Banning of Direct Electric Vehicle Sales Only Helps Car Dealers
(AP Photo/Michael Sohn)
Banning of Direct Electric Vehicle Sales Only Helps Car Dealers
(AP Photo/Michael Sohn)
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On a recent walk at home, my parents dropped a bombshell. “We’re thinking of buying a Tesla.” 

That was the last thing I expected to hear from them. My parents are blue-collar as they come. One’s a nurse at a small surgical clinic for skin cancer, the other has been a high school teacher and soccer coach for nearly 30 years. EVs, according to our family, have always been a luxury item. A ‘nice to have’, never a need. 

From a budgeting standpoint, though, I can see why EVs attract my parents’ attention. Eliminating the cost of fuel while simultaneously reducing carbon emissions would allow them to save more for retirement long term and still feel good about their impact on the environment. Not to mention the new blinker feature that would have my dad laughing every time he turns left — electric cars really are the complete package. 

My parents are lucky enough to live in Missouri where there are no restrictions on their ability to purchase any EV. But in most states, you can only buy them if they’re sold on a concrete lot. Which for many EV automakers means not at all. 

Few EV automakers (like Tesla, of Elon Musk fame) sell through car dealerships. Instead they prefer to sell directly to consumers. Direct sales cut costs for producers by eliminating the need to set up a national network of dealerships, the savings of which they pass on to consumers. By directly selling to customers, producers also prevent inventory from rusting on the lot. Direct sales EV automakers only make cars to order — there is never a surplus. 

This July, the US reached a critical milestone: 5% of new car sales were dedicated to those vehicles powered exclusively by electricity. According to experts, that percentage represents a tipping point, the threshold predicting future exponential growth in EV sales. Perhaps this growth is spurred by rising gas prices, perhaps by concerns over climate change, perhaps in response to political demands for EV growth. According to my parents, “It just makes more sense now.” Despite various reasons in favor, one key challenge remains: direct sales of EVs are not allowed in certain states because of archaic laws that prevent consumers from making their own decisions. American car drivers deserve better. 

Direct sales is a modern approach to car sales. In the current age, you don’t need to be in the office to work, so why should you need to be next door to the right car dealer to buy the car you want? However, in many states, these direct sales models are not permitted due to antiquated laws. 

Before 1950, General Motors, Ford, and Chrysler — the “Big Three” — were so dominant that their control of the market allowed them to impose unfair conditions. For example, Ford might intentionally offer a lower price at their company-owned store than nearby independent dealers, effectively pricing out the competition. In response, car dealerships urged state lawmakers to pass protective measures preventing the Big Three from unduly influencing the market. Lawmakers did so by preventing direct sales to protect the dealerships. This protection did not extend to consumers who stood to benefit from lower prices, no matter who was offering it. 

Direct sales laws might have made sense when the Big Three threatened mom-and-pop dealerships, but times have changed. The year 2000 was the last time GM and Ford combined to own 50% of the market, and Toyota has replaced Chrysler (who merged with Fiat) within the Top 3 automakers in the US. As the US market for automakers has become more competitive, the Big Three no longer threaten a monopoly as they once did. 

And yet, many of these laws remain in place. States (red and blue) like Connecticut, Montana, Texas, South Carolina, and others do not allow direct sales, and many states only allow an exception for a single manufacturer. Even then, they may restrict sales only to the federal government and charities. 

So while my parents are free to proceed with their wish to go electric, my brother in Texas cannot, my cousin in Maine must abstain, my buddy in Michigan will need to drive to Illinois if he wants to test drive EVs without restriction. My Aussie friend studying abroad in Indiana can buy as many Teslas as he wants, but he can’t compare his options and go for a Rivian — in Indiana, only Tesla can sell direct

Such restrictions don’t exist in any other market — only cars. You can buy an iPhone or a pair of Nikes from anywhere you want to, directly from the people who made it. Only if you wish to move from point A to point B on four wheels powered by electricity do you need to consult your state’s laws. 

These laws preventing direct sales serve only car dealers, whose only concern is to line their own pockets. They don’t help the planet, and they certainly don’t ensure freedom of choice for consumers. My parents lucked out living where they do, but they don’t have to be the exception to the rule. 

Given the increased competitiveness of the car market and the rise of direct sales due to the internet, state legislatures must overturn outdated laws preventing direct sales. They represent the needs and desires of all citizens, not just the special interests of dealerships. If we wish to protect the free market  —  empowering the consumer to turn right to the sound of farts — laws like these must go.

Danny Kenny is a contributing columnist who works in consulting and is based in the Washington DC area. His Ph.D. was in behavioral science from the University of Technology Sydney. Follow him on twitter @thedannykenny.

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