflated rates or hassle.

Lawmakers from other states have imposed even stricter laws to control Tesla sales. In 2014, Michigan passes a franchise law that didn’t allow Tesla to form dealerships in the state. Any Michigan resident that wishes to buy a Tesla has to pick it up out-of-state. Cleveland and Columbus, OH are the closest destinations for a Detroit driver.

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