Tesla is rocking another part of the auto industry--sales. Traditionally, and in certain U.S. states, car dealers are critical third parties that mediate auto sales between the manufacturer and the buyer. It is an industry that's been around for decades, and is one of the most deeply rooted financially, corporately, and even politically. But Tesla is changing all that.
According to the Houston Chronicle, "Tesla Motors won the blessing of the Texas GOP at the party convention in Dallas this month, paving the path towards a possible end to the three years of drama over the electric car manufacturer's right to sell in Texas." It was a long-fought battle; but it appears that the California auto maker will finally be able to sell its vehicles in Texas directly to consumers. This is a monumental victory that will send shockwaves through the Texas auto sales industry--the second largest in N. America.
The battle wasn't so difficult in the state of Ohio in which Tesla stores have been popping up all over the place, leaving auto dealers outraged. According to the Washington Post, auto dealers have "sued and lobbied their legislators," but the disruptive electric car company is there to stay--the questions is, poses the Post, is the auto sales industry? Ohio's direct auto dealer legislation not only benefits Tesla, but also sets a precedent for traditional auto makers--in fact, it forces them to sell directly just to compete with Tesla's business model. But this casts a brooding gloom over auto dealers, as the Washington Post explains:
[The new legislation in Ohio] has triggered a standoff involving dealers, manufacturers and Tesla over the future of car sales, the role of the Internet and whether it is legal to sell a car — often the second-largest purchase in the lifetime of an average American — online.
This is typically what happens with the victims of disruptive innovation: conform or die. While auto dealers have enjoyed a monopoly on the sales of automobiles for numerous decades, they are now facing obsolescence, and, as such, shaking in their boots. The legislation argument has spread over 20 states in the U.S., most of which have changed their laws to support Tesla's sales model. For those, like Maryland, that have opposed it, Tesla is simply appealing--and, according to Musk, they will continue until they win as they did in Texas over a three year battle.
Will Tesla upend and destroy the auto sales market as Steve Jobs did the music industry? Some people believe it will not happen--that there are too many points of failure that the auto sales industry has built in to prevent a landslide concession to Tesla. I maintain those who fail to see the collapse of the auto sales industry are delusional. It's already happening; and that's because people are fed up with closed market systems. They want to be able to purchase something right online, without hassle, and have the product delivered right to their front door. Amazon is proving this every day. Consumers do not want to pay extra for vehicles marked up by dealers to make a profit; they want the best price, with freedom of choosing as many options as possible.
We are seeing another tremendous shift happening. Vehicles are arguably the second largest purchase a person can make; and vehicle sales have been done the same way for generations. Now, with the rise of a renegade tech company that's smart, sophisticated, and tenacious, that system is being taken down and devoured. It is inevitable that Tesla will shift legislation across the United States
And what about Canada? It's been selling cars since 2012 when it opened its first 'store' in Yorkdale Shopping Centre right across, ironically, from the Apple Store. And neither the government nor the auto sales industry in Canada has given Tesla the hassle those south of the border have. Tesla's been selling cars directly, and people have been buying them. Has it radically upended the auto sales industry here? Not really. Many Canadians continue to buy from auto dealers, and aren't outside the dealerships waving banners to free the markets from the auto dealer cartels--at least not yet.
The U.S., especially Texas, has always had a problem with electric cars. Remember the movie 'Who Killed the Electric Car"? But giving to credit to Elon Musk, Tesla has remained tenacious about its vision to bring a whole new experience to driving, auto sales included. And they will succeed.
Will the big auto makers be able to shift their operations accordingly?
We'll see . . .
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