Wheeling and Dealing: How Auto Dealers Put The Brakes on Direct Sales

Alexander Sammon attends the the annual convention of the National Automobile Dealers Association:

Now car dealers are one of the most important secular forces in American conservatism, having taken a huge swath of the political system hostage. They spent a record $7 million on federal lobbying in 2022, far more than the National Rifle Association, and $25 million in 2020 just on federal elections, mostly to Republicans. The NADA PAC kicked in another $5 million. That’s a small percentage of the operation: Dealers mainline money to state- and local-level GOPs as well. They often play an outsize role in communities, buying up local ad space, sponsoring local sports teams, and strengthening a social network that can be very useful to political campaigns. “There’s a dealer in every district, which is why their power is so diffuse. They’re not concentrated in any one place; they’re spread out everywhere, all over the country,” Crane said. Although dealers are maligned as parasites, their relationship to the GOP is pure symbiosis: Republicans need their money and networks, and dealers need politicians to protect them from repealing the laws that keep the money coming in.

The political power of dealers is why many states still prohibit car manufacturers from selling direct to the public, an absurd restriction that I have been complaining about for years. Some progress has been made but also plenty of pushback:

After years of litigation, Michigan, the birthplace of the dealership, recently agreed to let Tesla sell and service cars in-state. Half of states have loosened dealer protections more (red states, ostensibly “pro-business,” tend to have the most binding restrictions), but dealers are still making record profits. Even Florida Gov. Ron DeSantis, despite launching his presidential bid with Tesla’s Elon Musk, has raised millions from dealers and given no indication he’d veto two restrictive, dealer-sponsored bills passing through the Florida Legislature. (These bills would make it illegal for car manufacturers to set transparent prices and allow buyers to order EVs from legacy manufacturers online.)

Even “pro-business” Texas, which Elon Musk now calls home, and where Tesla and SpaceX are major employers still doesn’t allow Tesla to sell its cars direct to consumers. As a result:

Teslas made in Texas have to be shipped out of the state and then reimported across state lines to any buyers in Texas who purchase them online, one of many ridiculous workarounds born of dealer-protection laws.

Absurd.

Hat tip: Market Power.