FTC panel considers direct-to-consumer auto sales

Tesla store

The Federal Trade Commission (FTC) recently assembled a panel of experts in auto manufacturing and marketing to consider the question of whether automakers should be allowed to sell cars directly to customers.

For several years, Tesla has been waging a war with auto dealers’ associations over this issue – the company’s direct sales model is currently allowed in about half of US states. In the past the FTC has sided with Tesla, calling for legislation to revisit existing regulations.

At the panel discussion, representatives from Tesla, as well as Elio Motors, a company that has plans to manufacture cheap three-seater vehicles, told the FTC that new car companies shouldn’t have to follow the dealership model.

Tesla’s lead lawyer, Todd Maron, argued that Tesla customers have a lot of questions that can’t be outsourced to third parties. “Our customers take a long time to study the car,” Maron said. “It takes hours and hours of a patient education process that only we can afford them and a traditional dealership model cannot.”

Maron also argued that Tesla dealerships couldn’t coexist with the company’s direct sales model. “If we hypothetically used a franchise dealer in a certain state, we would still be selling online and in neighboring states. If a franchise dealer marked up the price of our car, no customer would ever buy it from them, they would simply go to us and buy it for less.”

On the opposing side, auto industry analyst Maryann Keller and dealership attorney Paul Norman argued that the dealership model is good for consumers because it promotes “intrabrand competition” between auto dealers within the same city.

Keller also argued that cars aren’t like other consumer products. “There are simply costs associated with the distribution of objects that weigh 4,000 pounds, occupy 50 square feet of space and are sold to consumers with varying needs including trade ins, credit issues, etcetera,” she said.

“Independent dealers also act as advocates for consumers and provide a local presence which is a convenient place for customers to go to solve their problems,” said Mr. Norman. “Independent dealers add an extra layer of accountability.”

 

Source: Ars Technica
Image: Ming-yen Hsu (CC BY-ND 2.0)