Can auto manufacturers sell directly to consumers?
Because state laws prohibit that.
The purpose of the law is to shift money from the middle class to auto franchise dealers, who tend to be far richer.
Most states require car manufacturers to sell through dealers.
Even if you order directly from the factory, the order must go through the car dealer.
Why can’t automakers sell directly to consumers?
This is because automakers sell their inventory to their dealers, who then retail the inventory to the public. Most automakers mandate that their dealers take inventory on a regular basis as a condition of their franchise, which means automakers can always sell cars to their dealers (even if the public isn’t buying).
What happens to cars that never get sold?
Dealerships won’t just give the cars away for free, though. That means they buy new cars from the manufacturer and sell them at a higher price to make a profit. Therefore, once the dealership buys those cars, they belong to them. They can’t just send the unsold ones back to the manufacturer at the end of the year.
Where is it illegal to buy a Tesla?
Then there are nine states that limit the number of dealerships Tesla can open: Colorado (limit: one), North Carolina (one), Virginia (two), Georgia (five), Maryland (four), New Jersey (four), New York (five), Ohio (three), Pennsylvania (five).
Is Tesla a viable company?
Tesla came within a few weeks of going out of business as it worked to reach Model 3 production goals, according to Musk. there was a good chance Tesla would die.” Currently, Musk says Tesla’s viability depends on its ability to spend its most recent investment of $2.4 billion carefully.
Why do car dealers exist?
Long-established state franchise laws that largely prohibit direct sales by auto manufacturers are the biggest reasons dealers are mostly impervious to outside threats. The idea behind the franchise system is that third-party businesses can service customers better by fostering competition.
Do dealerships own the cars?
This may come as a surprise to you, but most car dealers don’t actually own the cars they’re selling. There is usually several million dollars worth of inventory on a typical dealer’s lot, and those cars are all owned by a bank or finance company. A typical new car costs a dealer about $5 to $10 in interest per day.
How does Tesla get around dealership laws?
Tesla US dealership disputes. Tesla, Inc. has faced dealership disputes in several U.S. states as a result of local laws. In the United States, direct manufacturer auto sales are prohibited in many states by franchise laws requiring that new cars be sold only by independent dealers.