The Direct Sales model is WRONG FOR CONSUMERS. New Jersey has been at the forefront of this fight for several years, but direct sales fights continue to rage all over the country, as you will see in our featured story from this issue of New Jersey Auto Retailer. Initially, it was just Tesla, but now Rivian, Lucid and other startups are taking up the mantle and trying to gain special consideration from Legislatures coast to coast. Even some legacy automakers are toying with the idea of breaking off their EV product into standalone companies.
Direct sale advocates have long said franchised dealers are unwilling or unable to sell EVs and that EV startups with direct sales are the only ones giving consumers the convenience of online vehicle purchasing. Neither of these assertions are true. Franchised dealers currently offer more than 40 vehicles with a plug, and dozens more are coming in the next few years. They also offer the consumer flexibility to complete their retail purchase online if the consumer prefers a remote or digital experience.
The network of 500+ franchised new car and truck dealerships in New Jersey represents a $34.6 billion industry and directly employs nearly 36,000 men and women, supporting an additional 34,000 jobs in the Garden State. Franchise dealerships provide consumers with fierce inter- and intra-brand price competition and prevent manufacturer monopolies. They offer ready access to warranty, recall and general repair service and generate good-paying, local jobs (many of which don’t require a college degree) that can’t be outsourced. They contribute billions of dollars in tax revenue and other benefits to the State and local economies. Factory-direct sales are simply an attempt to monopolize the electric vehicle (EV) market, eliminate competition and limit access to independent warranty and safety recall services.
NJ CAR has been communicating this message through a variety of paid and earned media campaigns targeting New Jersey’s elected officials and the public at large for more than a year. NJ CAR staff and dozens of dealers have participated in more than 100 Zoom calls and in-person meetings over the past 14 months, meeting with virtually every legislator to ensure the industry’s message stays in front of the State’s decision-makers. We have been proactive in our efforts, rather than reactive, and we are committed to staying one step ahead of Tesla, Rivian, Lucid and the other advocates for direct sales, including some legacy automakers that have begun to explore the possibility of factory-direct sales of EVs and autonomous vehicles.
For instance, Ford Motor Company recently announced it was spinning off its electric vehicle operation into a company separate from its legacy business. After receiving massive pushback, the company dialed back the spinoff talk and announced an internal separation of the EV business as its own unit under the Ford umbrella, but you can’t put the toothpaste back in the tube. And, as of this writing, it is unclear how this decision will impact Ford’s franchisees.
Direct sales advocates have said the unique nature of this evolving technology requires a factory-to-consumer direct sale. The fact is vehicles have been evolving for more than a century, and there is absolutely no reason to abandon the franchise system that has served consumers AND auto manufacturers well for all that time.
Consumers want convenient access to service. They want a strong local business that employs their neighbors and is active in the community. They want hearty competition on pricing for sales and service. The franchise system meets those needs. The direct sales model does not.