Does Tesla offer an end run around bad regulations?
By Scott Sumner
Here’s Matt Yglesias discussing Uber:
App-based ride hailing was a game changer in this context, not just because it offered a somewhat better way to get a ride, but because in Uber’s earliest cities it exploited loopholes in the way taxi regulations were written to put vehicles for hire on the road that would not have been allowed to operate as cabs. Uber then leveraged early success into getting rules changed in other cities.
In all cases, however, the basic value proposition was twofold. On the other hand, the app offered a somewhat more convenient way to get a ride. But on the other, much larger hand, the app undermined an earlier anti-consumer regulatory apparatus, greatly expanding the number of rides available and reducing their cost.
I thought about this post when reading an article by Alex Roy, discussing how Tesla might be able to transform the automotive industry:
As a standalone car, The Tesla Model S P90D Ludicrous is no more than a charismatic oddity–a handsome electric sedan with hints of Jaguar and Aston Martin in the sheetmetal and a quicker sprint to 60 mph than a Ferrari Enzo. But it’s also a ground-up rethink of what cars can, and should, be, and as part of Tesla’s larger ecosystem it represents to its buyers a blinding white beacon leading us into the automotive future.
Here’s an illustration: Make a list of everything that sucks about car ownership–purchasing, software updates, refueling, maintenance–and then realize that Tesla is upending those processes. Fueling: Charge it, for free. Glitch in the UI, or you want more range and performance? Tesla offers wireless updating to fix and/or boost the car you already own. The Germans and Detroit’s Big Three don’t do this because of dealer franchise agreements. Tesla doesn’t have dealers. You go to a Tesla-owned factory store where pricing and service are standardized.
I’d be a happy person if I never again had to visit a car dealer or auto repair shop. Around here, many of the businesses are dishonest (due to information asymmetry). So why doesn’t the market provide a solution? In the case of car dealerships it’s because government regulations won’t allow automakers to do an end run around auto dealers. Tesla is changing that. And with improved technology, the electric car industry may even be able to replace independent repair shops with manufacturer repairs done under long warranties.
But at least we can get rid of the dealers. Does anyone enjoy talking to car salesmen?