6 PHOENIX CENTER POLICY PAPER [Number 48
Phoenix Center for Advanced Legal and Economic Public Policy Studies
www.phoenix-center.org
Ford dealer down the street or in the next town. Because of broad
access to vehicle pricing, consumers can bargain with multiple
dealers to get a great deal.
10
In these views, as dealer counts fall, intra-brand price competition should soften
thereby raising new car prices for consumers.
The intensity of intra-brand price competition has become a significant policy
issue of late as a result of Tesla Motors’ efforts to own and operate its own
dealerships, an approach which violates the laws of almost all states.
11
Tesla’s
plan has met strong resistance from existing car dealers and some state
governments, not so much because of the threat of competition from Tesla
(which sells only about 30,000 extremely high-end electric cars per year), but
because of the threat of abandoning existing franchise laws protecting local car
dealers from manufacturer-driven shut downs.
12
In response to such challenges,
NADA lists, among other things, intra-brand competition as a benefit of such
laws.
13
Implicit in NADA’s defense of franchise laws is the seemingly reasonable
assumption that a weakening of dealer protections in the franchise laws will
result in a reduction of dealerships and, in turn, a lessening of intra-brand price
competition.
14
While the reform of the franchise laws and prohibitions on
10
Why Franchise Dealer Laws? Why States Promote the Buying and Selling of Cars through Local
Dealers, National Automobile Dealers Association (2014) (available at:
http://www.nada.org/NR/rdonlyres/39A36250-8BBA-41C0-9B15-
E1BB1A2E9EA9/0/NADA_Why_Dealer_Franchise_Laws_20140616.pdf).
11
See, e.g., C. Trudell and C. Smithe, U.S. Dealer Group Seeks Tesla Meeting on Retail Plans,
BLOOMBERG NEWS (October 24, 2012) (available at: http://www.bloomberg.com/news/2012-10-
23/dealer-group-leaving-tesla-retail-challenge-to-states.html); A. Ohnsman and M. Niquette,
Tesla’s Direct-Sales Push Raises Auto Dealers’ Hackles, B
LOOMBERG NEWS (March 10, 2014) (available
at: http://www.bloomberg.com/news/2014-03-10/tesla-s-direct-sales-push-raises-auto-dealers-
hackles.html); S. Alcorn, Car Dealers Sue Tesla, Citing State Franchise Laws, NRP.ORG (November 9,
2012) (available at: http://www.npr.org/2012/11/09/164736569/car-dealers-sue-tesla-citing-state-
franchise-laws).
12
A. Ohnsman, Tesla Rises After Model S Sales in 2013 Exceed Forecasts, BLOOMBERG NEWS
(January 15, 2015) (available at: http://www.bloomberg.com/news/2014-01-14/tesla-delivered-6-
900-cars-in-fourth-quarter-executive-says.html).
13
Get the Facts: The Benefits of Franchised Auto Dealers, National Automobile Dealers
Association (available at: http://www.nada.org/GetTheFacts).
14
According to Bill Wolters, President of the Texas Automobile Dealers Association
(TADA), easily two-thirds of Texas car dealerships
would be at risk if the law against manufacturer
(Footnote Continued. . . .)