Archive for March, 2014

Tesla vs Christie

Tesla

Bloomberg reports that onMarch 6, at the Conservative Political Action Conference (CPAC), NJ Governor Chris Christie had this to say: “We need to talk about the fact that we are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.”   Your effort and ingenuity determine your success, not the government.  Sounds great, if only it were so.

In 2008, Tesla Motors began selling all electric cars to the public.  Elon Musk, an early investor and current Chairman and CEO of the company dared to enter a market with a product that experienced senior car executives said was not possible.  Through tenacity and perseverance (and a lot of government help – but I won’t go into that) he and his team created a new type of car and a new type of car company.  Because the company was developed in the 21st century they realized that they didn’t need to be shackled by old ways of doing business andcould take advantage of how consumers are doing business today. 

This clean sheet of paper would allow Tesla to sell cars directly to consumers, something that the incumbent auto companies would love to do.  A Goldman Sachs report in 2000 estimated that such direct sales would save consumers $2,225 on a $26,000 car.  One can only wonder what the savings on a $75,000 Tesla S would be.

But just like Charter Schools dramatically show the flaws in the public school system, this new distribution model shows the flaws in the existing dealer networks.  In this case the dealer lobby has played the role of the NEA and fought this new system tooth in nail state by state.

We aren’t talking about putting existing dealers out of business (like Obama did with the Chrysler and GM restructurings).  No we are just talking about competing with them side by side with a different model.  It’s as ridiculous as if HP fought Apple Stores because computers are complicated and all computers should only be purchased at a Best Buy where the consumer can get the assistance that they need.

The dealers have won in Texas and Virginia, and last week they won in NJ when the NJ Motor Vehicle Commission declared that all cars needed to be purchasedthrough franchisees.

To be clear, I do not have a dog in this hunt.  I am not anti Christie and I am not a Tesla fan boy.  (Although, I had the privilege of driving a Model S once and it was the most amazing ride I have ever had.)  I am opposed to all of the subsidies that Tesla and it’s buyers have gotten and as a NJ native I respect what Christie has been able to do as Governor.  But once again, I am disappointed in Christie.  He claims to be a new kind of Republican and then shows that he is just another politician.

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