Car Dealerships and Wine Wholesalers: “Daddy, Please Help Me”

teslaRemember what happened back in grade school when the bully started telling you how it was going to be and you decided to push back. Immediately the bully would run to the principle in tears, tell a lie or two, then beg for protection.

Yes, I’m describing middlemen wine wholesalers who tend to run to daddy-lawmaker whenever they face the slightest bit of competition. They tell their lies about how the three-tier system is actually good for consumers or how children will get drunk on direct shipped wine, or how if they don’t get one-sided, protectionist Franchise laws they will go out of business. They cry like little girls with a skinned knee, beg for help so they don’t actually have to provide good service and innovate, shove a few thousand dollars at daddy-lawmaker, then wipe their noses and go about their business.

Well it turns out that alcohol wholesalers aren’t the only ones who run for cover from the state at the first sign they might actually have to face competition from innovators. This week New Jersey Governor Chris Christie approved a rule change in the state that will force Tesla Motors to abandon their direct to consumer sales model and work through middlemen auto dealer franchises. It’s pure protectionism that the auto franchise dealers ships begged for.

The Tesla direct sales model threatens traditional auto dealers because direct from manufacturer sales saves consumers thousands of dollars and represents real innovation. It’s no different from direct to consumer sales from winery or retailer to consumers. Wholesalers hate it because it upsets their cozy, daddy-help-me, protected industry and protects them from actually having to innovate or provide a service with modern value.

In response to Governor Christie’s move, the Wall Street Journal wrote:

“Rather than selling to dealerships, which then mark up the vehicles that we eventually buy, Tesla prefers to sell its cars directly to consumers. It’s not surprising that middleman dealerships would oppose direct sales, but it’s too bad that the dealers found an ally this week in New Jersey’s Republican Governor Chris Christie….New Jersey isn’t the only state where Tesla is having this fight, and car dealerships aren’t the only middlemen who run to politicians for legislative cover. For more than a decade wine retailers and wholesalers have been battling wineries that want to sell directly to consumers. But when protectionism prevails, competition is limited and consumers are worse off.”

It’s taken wine producers a millions of dollars in litigation, a Supreme Court Decision and years to open up 40 states for direct to consumer wine shipping. And even with that effort, 35 states still outlaw the delivery into their states of imported wines. Because the auto dealership franchises have the same “daddy-please-help-me” worldview, Tesla better gear up for a long fight.

 


6 Responses

  1. Bob Henry - March 14, 2014

    Tom,

    One little known aspect of Tesla’s business model: reaping a Zero Emission Vehicle credit from each sale.

    Reports the Los Angeles Times (May 5, 2013):

    “. . . the state [of California] has created a system in which Tesla can make as much as $35,000 extra on each sale of its luxury Model S electric sports sedans. . . . The credits, coupled with state and federal incentives to buyers, can add as much $45,000 for each Model S sold. . . . These Zero Emission Vehicle credits could put as much as $250 million in Tesla’s coffers this year, according to one Wall Street analyst, and they are a key reason the 10-year-old automaker has survived this long. Tesla gets to sell the credits to other automakers that need them to satisfy tough California regulations.”

    So their revenue on the $70,000 “baseline” model is more like $100,000.

    And the revenue on their $100,000 top-of-the-line model is more like $135,000.

    How much (if any) of that revenue they would have to share with independent dealers is unknown.

    Link: http://www.latimes.com/business/autos/la-fi-electric-cars-20130506,0,882034,print.story

    ~~ Bob

  2. Joe - March 14, 2014

    Too bad for the wine wholesalers. Serves them right when they lie to customers
    such as telling them its illegal for them to purchase direct from a winery where its
    not illegal to do so. Just make that sale at all costs boys n girls. This hurts consumers.
    The wines they offer are plonk big name big production 4$ a bottle type.

  3. John Kelly - March 14, 2014

    Bob, I wouldn’t call that Tesla ZEV credits story “little-known” – it’s been all over the media since they first reported a profit. Couple of points. The “credits” are a legal fiction. They don’t get to book them as revenue until they sell them. And the price for these credits if going down as more come on the market, and as the companies that have been buying them as offsets reduce their own emissions.

    As a grower, I wish I could sell credits for the excess carbon my vines pull from the environment.

  4. Portefeuille Louis Vuitton Sarah Pas Cher M93524 Amaranth - March 19, 2014

    31. They remain in custody. The concert is free and open to the public. Once everyone has found a seat,14-13-103834, the Immokalee High School concert band will perform two concert selections, followed by two selections from the Immokalee Middle School concert band, and then all the elementary school bands (made up of students in fifth and sixth grade) will play two selections of their own “Love Somebody” and “Ode to Joy.” The grand finale combines all 275 students from all three levels (element

  5. Sac Louis Vuitton Alma Pas Cher M4032N Noir - March 23, 2014

    Both sides of the road will be closed off between Moulton Parkway and Paseo De Valencia,14-14-1447, including entrances to Gates 1 and 5 of Laguna Woods Village, until at least Thursday morning. City staff said the section of road will be shut down because police are still concerned about the stability of the road after heavy rains on Tuesday and Wednesday.. They stood as one as the surly crowd lost control. The Cardinals stood as one and sprayed champagne. It’s the $215,Portefeuille Louis Vuitt

  6. Bob Henry - May 9, 2014

    From the Los Angeles Times:

    “Another Big Hit for Tesla Shares”

    Link: http[color]//www[dot]latimes[dot]com/business/autos/la-fi-hy-tesla-first-quarter-earnings-gigafactory-questions-20140508-story[dot]html

    Excerpts:

    “Shares of Tesla Motors Inc. plunged after the electric car maker reported losing $49.8 million in the first quarter and outlined a host of challenges.

    “The Palo Alto automaker reported Wednesday that research and development expenses are rising, revenue from selling environmental credits is falling and its next model, the Model X sport-utility vehicle, is delayed.

    . . .

    “Meanwhile, Tesla’s revenue from sales of California environmental credits dropped to ZERO in the first quarter. In the same quarter a year earlier, $68 million in credit sales helped power the company to its first quarterly profit of $11.2 million, setting off a flurry of investments on Wall Street.”

    [CAPITALIZATION used for emphasis. -- Bob]


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