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Tesla challenge to dealers goes beyond electric cars

Mark Garrison Jun 8, 2015
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Tesla Motors is in a state-by-state fight to sell its electric cars directly to consumers. States have strong franchise laws that give only dealers that privilege, and dealers are using their political power to keep it that way. But maybe not all of them. Some on Wall Street think a few dealers might be fine with Tesla getting its way.

The issue is way bigger than Tesla, which sells a relative handful of cars. Franchise laws protect dealers from competition. But they can also make it tricky for certain dealers to get bigger.

“If these laws were amended or liberalized more to open up the opportunities that dealers have to consolidate, that would actually be to their advantage,” says Dan Crane, associate dean at Michigan’s Law School.

Crane and other Tesla supporters say that opening up the system would lower prices for consumers. But it could also set off a wave of mergers. There are thousands of car dealers. Buyouts could shrink that to hundreds, even dozens. Many established dealers don’t want that, so they’re fighting to preserve their franchise laws.

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