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Texas a Beacon of Free Enterprise? Hah!

Ask Tesla owners how easy buying the whiz-bang electric car is in the Lone Star State compared to the other 49, and you’ll learn just how much Texas values competition. Indeed, what the Texas Legislature seems to value most is cash.

But there’s a larger problem at play here, in the age of disruptive technologies (Tesla, for example, only sells its cars online. No dealerships, no middlemen.) Like Amazon,Uber, and Netflix, Tesla’s direct-to-consumer model severely damages local businesses, which is why the New Car Dealers Association is spending ferociously to combat it. Amazon first destroyed the bookstore, and now is challenging almost every form of local retail. Uber will eventually upend the taxi franchise — and its $50,000 a month license fees to local government. Netflix is challenging local cable franchises  (and hooray for that). Tesla is only the harbinger of changes that will ultimately disrupt the local franchise arrangement on which the auto industry is built.

Capitalism is disruptive and destructive, we all know that. But before we cheer it on too lustily, Jonathan Coppage warns we had better consider the consequences. Goodbye to the local bookstore, and even to Border’s. Goodbye to taxis. Goodbye to cable (hooray for that). But goodbye to local car dealers? Have we thought that through? In most towns as in Dallas, the local car dealers are among the last major supporters of civic enterprise and charities. We lost our three major banks in the 1980s, and can anyone truly claim we are better off for it? The internet is accelerating the nationalization of business. That may bring more convenience to the local consumer. But what it wreaks on local institutions that are the mainstay of civic society may turn out to be a high price to pay.

That said, it’s gonna happen anyway. Like Canute commanding the tide to halt, neither the Dallas City Council nor the Texas Legislature can stop it.

  • Harvey Lacey

    NPR yesterday had a great story on this topic, Amazon vs local book stores in Paris. Interesting quandary, if the prices is cheaper, Walmarting one oh one, and the wages are less, Walmarting two oh two, is it a wash for the average person?

    What I see is lost is opportunity for the individual to prevail over the system as the system becomes more top heavy.

  • Dubious Brother

    Amazon has buried all the book stores with the exception of Half Price Books which had a brilliant business model from day one. A close look at the Amazon business model makes one wonder how long will they last when they are losing money every quarter? Amazon and Tessla shareholders are from the same mold and the stock prices are way higher than they should be. What happens when the bubble bursts? Will they still be able to finance the losing business? We may end up with no book stores and no Amazon.

    As far as Tessla is concerned, are you ready to drop $100,000 on a car that you have never driven or seen in person? Where do you go when something goes wrong?

  • Paul

    You’re missing a very important aspect here – Tesla is nothing like Amazon, and selling cars is nothing like selling books.

    Books are a commodity product, in a market that was ripe for disruption. That’s what Amazon did (and they did it beautifully).

    Tesla is not GM, it is not Ford, it is not Honda or Toyota. Tesla is a high end, high technology product that caters to early adopters who are comfortable buying their car online. The traditional dealer model is not going to die the way the traditional book seller model did, simply because you cannot sell “test drives” online. You cannot sell a car online to someone who wants to drive “their” car before they buy it.

    Will the dealer model die eventually? Almost definitely, but I wouldn’t worry about it going quickly like the booksellers did (<20 years from founding of Amazon to death of Borders).

    I for one am sick of us trying to defend the middlemen. Middlemen make their money (largely) by making the process less efficient, while often providing little of value. Direct to consumer (with the use of technology as the middleman) is a highly efficient model that delivers only the value of the product/service without requiring the consumer to pay for inefficiencies.

    Car dealers may support local communities, but if that’s the only reason to keep the inefficiencies in the system, I say let them fade away. Let’s find new supporters instead of clinging on to an old paradigm. Instead of fearing the march of progress, let’s embrace it and enjoy the better future it will ultimately bring.

  • Jim Schermbeck

    And yet 1/2 Price Books is bigger than ever (thanks Ken), most of the stuff people watch on Netflix is cable-produced, and taxis haven’t been popular or widely available in Dallas since Jack Ruby ran the Carousel Club. And when I went shopping for a new car, the last places I went were the dealerships, not the first, because I had already done all he research. How much overhead can be sustained by dealerships with a hundred acres of vehicles given new buyers like me? Not much I’d imagine. Eventually, the bricks and mortar part of it will have a footprint smaller than your average RaceTrac.

  • Alexander Muse

    Would you have it any other way?

  • Charly

    Capitalism is great for cable, car dealerships and taxi service until someone else wants a piece of the pie and then they don’t like it. Deal with it or disappear!

  • tested

    So what’s your point? You want the auto dealerships to stay because they support civic organizations, but they paid off the legislature to stop Tesla which won’t be stopped anyway?

    My view: the local auto dealerships should start selling online and let Tesla compete with that.

  • Mavdog

    Keep in mind the reason TX set up the regs seperating the manufacturer from the dealer was to guarantee competition for the sale. Clearly this has been a success, dealers don’t have much profit (many times none) in selling the new car.
    not to say there isn’t profit at the dealership, they get their $ from the service, used cars and the financing they set up.
    It’s easy to see why Tesla doesn’t want to go with dealers selling their vehicles, Tesla will enjoy a higher profit margin.
    Other than a person believing the Tesla direct model is better because they won’t need to deal with a dealer (and what that says about the image of the car salesman…), there isn’t any reason the Tesla model would be better for the consumer than what currently exists.

  • Lori

    This is a well-crafted post. I like the populist headline and opening paragraph, and then you throw a bone to your marketing partners/clients at the local car dealers.

    I would argue that, yes, we are better off without our three major banks. They caused a lot of destruction to our local economy, and their demise led the Metropolitan Complex’s business to become more diversified.

    There’s always lots of wonderful hoopla about businesses moving to the Metroplex, but unfortunately we are not luring high tech or those disruptive ventures.