Written by Connor Frechette-McCall
Since its creation in 2003 by Silicon Valley visionary Elon Musk, the electric car manufacturer Tesla has effectively changed the course of automotive history. It was the first company to produce a cost effective and practical electric vehicle. It created the world’s first Gigafactory that can produce ion-lithium batteries at a third of the previous cost. Just this year it announced that its new electric vehicle will be affordable for the masses, starting around a mere thirty thousand dollars. However, Tesla’s intuitive changes have been met with harsh pushback from the automotive industry that does not want to change the age-old hegemony of fossil fuel powered cars. Other auto manufacturers are halting technological progress by political means as well.
Recently, the National Automobile Dealers Association (NADA) has gone after Tesla for the practice of selling their cars directly to consumers. This practice allows for Tesla to have a single price, therefore reducing the stress on consumers to haggle or shop around for better deals. However, standard automotive dealerships see this advancement as a threat to their franchised dealer market strategy, which has been around since nearly the creation of the modern automobile. The NADA, which is considered to be “one of the most politically connected groups in the United States,” has used more than four million dollars on lobbying congress to change the laws to prevent Tesla from operating their dealer-less practice in many states (Bogage, 2016).
Conventional car markets have been using their political influence (done by sponsoring candidates through campaign and Super PAC contributions) in the United States political system to prevent progress not just in the case of dealership organization, but also to halt some of the earliest electric vehicle prototypes.
In the mid-1990s, General Motors had developed an electric vehicle that had zero emissions, was relatively inexpensive, and ran solely on battery power to adhere to California’s new lower vehicle emissions standard. However, General Motors quickly cut the car from a limited production and destroyed all remaining models. According to Michael Shnayerson, author of the book The Car That Could, this was said to be due to the “high costs” associated with maintaining the vehicle’s battery, as well as GM wanting to focus more power on brands like gas-guzzling vehicles like the Hummer line and Chevrolet Suburban.
In a 2006 documentary investigating this phenomenon, it was noted that “the cost of batteries and electric vehicles would have been reduced significantly if mass production began, due to economies of scale” (Shnayerson, 1996). It is theorized that investment support from fossil fuel companies incentivized GM to end its venture into the electric market by manipulating oil prices. The film entitled “Who killed the Electric Car?” uncovers how many fossil fuel moguls funneled billions of dollars into the campaign of George W. Bush, who used his presidential power to pressure California’s legislature to repeal the emissions standard. Furthermore, there was a coalition of General Motors dealers that had opposed selling GM’s new electric vehicle, as profits would be threatened by how “few service requirements [the electric vehicle needed] —no tune-ups, no oil changes, and less brake jobs because of regenerative braking” (Paine, 2006).
In the case of Tesla specifically, many enterprises have worked to discredit or make it difficult for the brand to develop. Even the British Automotive news program Top Gear was sued for “libel and malicious falsehoods” after their review of Tesla’s Roadster S dramatically mislead audiences into showing the range of the car to be 1/4th of its true battery duration (Moshinsky, 2013). This is because the innovations brought by companies like Tesla, or even GM’s electric car, pose a threat to the pre existing economic conditions that fossil fuel companies and conventional automobile brands benefit from. The business model of Tesla, which has a $0 budget for advertising and a $0 budget for franchised dealerships, allows for the car to be sold at a cheaper price to all consumers. By allowing all Americans to see how this business model values the consumer and the product itself over corporate profits, all sections of the conventional automotive industry feel threatened. The perceived threat is reminiscent of the 1800s era, where big business monopolies controlled so much of each market that any sort of deviation or innovation was immediately silenced, whether through litigation or force. In that time period, the United States government created “trust-busting” legislation that encouraged new ideas and the competitive pricing effects that come with multiple companies.
Today, the dollars that are being poured into political campaigns by automotive super-PACs essentially ensure that new legislation that curbs the process of innovation stifling will never be put into place. Consumer market analyzer James Albertine concludes that “The reason [Tesla is] so successful is because everybody is fed up with the traditional dealership model” (Bogage, 2016). When examining the excuses brought forward by the NADA on why Tesla shouldn’t be legally allowed to open dealerships, it appears that their only reasoning is that dealers want to preserve profit opportunities based on older market conventions for themselves instead of changing to adapt to a more competitive market. If all companies had the ability to legally block their competitors from pushing innovative business models, the entire American economic system would falter.
Given the challenges Tesla faces from the automobile industry, perhaps the best way to deal with the lobbying bias against it and other electric car manufacturers is to reintroduce and enforce “trust-busting” legislation that levels the playing field of ideas and competitive pricing. Only then will innovative companies like Tesla have a fair chance to make a profit and improve the environment.
Written by Connor Frechette-McCall
University of Massachusetts, Amherst
References
Bogage, J. (2016, September 9). The battle between Tesla and your neighborhood car dealership
Retrieved October 20, 2016, from http://washingtonpost.com
Moshinsky, B. (2013, March 5). Tesla Libel Suit Over BBC’s ‘Top Gear’ Dismissed in U.K …
Retrieved October 20, 2016, from http://www.bloomberg.com/news/articles/2013-03-05/tesla-libel-suit-over-bbc-s-top-gear-dismissed-by-u-k-court
Paine, C. (2007). Who killed the electric car?: A lack of consumer confidence… or conspiracy.
London: Sony Pictures Home Entertainment.
Shnayerson, M. (1996). The car that could: The inside story of GM’s revolutionary electric
vehicle. New York: Random House.
Snavely, B. (2016, October 7). Auto dealers chief warns of Tesla direct sales model. Retrieved
October 20, 2016, from http://www.usatoday.com/story/money/cars/2016/10/06/auto-dealers-chief-warns-teslas- direct-sales-model/91649750/
