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Dealers should not be sole source of car sales

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In the Tesla showroom at the Tysons Corner Center in the Virginia suburbs of Washington, D.C., you can climb into a Model S, the high-end electric car that Consumer Reports and Car and Driver have raved over.

But don’t ask to drive one. That’s not possible at this location. Nor can you buy one. In fact, you can’t even get a price quote, though an attendant will point to the sales sticker ($86,020 for a red model with a sunroof and retractable door handles).

This little charade is necessary because Tesla believes that direct contact with consumers is vital in selling a radically new product, and because Virginia is one of a handful of states that require automakers to sell through independent dealers. Tesla calls its Virginia showroom a "gallery." A casual visitor might think it’s a luxury-vehicle petting zoo.

None of this is likely to affect your next car purchase. But if Tesla grows as fast as many investors expect, it could affect the one after that.

For one, you might buy a Tesla. Next year, the company plans to introduce a model in the $50,000 range, to be followed by a $35,000 model in three or four years. Car companies might feel pressured by Tesla to change their own ways. They might start electric car divisions, or conventional ones that use Tesla’s direct sales philosophy.

The dealers must not see this as far-fetched because their lobby has championed laws in states ranging from Arizona to Texas that ban or limit direct sales, and it is pushing restrictive laws in New York and North Carolina.

The fight over Tesla sales is about more than one company. It is about whether government should reward a politically powerful industry with a guaranteed right to play the role of middleman between producer and consumer.

The answer is a most resounding no. Government did not require the airline industry to continue paying commissions to travel agents when the Internet made them expendable. It did not bar sports leagues such as the NFL from starting their own cable channels. And it should not tell car makers that they need to sell through third parties. That thwarts both innovation and competition.

The dealership model does, to be sure, have some advantages. A local owner typically has deep contacts in the community and a strong alliance with the manufacturer. But the model also has its drawbacks. The dealer’s cut makes cars more expensive. And the cumbersome nature of the system makes it harder to adapt in changing times.

When Detroit’s sales went through a long decline, the Big Three were stuck with a host of marginally profitable dealerships that couldn’t provide optimal service. Even during the 2009 auto bailouts, the dealers were able to limit closures by running to Congress.

Ultimately, it should be up to the automaker to choose its sales strategy. Tesla should have every right to go it alone. And the same goes for other automakers.

As far as consumers go, they, too, should get something — the right to actually buy a car when they visit a showroom.

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