“The dealer-based distributional system divides the United States into sales “territories,” each one allocated to a dealer, on the theory that a protected market compensates for the risk of investing in a brick-and-mortar building and holding a large inventory of cars.
Long ago, this business model might have made sense, but today technology takes much of the risk out of inventory management — and enables consumers to understand their choices without “help” from a commissioned salesman.
The dealer-based system was obsolescent even before the Internet, which is why Detroit automakers tried to streamline it decades ago, only to be thwarted when dealers turned to state legislatures for protection.
The stage is set for protracted political and regulatory warfare between car dealers and disruptive market entrants. Given the dealers’ proven clout, it would be unwise to bet heavily against them.
Still, Tesla chief executive Elon Musk may be that rare individual who can afford to fight the dealers and can’t afford to lose. I’m no fan of his electric-car dreams or the government subsidies that have enabled them. But in this battle, I’m rooting for him.”
“Every new technology is somewhere between evolutionary and revolutionary, and every time human nature gets excited about a new technology we eventually discount all of the risks – assuming flawless execution, a continued absence of competitors and that this will remain the only stock in town. If we return to the mobile phone analogy, no one could correctly anticipate the changing industry dynamics. Yet Tesla’s current valuation implies 44.7% EPS growth every year for the next 10.”