Ohio legislators have joined New Jersey bureaucrats in attempting to derail Tesla’s innovative distribution strategy. For decades, car dealerships nationwide have acted as middlemen between automobile makers and consumers. As the leading electric car manufacturer, Tesla has chosen to sell directly to consumers through more than 50 planned or currently operating company-owned stores.
Some automobile dealers apparently feel threatened by Tesla’s novel approach to distribution. Rather than compete fairly in a free market for the business of automobile buyers, lobbyists are enlisting the help of bureaucrats and politicians to ban this competing business model.
In New Jersey, state statutory law does not yet prohibit an automobile manufacturer with no existing distributors from selling directly to the public. Yet, in a short-circuiting of the legislative process, the state’s Motor Vehicle Commission issued a rule banning Tesla from directly selling to consumers. Gov. Chris Christie (R) seemingly went along with the MVC’s decision, although he often attempts to brand himself as a conservative Republican.
“This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation,” the Governor’s spokesperson said in defense of this stance.
Yes, you heard that correctly. The Governor considers it inappropriate for a private business to test a new sales strategy without the State’s omniscient approval. Is it any wonder that New Jersey’s business ranking continued to drop last year to 42nd in the nation?
Last week, the Ohio senate voted unanimously to limit Tesla to opening just one more sales center in the state. Similar to New Jersey, Ohio statutory law does not presently prohibit a car manufacturer with no existing distributors from selling directly to consumers. As such, the Bureau of Motor Vehicles issued licenses to Tesla to operate company stores in Ohio. The Senate President — Keith Faber, a Republican — reportedly said this decision by the BMV was “out of step with prior precedent.”
Is this bipartisan vote to allow Tesla to operate a few sales locations a more free market approach? Not by a long shot!
First, the proposed law makes a special exception to just one company — Tesla. Why should Tesla be the only automobile manufacturer to enjoy such a privilege? Why should a group of politicians and bureaucrats take it upon themselves to shower financial benefit upon one entity? Why are legislators proposing to ban Ford, Honda, BMW and GM from pursuing a similar distribution strategies as well? Granting an exception to only one company while denying the option to other companies serves no compelling interest. It is cronyism.
Secondly, the proposed law permits Tesla to operate just three company locations. Why should Tesla be limited to just three locations? Why should politicians and bureaucrats dictate to Tesla how many stores the company can open? Why are other dealers permitted to operate without such limits? Why are other types of manufacturers allowed to develop distribution strategies without such interference? This arbitrary limitation benefits members of the Ohio Automobile Dealers Association to the detriment of the public.
Thirdly, this legislation actually tightens government control of the market in Ohio. Recall that current statutory law does not prohibit Tesla’s continued distribution network expansion in the state. This law stunts Tesla’s growth by limiting it to three locations. At the same time, the legislation would deny other automobile manufacturers the chance to experiment with even a single company location. All automobile manufacturers — not just Tesla — should be free to experiment with and implement sales strategies free of unreasonable government interference. This legislation stands in opposition to the foundational notion of prosperity through free markets, benefiting dealers at the expense of consumers.
Hundreds of millions of people regularly purchase cell phones, computers, clothing and even mattresses directly from manufacturer-owned stores. With this in mind, can consumers be duped into believing that banning the Tesla distribution model truly is in their best interest? The propaganda machine is betting in the affirmative.
The Ohio legislation protecting the narrow interests of automobile dealers in awaits approval by the House. A defeat in the statehouse would represent a defeat of cronyism and a victory for innovation.
