Pub. 56 2015-2016 Issue 3

33 SPRING 2016 The motor vehicle franchise system, in addition to offering the consumer the most competitive market, is also beneficial for the committed manufacturer. This system shares the costs inherent in the motor vehicle manufacturing and distribution system so that each can perform at their optimum. The manufacturer can concentrate on designing, engineer- ing, and nationally marketing vehicles in lieu of retailing. The dealership can concentrate on investing in their community, their land, their buildings, their customers, and employees so that the consumer can obtain their desired product with the optimum service for the best price. Some estimates put the combined investment made by the dealers at more than $200,000,000,000.00 (two hundred billion) in land, buildings, software and infrastructure to sell vehicles. 55 This combined dealership investment inures to the benefit of the consumer, the dealer, the manufacturer, the community, and to the general economy. It can not be duplicated. When the manufacturer attempts to retail, experience shows that the result is a fixed price, lower market share, and falling store profits, as evidenced by the Ford Motor Company retail network in 1997 and outlined by Maryann Keller. By 2002, “after lower market share in five test cities, falling store-level profits, and the added administrative cost burden, Ford terminated the retail network and sold the stores back to its dealers.” 56 Ms. Keller continues by explaining that Ford’s approach actually increased its distribution costs. “Making and selling cars are two different areas of expertise.” 57 The General Motors (GM) Brazil’s Celta experience is un- fortunately incorrectly cited by some as evidence of savings in a factory direct build-to-order system. GM ended the direct sale of Celta in 2006 and emailed Ms. Keller’s business partner that the program ended “because of the high cost of selling online and operating distribution centers.” It is troublesome that this example is misused by those advocating for a factory direct build-to-order model. 58 Although Tesla’s representative at the workshop advocates for direct factory distribution because of product uniqueness, 59 the first electric car dates to the early 1800’s when Hungarian inventor Anyos Jedlik, who invented an early electric motor, built a small model car. 60 In 1896, the first motor vehicle dealer in the U.S. was established and only sold electric vehicles. 61 Mr. Shahan chronicles that in 1900, 38% of all vehicles in the U.S. were electric; 40% steam; and, 22% gasoline-powered. This percentage would soon change when in 1913, Ford’s Model T rolled off the assembly line. 62 After the introduction of the Model T, the electric vehicle was two to three times more expensive than the gasoline vehicle. The electric vehicle could not compete with “cheap Texas oil; a more developed road network; the ability or desire to travel long distances as an electric car typically had a driving range of 30 to 40 miles; a limited charging infrastructure; the electric starter; slower speeds, about 20 mph for an electric vehicle; tough eco- nomic times during World War I; and, the stigma that electric cars were for women.” 63 Since the last Detroit Electric vehicle was sold in 1926, the current administration determined to invest in electric vehicles and spent $2 billion from theAmericanRecovery andReinvestment Act of 2009 toward the development of electric vehicle batteries and related technologies. Another $400millionwas awarded toward the development of a plug-in vehicle charging infrastructure. 64 The U.S. Department of Energy in 2009 awarded $8 billion for fuel-efficient vehicle loans to Ford, Tesla Motors, and Nissan, part of the $25 billion dedicated for such a purpose under the Energy Independence and Security Act of 2007. 65 As the government invests in the electric vehicle industry, Tesla Motors garners much attention, including their single-mindedness to distribute directly. Tesla’s representative,Mr.Maron, lists Tesla’s reasons for a direct This system shares the costs inherent in the motor vehicle manufacturing and distribution system so that each can perform at their optimum.  DEALER FRANCHISE — CONTINUED FROM PAGE 31  DEALER FRANCHISE — CONTINUED FROM PAGE 34