Legislation pending in the Colorado General Assembly, Senate Bill 167, has critics of the independently operated automotive distribution system in full cry.
“The franchised dealer model is anticompetitive,” we hear.
“Colorado dealers are trying to keep electric cars out of the market,” they say.
These critics either don’t know how the automotive dealership system works — or they simply don’t get the fundamental concept of consumer choice.
The bill title — “Electric Motor Vehicle Manufacturer and Dealer: Concerning increasing consumer access to electric motor vehicles by allowing manufacturers to sell their own electric motor vehicles directly to consumers” – doesn’t tell the full story, either about competition or about the availability of electric vehicles in Colorado.
The bill is being promoted by Rivian, an electric vehicle startup.
Is there a need for the bill? No. Under current Colorado law — as verified by the state’s Department of Revenue, which regulates the industry — Rivian could have operated in Colorado, just as Tesla currently does. Rivian just needed to apply for a license to sell its cars directly to consumers — but it never has applied.
Last year, a similar bill was defeated.
This year’s iteration passed the Colorado Senate with an important amendment that limits direct-to-consumer sales to manufacturers without existing franchise dealers in Colorado. The Colorado Automobile Dealers Association (CADA) was originally opposed to the bill, but CADA has adopted a neutral position on the legislation, as amended, as it moves to the state House of Representatives.
As originally introduced, Senate Bill 167 would have allowed out-of-state manufacturers to compete directly with their own franchised dealers in Colorado.
It would have devalued the multimillion-dollar investments Colorado dealers have made in their local businesses, causing those businesses to close, and creating huge job losses among the 42,000 Coloradans whose employment is tied to this statewide dealer network.
Communities would lose sales taxes, real estate taxes, community and charitable giving and much more.
Consumers would lose convenience, time and competitive pricing on vehicles and their service.
Why? As demonstrated by Tesla, under the factory-owned dealer model manufacturers would not replace the 260 new car dealerships in 58 communities throughout the state. They would locate in high population centers and make consumers drive hundreds of miles to test drive and purchase a new car or get service. Imagine if you lived in Montrose or Grand Junction and had to take your vehicle all the way to Denver.
The automotive industry is highly competitive. Colorado’s dealers all compete among themselves for consumers. Chevrolet dealers compete with nearby Chevrolet dealers plus more dealers online. Chevrolet dealers also compete with Ford, Toyota, Nissan, Honda and Chrysler dealers.
Competition drives down costs: 95% of vehicles sold through dealerships sell for less than the Manufacturer’s Suggested Retail Price (MSRP). Yet 100% vehicles sold through manufacturer-owned outlets sell at full retail price, another reason they are so expensive. No competition.
Colorado’s franchise laws originated in 1937. Both then and now, they benefit consumers. In 1910, there were 2,000 startup automakers, almost all of which failed. Today, there are 500 startup electric car companies in China alone. Without dealers, who will help consumers when most of those fail?
Colorado dealers will continue competing just as hard as the industry transitions toward more electric vehicles. And there will be a lot more, since most manufacturers are already rolling them out pretty aggressively.
As of this writing, there are 26 plug-in hybrid electric vehicle (PHEVs) models and 20 battery-powered electric vehicle (BEVs) models available to Colorado consumers; all but three through franchised dealers. Most of these vehicles are in current inventories, which means that a consumer can view, test drive and take one home today. Consumers can — and are — buying the cars they want, when they want them, and in their own communities from a local dealer they know and trust.
Colorado dealers have embraced PHEVs and BEVs, making substantial investments in equipment, training and marketing to welcome early adopters. Though many Colorado consumers haven’t rushed enthusiastically to buy electric vehicles, we are proud that our state ranks fourth nationally in per capita market penetration.
Colorado dealers have been spreading the word aggressively, too. For more than a decade we have hosted a Green Car Parade at the Colorado Capitol on the Sunday before the Denver Auto Show.
And we have taken that show on the road to host 150-plus local one-hour emerging technology events across the state.
We invite people to come out and take a look at what’s available at this year’s Green Car Parade at the state capital from 1-3 p.m. March 29.
In addition, we will show every hybrid, PHEV and BEV available through dealers April 2-5 at the Colorado Convention Center during the Denver Auto Show. Particularly interesting will be the Xcel Energy Drive Electric Experience, where people can learn more about the benefits of going electric, including how to make it easy to charge up in their own garages. Attendees will even be able to take various EVs for a test drive.
At the Denver Auto Show, you also will be able to get the answers to your questions and find out where you can buy these vehicles from one of Colorado’s many franchised new car dealers.
You want options? We have them.
Competition? We welcome it.
Throw out more than 70 years of successful history serving consumers and Colorado communities under the bus? No thank you.
Tim Jackson (@timwjackson on Twitter) is president and CEO of the Colorado Automobile Dealers Association.
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