Direct Car Sales

Ever wonder why cars are sold through "car dealerships?" Maybe in the imaginary Bastiatian free market, they wouldn't be.

Read reference article

This example of a collision between the free market and the hampered market was found on Mish Shedlock's excellent website. Tesla’s direct sales strategy represents the Bastiatian free market (that's not allowed to exist) and car dealership lobbyists represent the hampered market that we actually live with.

Mish comments:

"Why should anyone need a franchise to sell anything? If Tesla, Ford, GM, or any car maker wants to sell cars on Ebay, through Amazon, or their own online site, why should anyone care?

And

If the buyer and seller think it's OK, of what business is it to the state of New Jersey, Texas, or Arizona?" 

Mish answers his own question:

Tesla doesn’t use car dealerships.  They sell directly to the consumer. No haggling, no upselling, no commission for employees, and uniform prices at every store.  You just point to the car, say “I want that,” and you buy it. It makes a lot of sense for Tesla.  Customers don’t like car dealers, and car dealers don’t like electric cars, so why would you try to sell an electric car to a customer through a car dealership?  It is capitalism – a producer of a good is responding to the incentives of the market.

But the car dealerships feared, perhaps correctly, that if Tesla Motors could sell cars directly to consumers, there would be no way to stop other car companies from selling directly to consumers.  And they got their way because they bought the laws they wanted, laws which prop up their outdated business model at the expense of Texas consumers and innovative entrepreneurs. 

Why? Well, the Texas Automobile Dealers Association lobbied hard against letting Tesla sell cars in Texas, spending $278,750 on Texas political campaigns – about 75% to Republicans.

In addition to the $278,750 from the TX Auto Dealers Assoc. Pac, the Texans for Public Justice website, shows $453,324 from Thomas Dan Friedkin of Gulf State Toyota, the $331,310 from Gulf States Toyota PAC, and $306,500 from B.J. 'Red' McCombs, of the Red McCombs Auto Group.

Read more at http://globaleconomicanalysis.blogspot.com/2014/03/corrupt-politicians-on-take-another.html#9IVlTtHumotAr5aW.99

My conclusion: in the imaginary Bastiatian economy that we don't live in, cars would be sold (at a lower price) on Amazon.