NADA's Chairman Says Tesla's Sales Model Would Cause Higher Prices

One group that has been fighting tooth and nail against Tesla and their direct sales model is the National Automobile Dealers Association. With Tesla filing a federal lawsuit against the state of Michigan over a law banning direct sales, NADA Chairman Jeff Carlson has made some comments as to why Tesla's direct sales model is bad.

The Detroit Free Press reports that Carlson said the direct sales model is bad for consumers because it would lead to higher prices. Competition between dealers is a good thing for consumers. In a study commissioned by NADA and done by Phoenix Center for Advanced Legal and Economic Public Policy Studies, competition between dealers lead to an average of $700 in price reduction.

"Every state has to look to their consumer and decide what’s best for them. Either they can continue to support the franchised dealers' discount of up to $700 ... or, the choice for the policy makers is they can offer the consumer a vertically integrated model that prices vehicles at retail," said Carlson.

"The public policy makers are going to go to the consumers and say which (model) do you want? The discounted product? Or the product at retail?"

Carlson also pointed out a memo that Tesla CEO Elon Musk sent out to all employees saying that they need to abide by the company's “no negotiation and no discount policy.” It should be noted that policy that Carlson used as an example only pertains to new vehicles. Vehicles that were used as floor models, test drives, or were damaged in transit are allowed to be discounted.

We're to jump in here now and bring a little editorial. Carlson's argument of using price to say why the franchise model is better is ok. But there is another part that either Carlson forgot or neglected to mention - service. There is a reason why people don't like to go to dealerships. They don't feel like they are being treated as a person, more of a number for this month. You see in various ways from dealer markups on popular models, pushing rust proofing or extended warranties during the sales process, and we're only scratching the surface. Yes, Tesla may be a more expensive option. But at least you don't feel that you're being pressured to buy something.

Before someone jumps in and says 'not all dealerships are like this' or some variation of it, we know. The problem is those dealers are so few. It's basically trying to find a strand of hay in a bushel of needles. 

Source: Detroit Free Press, Automotive News (Subscription Required)