Wednesday, March 12, 2014

Tesla: Pennsylvania is Open for Business

Since the first Tin Lizzies rolled off the assembly line in Highland Park, MI over a century ago, the American auto industry has hosted some of the nation's most nefarious backdoor deals and unethical political maneuvers. Once a competitive industry of Studebakers and Duesenbergs, a select group of choice brands emerged as the captains of the automotive industry.

The Big Three don't rule the American market by making better cars, they sustain themselves through powerful Washington lobbies and truckloads of subsidies. You don't have to make a better car to be an American car company, you just have to be Chrysler, Ford, or General Motors.

Some have learned the hard way, most notably Preston Tucker. The Tucker 48 was set to be one of the most advanced cars the world had seen, a feat accomplished by adding seatbelts and three headlights to a Studebaker. With no major American car company releasing a new model in more than five years, the American market was eager to drive the Tucker 48, until a baseless stock fraud claim and federal indictment led the media to shroud Tucker in a cloud of corruption. Only 51 Tucker 48s were ever produced and Preston Tucker died less than ten years later.

Tucker 48

Since then few new car companies have emerged, and when they have they've been absorbed under an umbrella of one of the Big Three. The American Motor Company was the last major American manufacturer to compete with the Big Three, but was absorbed into Chrysler in the 1980s. AMC's sedans were discontinued and Chrysler continues to manufacture AMC's Jeep brand.

Since 1987 the Big Three has been the Only Three. That is until Elon Musk, a dot com billionaire behind PayPal, took over the California based Tesla Motors. During the financial crisis, Musk was the Big Three's biggest nightmare. The Tesla is more than the motor company's sedan and roadster models, it's a profitable powertrain used by Mercedes and Toyota, a completely electric powertrain that can compete with the most powerful combustion engines.

Sales of the Tesla have put fire under the Big Three, evident in GM's release of the Chevy Volt. The American auto industry hasn't seriously dabbled in electric vehicles since GM's EV1, an electric car offered only as a lease in the late 90s. Despite the EV1's popularity among its drivers, GM cited poor profitability to recall and crush nearly every one of them.

Stacks of crushed GM EV1s

That decision remains controversial, with some conspiracy theorists even claiming that the American automobile lobbies pressured GM to discontinue its experimental program as the EV1 would potentially advance GM ahead of Ford and Chrysler.

So why the history lesson? Well, it would seem politics haven't changed since Preston Tucker engineered his Tucker 48 and Tesla Motors is throwing a little too much competitive innovation at the Big Three, and their lobbyists have been working overtime to keep Tesla Motors out of various markets, including the entire state of New Jersey.

The NJ Motor Vehicle Commission created a legislative loophole yesterday that all but ensures the only American cars available in NJ will be brought to you by the Big Three, and New York is considering similar prohibitions. Car manufacturers will no longer be allowed to directly sell their models in the Garden State, only resellers.

Why? Well it doesn't make any business sense. That's like forcing private bakers to sell their cupcakes through Wegman's.

What it does do is frustrate independent sellers like Tesla and other emerging automotive products at the behest of the giants. What lobbyists likely hope to do is isolate the major markets, and NJ and NY are two of the biggest, leading to one of a few potential outcomes, all benefitting the Big Three.

Tesla will need to find dealers capable of procuring licenses from a state openly trying to ban Teslas, dealers willing to open very expensive dealerships to sell Tesla's only two models.

The other outcome is that this legislation cripples Tesla Motors' sales, forcing the company to sell its soul to the Big Three, or worse, into bankruptcy. This is the more traditional M.O. of the Big Three lobby, but given Tesla's success overseas and its profitable powertrains, not a likely one. Basically, the NJ legislation just screws NJ consumers by giving preferential treatment to the Walmarts of car builders.

Tesla Model S

However if NY follows suit and finds its own way to ban Teslas from their car lots, it puts Pennsylvania in a uniquely lucrative situation. Nothing drives sales like mystique, and if NJ and NY residents want to drive a Tesla, PA is a nearby option. Let's take it a step further, not only selling Teslas in PA, but let's invite Elon Musk to manufacture one of America's most exciting new automobiles right in our own backyards.

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