Tesla Direct Sales are ‘An Inconvenience:’ NADA Chairman

Tesla Direct Sales are ‘An Inconvenience:’ NADA Chairman

As Tesla tries to reinvent how people buy cars, traditional automotive retail practices have been called into question. Despite the brand’s new approach, which has attracted a lot of attention, today’s arrangement is not without its benefits according to the dealers. 

“The advantages of the dealer franchise system are numerous,” explained Bill Fox, chairman of the National Automobile Dealers Association.

“The first and foremost one is, we’re the face of the manufacturer in every small town in America,” said Fox. “We’re the guy that hires the local people, we pay for the cars, we support the local economy.”

Tesla Model X

According to Fox, dealerships collected a whopping 15 percent of all the sales taxes in the U.S. last year. Another benefit of today’s franchise system compared to buying directly from a manufacturer is that consumers have a local person they can interact with instead of dialing a 1-800 number.

Fox asked, “If you had a Tesla and it broke down, where would you get it fixed?” Continuing he said, “What they have is a service facility somewhere. And they’ll come and pick up your car, leave you a loner car … In my judgment, that’s an inconvenience.” He also noted, “I don’t know that the American public is ever going to accept that version of car ownership,” especially with electric vehicles that have limited range.

Fox owns numerous franchises in upstate New York, with brands including Toyota, Honda, Jeep and Chevrolet to name a few. He’s not opposed to Tesla selling cars so long as the law allows it, though he’s not a fan of the whole process. “I don’t think it’s a very good solution, I don’t think that the result will be that the consumer will be satisfied in the end.”

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When asked about automotive retailers fighting what Tesla is trying to do, that is, sell vehicles direct to consumers, Fox said, “Yes, dealers have lobbied, there’s no question about that, they’ve hired lobbyists. But that’s because, you know, they’ve made these great investments and they’ve got an interest in … those stores and everything else.”

It’s not cheap to open or run a dealership. The initial investment to secure a franchise, buy land, build a facility, and hire people has got to be millions and millions of dollars. And this steep cost is no guarantee of fiscal success. Totaling their new- and used-vehicle sales, financing, service and parts businesses Fox said the average profit for dealers is 2.2 percent.

Tesla Model S

It’s understandable why dealers bristle at the thought of upstart companies selling cars directly. While not abreast of every franchise requirement in all 50 states Fox said dealerships follow these regulations, “And they think Tesla should adhere to the law [as well].”

Fox said, “If you want to sell directly, apply to get a dealer’s license.”

Discuss this story on our Tesla Forum.

  • serge delinois

    The problem is that the law that they want Tesla to follow is specifically put in to protect their business not their customers. For example the dealership has to be independently owned.

    So Tesla could not build a dealership that looks like every other dealership if they wanted to. The days of a middle man are gone and people just want to pick their car and pay for it just like they shop for anything else shop for. Does anyone ever thing haggling over the price of the car for hours going back and forth with high pressure sales tactics is convenient. Does anyone think high pressure sales tactics for financing and extended warranties is convenient. Has anyone ever gotten out of a dealership in less than 4 hours of mind numbing pounding by sales people.

    One time they took my license before I could take the test drive and I had to argue with them to get it back before I could leave. If this is so much better than direct sales experience then they have nothing to worry about.

  • Andy

    Why does this old-timer keep talking about irrelevant stuff? Yesterday they wanted less regulation regarding interest rates/finance but today they want legislation to protect them from their precious free market? You cannot have it both ways. People with Tesla money aren’t buying the econoboxes from the dealer, so don’t worry too much and let competition dictate its course.

  • Kinetis

    Self-preservation is the name of the game. Of course he says dealers are beneficial, he’s the NADA chairman and owns a string of dealerships.

  • Disqus11111

    This clown, as Fox truly is, was saying in an article yesterday, how dealers offer the best financing opportunities and the least expensive and was claiming how they represent consumers best interests. it was beyond comical and today he is spewing this crap. This clown has no respect for consumers/customers and is nothing but an elderly version of Joe Slick the car salesman who would steal from his mother and then try to tell you why he was doing her a favor.

  • smartacus

    From what i’ve seen; customers like being able to go to dealerships and looking at the cars up close in the showrooms. Then there are those who like to test drive.
    Some trade in their old vehicle immediately without having to post on craigslist for a month.
    Some just have to get out of a lease before it’s up.
    Getting a better deal because the dealer is trying to clear the lot or making room for next year’s models is popular.

    Sometimes people get extra equipment or packages for free to sweeten the deal.
    Some dealers gives free car washes to customers who bought there.

  • Dean de Leo

    I completely disagree with Bill Fox. I hate dealing with a dealership. If I could afford a Tesla now, I’d get one. Looking forward to the Model 3!

  • Jonny_Vancouver

    I’m glad to see most of the posts here are of the same mind. Dealership franchises are a f*cking nightmare. It’s an outdated way of doing business and it’s not at all, in any way geared towards putting the customer first. I hate slimy car salesman too, when I shop for a car for myself or friends and family, I come at them like I’m going to war, all day long and I’m sure they don’t appreciate that either. I would love it if a car company came to my house, picked up my car for service and left me a loner vehicle, talk about service! Vs. Going in for routine service and waiting for almost 4 hrs at the dealership sipping on their stale coffee. <3 Tesla. Keep on doing what you do.

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  • Mark S

    Just so unamerican in spirit. The States protect the dealerships who in turn provide large amounts of sales taxes for this protection…..like legalized protection money, racketeering basically. GM and Ford both tried and failed at this approach of direct sales, but Tesla and others will have the internet and also a streamlined in State presence. There will always be a need for traditional dealerships, so why can’t they compete on a level playing field?

  • Johnq

    Free Enterprise, that is the spirit of our country. Let the dealerships, OEM’s and aftermarket be voted in or “out” by what the customer/people want by purchasing power.
    Tesla has done some thing that no other OEM has done in recent times. Now we have Google working on there own car. Its exciting to see what might happen! You or your own company is only limited by ones imagination. There has been, in history, a few that dared to go up against giants such as GM, FORD and Chrysler. Now its a mix of Toyota, Hyundai, Mazda, Honda, Ford, GM, Chrysler, Mercedes and on.
    I really do not like the dealership format much myself. I have purchase two new vehicles in the last 3 years. Each time, I spent over 3 hours actually going through the process with more negative than positive.
    Dealer networks are not happy about Tesla, at all! I guess I do not blame them, but on the other hand I say get better at what you do instead of attacking you competition, be better than you competition. That is true free enterprise!

  • Jay Donnaway

    “And they’ll come and pick up your car, leave you a loner car … In my judgment, that’s an inconvenience.”
    What a laugh, and a perfect illustration of how hard it is to defend an indefensible position. Dealers are dinosaurs, and Fox is Exhibit 1.

  • Jim Farnsworth

    I’m an old timer, grew up in a Ford dealership where my dad worked (this is how old I am, I could run around the place, free reign as an 8 year old) and I also dislike the sales tactics and hassle. Drive an hour to get my Toyota warranty work done after making an initial trip to have the problem diagnosed when there is already a TSB. Boy what an inconvenience it would be if they picked up my vehicle. I suppose that Tesla doesn’t employ anyone pay taxes or have any facilities.

    It’s hard to understand why someone would invest money in the Taj Mahals I’ve seen dealerships in or acquire multiple franchise if the return on the money is so poor.

    If people want to buy direct from Tesla let them, if they want to buy there car from an “independent” dealer let them.

  • Ash45

    So how happy would you be, if you found out that your neighbor with the same exact car as yours and bought from the same dealership, but paid $2500 less than you did because he haggled it better?

    Sure, some people may be okay with the current car buying process. But the vast majority of people can’t help but feel they got ripped off one way or another.

  • smartacus

    HAHAHA, i can detect in your voice you failed at love somewhere and your heart is crying, so now you are throwing a tantrum 🙂

  • constantine272

    This guy is a dinosaur. If you fail to evolve you will become extinct.

    The direct sales approach is an organic response that represents the collective dissatisfaction that customers have with dealerships. I for one would gladly be slightly inconvenienced to save thousands of dollars that would otherwise go to a middleman.

  • vike

    Ooh smartacus, almost presented a touching defense of the indefensible there, but just couldn’t help yourself, could you? Face it, this is just a fact of life that everyone already knows – car salesmen and their bosses (as smartacus here must be unless he is a natural idiot) are predators, not “service providers”, and this little exchange proves the point. If you don’t like getting bent over by your local dealer, you’re just a whiner, because real men make better deals. Thanks for showing your true colors – “customer service” at its finest!

  • smartacus

    that’s like saying USA is evil, so let’s allow North Korea be in charge.

  • vike

    You’re right. It’s exactly like that.

    Keep digging kid – I’ve got extra shovels here if you need ’em.

  • smartacus

    we will bury you

  • vike

    I’ve no doubt you mean to.

    [Wow. This guy’s a car salesman poster boy.]

  • smartacus

    oh i disagreed with you, you the god of all gods in your universe.
    ahaa! i must be a car salesman.
    [Wow. This guy’s a narcissist poster boy]
    *and last i checked, narcissists are less socially acceptable than even car salesman.

  • Mark S

    The main problem with the current set up is that the dealers are protected and the direct car sales are stifled by regulation. Do not think dealers should be banned at all, but if a car maker wants to try a different way, the dealer system should not be protected by regulation – let them swim in the free market. End of the day, the State will get sales tax from the dealer or sales tax from the car maker….there will be jobs for folks to service and fix cars, even if the sales are done over the internet. Dealers will get smart, companies like Auto Nation etc. will both do internet sales and on site sales, they will sweeten the pot with loaners, dealer extras – do not think the Tesla model will work for everyone, but Tesla has the right to try. Direct sales has been tried and failed before. Maybe Tesla is not the issue, maybe the issue is that some folks think that other car brands not in the US market will try and go round dealers (once they have passed US safety and emissions laws), e.g. Chinese Car makers like Chery, Brilliance etc.

  • vike

    Sure. So to recap:

    1. Anybody who is unhappy with being forced to buy their cars from dealerships — that’s a communist.

    2. Anybody who assumes that someone snarkily defending the current system must work for that system — that’s a narcissist.

    3. Anybody who decides after the fact that they can make their posts wittier (or at least more red-baiting) by editing them after replies are already in — that’s you.

    I’m sure everyone here can get behind those points. I guess you win, since I’ll decline to attribute your conduct to absurd political motivations. Take a victory lap and keep talking to yourself all you like.

  • smartacus

    don’t forget to vote for Colonel Sanders, chicken :))