Terrified Of Tesla, NADA Launches Campaign To Tout Benefits Of Franchise Dealerships

June 18, 2014

Tesla's roadmap to success has been long and winding and full of potholes. One of the biggest obstacles vexing the startup automaker has been America's network of state franchise laws, most of which prevent automakers -- even small ones like Tesla -- from selling directly to consumers.

But CEO Elon Musk and his team of lawyers and lobbyists have slowly been making inroads from coast to coast. And that seems to be making dealer networks nervous -- how else to explain the National Automobile Dealers Association's latest press release, entitled "NADA Launches Major New Initiative to Promote the Benefits of Franchised Auto Dealers"?

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In the release, NADA outlines the four biggest benefits of dealer franchises:

  1. Price Competition – New-car dealers compete fiercely for business and drive consumer prices down;
  2. Consumer Safety – New-car dealers take the side of consumers in warranty and safety recall situations;
  3. Local Economic Benefits – New-car dealers create well-paying local jobs and generate significant tax revenue that have a huge impact on local economies; and
  4. Added Value – New-car dealers simplify an otherwise complex car-buying experience.

But lists and bullet points don't make for effective education campaigns. And so, NADA has launched a website to make its arguments more persuasively: NADA.org/GetTheFacts. According to NADA's president, Peter Welch, "NADA's efforts will set the record straight about the benefits of the dealer franchise network for consumers, manufacturers and local communities everywhere. New-car dealers provide the best and most efficient way to buy and sell cars for both consumers and manufacturers, despite the misinformation and misconceptions that have surfaced over the last several months."

That "misinformation" stems in large part from Tesla fans who've been pushing to overturn decades-old franchise laws and bring Tesla's sleek, all-electric cars to their respective states. So far, public sentiment seems to support Tesla -- after all, everyone loves an underdog. But NADA is hoping to change the tone of the debate.

To do that, it's produced the two-and-a-half minute video clip embedded above. In bold strokes, NADA paints automakers as big, bad corporate fat cats who don't give a flying flip about consumers. Dealerships, on the other hand, are like a hot apple pie that Aunt Bee has delivered right to your windowsill: American, homey, and convenient.


There's some truth to NADA's claims. Franchise laws were passed for good reasons, and like, say, the Civil Rights Act of 1964, there are many good reasons to keep them on the books.

Perhaps NADA's strongest point involves dealers and their focus on consumer safety. During recalls, dealerships are paid to make repairs, and since they depend heavily on return business (moreso than automakers, who may have multiple franchises in a given town), it's in their best interest to carry out those repairs quickly, cheaply, and efficiently. If automakers themselves were in charge of repairs...well, we don't want to cast aspersions, but it would be easy to see the incentive to cut corners.

However, there are also some gaping holes in NADA's arguments -- especially when the video discusses how simple and hassle-free the shopping experience can be at dealerships. Anyone who's ever bought a vehicle, new or used, knows that thanks to commission-hungry sales personnel, laborious financing paperwork, and other annoyances both within and beyond a dealer's sphere of influence, there's no such thing as "sign and drive".

But NADA's biggest rhetorical flaw is that it fails to understand precisely why so many consumers despise traditional dealerships and why, in turn, it's losing the debate with Tesla. NADA's screams of doom and gloom are grounded in the idea that Tesla is somehow pulling a fast one and altering the car-buying process. That's a bunch of baloney. Honestly, the difference between shopping in a Tesla gallery and shopping in a conventional showroom is minimal.

No, consumers despise dealerships because many of us have had terrible experiences in showrooms. And even though Tesla's sales work in a similar way -- the same registration paperwork, the same financing paperwork, etc. -- consumers are inclined to like Tesla because the Old Guard hates it. (Insert parents-teenager analogy here, if you like.)

Tesla is trying to offer new products -- products that appeal to younger consumers -- and the old-line dealerships are digging in their heels and telling Tesla "no". And from outside the industry bubble, it looks as if that "no" stems not from dealerships looking out for shoppers' best interests, but rather because they want to defend the status quo. That's always a terrible argument: saying that you're doing something just because the way that it's always been done that way is never persuasive. Ask the ghost of George Wallace.

Like America's education and agriculture systems, the car sales system needs some repairs. Tesla isn't really proposing anything new or groundbreaking on that front -- its galleries are simply a means of remaining in compliance with franchise laws. In fact, if NADA hadn't put up such a fight, if Tesla were allowed to sell cars as it wants, Tesla would've generated far less awareness and drawn much less of the public to its side.

NADA has been Tesla's biggest friend by giving Tesla an enemy.


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