Michigan's capitulation in the settlement of a federal lawsuit, allowing Tesla to sell and service vehicles directly to consumers in the state, is more than just another tailwind in Tesla's hot-air balloon of a stock. It clears the way for other new brands to bypass the franchise retail model.
This space has long argued the continuing value of the franchise sales system, to consumers as well as to dealers and automakers. That position remains unchanged, yet dealers and their automaker partners must recognize and respond to the demographic and cultural forces driving increasing consumer interest in sidestepping the franchised dealership to buy both new and used vehicles.
Millennials may buy more new vehicles in the U.S. than baby boomers do this year. There's a significant demographic shift taking place, and those consumers who expect to be able buy a car on their phone or from an Apple store are also voters and political donors.
If franchised dealers and their automaker partners don't find compelling ways to compete, even the best franchise laws in the land won't protect them. And those can't be counted on, either.
But it's more than demographics that are changing. Affluent consumers of all ages these days casually connect with a world of people as simply as pulling a little rectangle out of a pocket.
Digital natives and converts alike want pleasant shopping experiences. They want to feel like their time and intelligence are respected. If they view a way of doing business as archaic, they will seek out something new — even if there are risks.
For dealers, these changing demands require a fundamental reassessment of how their business operates and how they earn money. If time and convenience are paramount in the current market, would consumers pay more to have their vehicles serviced overnight, with home pickup and drop-offs? Should a dealer spend to upgrade a waiting room when that money might be better spent employing ride-hail services to ensure their customers get where they really need to be?
Tesla has just about run the table nationally, establishing precedents for direct sales. And there will be others.
If dealers want to survive and prove their continued value to consumers, it's going to require more effort than just lobbying state legislatures for tougher franchise laws.
