Perhaps the biggest fight Tesla Motors Inc (NASDAQ:TSLA) faces right now is the ability to sell its vehicles directly to consumers, but is this desire that different from what Apple Inc. (NASDAQ:AAPL) and other electronics manufacturers do? Not at all, says Forbes contributor Tim Worstall.
Tesla Motors’ Battle
Tesla Motors Inc (NASDAQ:TSLA) has been fighting the battle at the state level in numerous battlegrounds as it attempts to beat back auto dealers, which have long held sway in state legislatures. The most recent chapter in the fight comes in the form of a White House petition started by a fan of the automaker, although that petition will likely have little impact on how Tesla is allowed to sell its vehicles.
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Worstall compares Tesla Motors Inc (NASDAQ:TSLA)’s attempts to sell directly to consumers with those of Apple Inc. (NASDAQ:AAPL), showing how the battle Tesla faces is largely political in nature. After all, Apple is allowed to set up Apple Stores which sell directly to consumers and compete with Best Buy Co., Inc. (NYSE:BBY), AT&T Inc. (NYSE:T) and every other third party retailer which sells Apple products.
Tesla however, is an automaker, so it is governed by a different set of laws which are backed by auto dealers. Worstall refers to an article by economist Lynne Kiesling, who wrote on Virginia’s laws regarding automakers and auto dealers. Laws in the state bar manufacturers from owning dealerships, preventing vertical integration as a way to promote competition—supposedly.
Similar laws in other parts of the market, like the electronics market, would also keep Apple Inc. (NASDAQ:AAPL) from setting up Apple stores and selling its products directly to consumers. Of course we don’t know how a law like this would affect the electronics industry, but Kiesling points out that vertical integration isn’t anti-competitive at the retail level. She also says that the laws auto dealers are backing are nothing but “a relic” from times when “the economics of vertical integration” weren’t understood well yet.
Apple And Tesla In Politics
Worstall notes that Apple Inc. (NASDAQ:AAPL) has not had to throw its massive heft behind paving the way so it can sell its products directly to consumers. He also says that electronics retailers don’t have the political power to influence laws the way auto dealers do, so Tesla Motors Inc (NASDAQ:TSLA)’s real problem essentially stems from politics. Auto dealers will lose out big time if Tesla is successful in its direct to consumer sales approach, so it’s natural that they throw their weight behind making sure that it doesn’t happen.
“Maybe selling cars direct is a good idea, maybe it’s a bad one,” Worstall wrote. “But we most certainly shouldn’t be leaving the power to determine whether it should happen or not in the hands of those who will lose out if it turns out to be a good one.”