Regulation

Tesla vs. the Regulatory Status Quo in NJ

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Via Geoffrey Manne, who teaches law at Lewis & Clark University in Portland, Oregon, comes this open letter about New Jersey's riidiculous ban on direct sales of Tesla cars. For more on Garden State awfulness regarding the sale of luxury electric cars, read Ed Krayewski.

The Motor Vehicle Commission's regulation was aimed specifically at stopping one company, Tesla Motors, from directly distributing its electric cars. But the regulation would apply equally to any other innovative manufacturer trying to bring a new automobile to market, as well. There is no justification on any rational economic or public policy grounds for such a restraint of commerce. Rather, the upshot of the regulation is to reduce competition in New Jersey's automobile market for the benefit of its auto dealers and to the detriment of its consumers. It is protectionism for auto dealers, pure and simple….

In sum, we have not heard a single argument for a direct distribution ban that makes any sense. To the contrary, these arguments simply bolster our belief that the regulations in question are motivated by economic protectionism that favors dealers at the expense of consumers and innovative technologies. It is discouraging to see this ban being used to block a company that is bringing dynamic and environmentally friendly products to market. We strongly encourage you to repeal it, by new legislation if necessary.

The letter is signed by more than 70 economists and law profs (full text and signatories here).

I wrote about attempts to ban or restrict new-model businesses such as Tesla, Uber, and Airbnb for Time recently. Read that here. 

The move by New Jersey's legislature to heap even more restrictions on new ways of doing business is appalling and should be denounced as such. The upside, though, is that such anti-business activity forces legislators and "poltiical entrepreneurs" (to use Burton W. Folsom's excellent phrase) to defend an indefensbile status quo. If the only argument you can make against liberalizing a market (or social practice, such as gay marriage) is essentially to say, "We've always done it this way," or "My profit will suffer," change is on the horizon. It may take a while—and it typically takes way too long—but such empty, self-interested, and unpersuasive defenses of an exclusionary and highly self-interested status quo ultimately start tumbling down the minute they have to be articulated in public debate.

Speaking of cars and Jersey, here's a jolt of what Garden State DJs inevitably—and somewhat disturbingly—called "Bruce Juice" to get your engines running this Hump Day morning: 

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44 responses to “Tesla vs. the Regulatory Status Quo in NJ

  1. If we spot all the typos in the article do we get a six-pack of Bruce Juice?

    1. No. You get fired, like Lucy did.

    2. Typos? I thought all the double i usage meant the Dutch had seized control of H&R…

  2. Struggling. To. Care. About. Tesla.

    Leave by the government teat, die by the government teat.

    1. Like I say below, sometimes justice is served.

  3. First, that a crony capitalist golf cart company like Tesla could now get bitten by the crony capitalist car dealers in New Jersey just shows that sometimes justice is served.

    Beyond that, this is not about Tesla but about car sales in general. Car dealers are one of the worst parasites on the market. There is no reason why you shouldn’t be able to go on the internet and buy a new car and have it shipped to your door just like any other product. The only reason you can’t is that car dealers have bought off every state legislature and made that illegal. Every time someone buys a new car, they pay what amounts to an extortion tax to the dealer. And lets not forget dealers intentionally hide the actual price of cars from buyers so they can rip them off. Fortunately, the internet and sites like autotrader has stopped a lot of that, since you can now look on the internet and see what every dealer near you is charging. But a lot of people don’t realize that and still get ripped off.

    Car dealers need to die. The big dealers make a fortune basically through graft, corruption and cronyism.

      1. I don’t think I will ever buy a new car again. Cars last so long now and are so well made, it makes no sense. Just go buy a very low mileage late model and make sure it is inspected. You get just as good of a car at 3/4ths or less the price.

        1. Ehh, with some models, very low mileage late model cars cost 90% or more of new cars.

          Bought a car recently, and it was plain cheaper to get a brand new car that was sitting on the dealer’s lot– but last year’s model when the new year (not even a major redesign) had come out and was also on the lot– than to get a low mileage 3 year old car.

          1. Ehh, that is a pretty rare occurrence.

          2. Lease turnbacks that are “certified” by the maker are generally a pretty good deal.

            For new cars, though, you can get good deals when they are clearing last year’s inventory to make room for this year’s model.

    1. The big dealers make a fortune basically through graft, corruption and cronyism.

      And you’ve also basically described the entire Japanese auto industry.

      1. Really? How so? I am not saying you are wrong. But I have never heard that.

        1. In the late 90s, Japan, Inc. was published, which is a classic book (in comic book form!) that explains in great detail the institutionalized public-private shenanigans have defined the Japanese economy since the Meiji Restoration.

          Also, read up on the zaibatsu system.

          1. Yes. But that is pretty much the entire Japanese economy, not just the auto industry.

            In fairness to the Japanese car makers, unlike Tesla, they actually make a great product that people want to buy for economic and practical reasons rather than as a way to feel smug.

  4. The real reason NJ wants to stop Tesla is that Tesla owners don’t depend on the professional gas-pumpers.

    1. LOL. There is that. But it is more that if you want to sell a car, you have to pay off the dealer cartel.

      As 3d printing gets more advanced, I really think we could see a return to craftsmanship. The post industrial world will be craftsman making custom products again instead of giant factories turning out standard models of products. This can really happen with cars. The craftsman model has always lived in cars in the form of hotrodders. But hot rods are expensive toys for the most part. But with the coming 3d printing manufacturing revolution, the small shop craftsman will be able to give you the quality and cost of a factory made model with the customization of the hot rodder.

      That is, if government and the big car companies don’t kill it, which they most certainly will want to.

  5. What’s It Like To Buy A Tesla In China?

    You may order one right in the showroom.

    http://www.forbes.com/sites/ja…..-in-china/

  6. If the only argument you can make against liberalizing a market (or social practice, such as gay marriage) is essentially to say, “We’ve always done it this way,” or “My profit will suffer,” change is on the horizon.

    You say that, but we’ll end up having to choose between the New Jersey anti-gun rights, anti-property rights, big government cronyist pictured above and Hillary Clinton to stop signing the legislation that does the opposite.

    1. Keep a stiff upper Fist, lip.

      Christie is toast because of Bridgegate and Hillary has a brain tumor, so our choice will be even *more* disturbing.

      1. I wouldn’t count Fatso out so easily. I doubt Hillary has a brain tumor or even if she did it would stop someone as craven as her from running. Running for office and power is all she has.

        I still think it is a fifty fifty proposition at best Hillary gets the nomination even if she runs. A lot of Democrats hate the Clintons and a lot of Progs would like to get some of their self respect back after rolling over for Obama for 8 years. I wouldn’t be surprised if some surprise candidate picked up the full retard banner and took the nomination from Hillary.

        1. I think he’s done. He pissed away a lot of his Repub goodwill by holding hands with Obama right before the last election. With little to fall back on, the mini-scandals are that much more damaging.

          And its not gonna stop. He’s an off-the-rack RINO NJ politician. He’s going to say stupid shit, and get caught doing stupid shit.

  7. Top Gear is getting sued over their review of the Tesla.

    http://www.topgear.com/uk/videos/electric-shocker

    1. I wish them luck. The car broke down on the track. Top Gear just reported that fact and made fun of the car, which is what they do. They recently reviewed some specialty sports car made in Denmark that broke down and had to be replaced only to have the replacement breakdown too. And they made fun of it.

      Tesla’s owners and fan boys are just douche bags who are defensive about anyone pointing out that battery powered cars don’t work as well as gas powered ones.

      1. Did you watch the finale of this season of Top Gear? If not, check it out. It was great. They drive through Burma and build a bridge out of bamboo. I shit you not.

        1. Yes. I watched the second part on DVR last night as a matter of fact. It was great. I will likely never go there but my God is Burma a beautiful place. The scenery was just astounding.

          You never quite know how much of those shows are real and how much is staged. Really, I don’t want to know because it doesn’t matter. The show turns out great either way.

          Did you see the one where they drove across the Andes? They drove the famous road of death in Bolivia. Staged or not, some of the things they do are nuts.

          1. I DVR all new episodes, so yes.

            1. It is really my favorite show. I could never get into the American one. It really is about those three hosts. The American one is like trying to do a British version of the Marx Brothers. It just doesn’t work if you have seen the original.

              I even like the side shows they do like James May’s Man Lab and Toy Stories.

              1. I even like the side shows they do like James May’s Man Lab and Toy Stories.

                Agreed. And didn’t Hammond have a side project as well?

                As I was watching last night I was thinking, my goodness these guys must hate each other.

                1. I don’t think they do. I think they actually like each other but have a genuine friendship such that they really know each other and know exactly how to push the others’ buttons. They remind me more of old fraternity buddies who get together twice a year for some week long adventure.

                  I think if they really hated each other, they would over compensate. The fact that they can annoy and torture each other in good natured ways is what gives the show its chemistry.

        2. And I think there might be one more episode this season. They still haven’t had the Porsche 918 do their track yet to see if it is faster than the new McLaren. It sure seemed to me that were teasing that as something that would happen this season.

          1. Jennifer?

            1. Yes. They still haven’t done that. I think there will be another episode where they do.

              1. Jennifer Clarkson. It’s got a nice ring to it.

  8. There was an editorial in the paper this weekend about this issue in Texas. It was as chock full of stupidity as you would expect. “We need to make sure the car dealers stay in business because they provide jobs” was the general tone.

    1. They do provide jobs. But, so does the mafia.

  9. Bruce Juice?

    I didn’t think anyone could make Bruce Stringbeen any less appealing.

    Wrong again.

  10. Fist is out there, waiting to strike. WE HAVE TO STOP HIM.

  11. I think this is one of those industries where people will be hard-pressed to break the status-quo. In most locations with a new car dealership that dealership is going to be one of the largest tax centers. Dealerships use a ton of land, usually land in prime locations, and the product they deal in generates huge amounts of tax revenue. They also tend to employ a lot of people. Owners of new auto dealerships have massive pull with their local politicians, both in having money to spend and votes to offer (“Hello employees, if Candidate X wins I won’t be forced to close down and leave you all unemployed”).

    I’d love to be able to drive to a brewery and buy a couple cases of some good beer while driving a car I bought direct from the manufacturer, but it’s going to be a hard fight to make it happen. And I doubt a company like Tesla whose success is so beholden to gov’t subsidy is the one who will win that.

    1. “And I doubt a company like Tesla whose success is so beholden to gov’t subsidy is the one who will win that.”

      Unless Tesla builds (or claims it will build) more battery plants:
      “Arizona may allow Tesla sales”
      […]
      “If the bill passes, it would become part of the portfolio of incentives each state in the running for the factory is expected to pitch to Tesla.”
      http://money.cnn.com/2014/03/2…..index.html

      Vigorish-are-us!

    2. One thing Tesla has going for it in this fight is they are cronies with the biggest boys of all. If the White House calls their buddy Chris and leans on him, things could change for Tesla.

      Of course, it would be a one-off rather than a repeal.

      I’m curious: has anyone challenged these laws on dormant Commerce Clause grounds? Seems like a pretty straightforward “local processing” type requirement, which has been struck down in the past.

      1. Of course, it would be a one-off rather than a repeal.

        This is the thing that irritates me most beyond the fact that Tesla is whining about the franchise laws interfering with the free market while taking big bags of government money. These laws have been on the books as consumer protection laws for 75 years, where were any of these people crying for GM or Ford or Chrysler all that time? And are they crying for them now, or are their tears reserved just for Tesla?

        And I don’t think the story that various states are passing special laws aimed just at Tesla is true – they simply are making plain that, regardless of whatever work-arounds or exemptions Tesla has come up with, the franchise laws that kept Ford and Chrysler and GM from monopolizing the retail market apply to all automobile manufacturers.

        Sure, the franchise laws no longer serve any public purpose (if they ever did – the franchise system was set up by the auto manufacturers simply because they didn’t have the capital to sit on millions of vehicles waiting for sales and the laws weren’t necessarily necessary) so they should go, but fuck me if I’m going to support writing special laws just for Tesla with their crony capitalism and their POS watermelon supporters and their overpriced battery-operated smugmobiles for the condescenti.

  12. In NJ, you just have to make sure the right people get to dip their beak.

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