If you’ll please forgive a bit of navel gazing, we need to have a little talk about social media, political action, issue advocacy, and earned media.
I’ve always avoided characterizing what Peach Pundit “is”. I find that really is in the eye of the beholder. But I have found over the years that we have an evolving role in public debate and issue advocacy. I’ve also started to notice a pattern. We’re all being used.
Readers of right-leaning political blogs tend to fit a profile. We’re libertarian leaning with a bit of a populist bent. There’s nothing wrong with that. That’s our market segment, and that helps those that wish to market to us hone a message.
I’ll use this week’s story about Tesla wanting to sell cars directly to consumers as an example of what I’m talking about so this makes sense. It generally follows an accepted formula to help you engage on their behalf, without letting pesky facts or shades of gray enter into your strong belief that Tesla is a complete victim of overarching government regulation and greedy auto dealers. Got that? Let’s begin.
The first step in this process is that a news story is “originated”. In cases where the company has a legislative interest at stake, that’s often with the help of a skilled PR firm. There’s no shame in that, and I’ve had PR contracts with companies that do this sort of thing before (client interests are disclosed on the rare occasion I write about my own clients). News is rarely organic these days. PR folks help make sure the right message gets to the right people.
Then, via the magic of social media (including folks like us), these stories spread. Often with a unified theme. In Tesla’s case, this is a company that is not allowed to sell cars in Georgia which is a violation of the free market. Why isn’t Tesla allowed to compete like a company should?
The problem is that in most cases like this, “free market” is a meaningless bumper sticker slogan designed to draw you in without any analysis of the actual facts or merits of the situation. “Free market” is a concept. For it to exist in reality, we would have to live in a world without taxes or regulation. We don’t. So what happens to Tesla’s argument if we make the subtle change from “Free Market” to “Level Playing Field”?
Well, first we would have to look at the fact that Tesla managed to turn itself into a legitimate company courtesy of a Federal loan in the amount of $465 Million Dollars. This was in 2009, when private capital from the “free market” was quite scarce. To be fair, GM and Chrysler (now Fiat) got a lot of government money too. But the folks screaming “free market” are still upset with GM and Chrysler, often citing that the Government shouldn’t pick winners and losers. Tesla was picked as a winner too.
Tesla also represents an example of government privatizing profits and socializing losses. As this Slate article points out, Tesla’s loans were given at rates well below anything would have been offered from the private equity markets. Now the company has a $35.6 Billion dollar market cap. The government didn’t get equity that would be accustom to a high tech startup. Instead, they got roughly 3% interest. How’s that “free market” looking now?
It’s looking pretty good. Tesla announced yesterday that it will be building a plant in Nevada to build batteries. Government incentives are estimated at $1.2 Billion over the next 20 years. This is where “level playing field” works better for Tesla. It’s hard to call $1.2 BN in incentives “free market”, but auto plants routinely get $300M-$500M in incentives for a new plant. Tesla has some “buzz” to generate a bit more, and the scope of the plant may be bigger. Or, Nevada just needed the win and overpaid. Regardless, not “free market”, but every manufacturer plays the same game. Tesla got a big win from Nevada.
If you buy a Tesla in Georgia, the “free market” will give you $12,500 in income tax credits. You can take an additional $2,500 if you buy a charger for your business. You get to drive in HOV lanes with only one passenger in the car for free. And Georgia Power will give you reduced electric rates. That’s some level playing field they have there. But if that’s not enough, Tesla’s website asks you to contact your state representative and ask for more. To level the playing field.
So what’s the problem? Tesla doesn’t want to sell cars through independent dealers. Instead, they have a fairly nondescript sales and service center off the 120 loop in Marietta which is company owned. That’s only legal in Georgia because Tesla got an exemption provided they would only sell 150 cars per year. The Georgia Automobile Dealers Association claims they’ve sold 173 cars, and wants them to stop selling cars. Cue the manufactured outrage.
You can get an idea of the typical response from the comments in this post from earlier in the week. They can be summed up as
1) Auto Dealers are greedy and thus should be punished.
2) Auto Dealers have lobbyists.
3) Any attempt by the greedy auto dealers and their evil lobbyists to not let Tesla do exactly what it wants the way it wants is a violation of the free market.
It’s the same it you take out Tesla and insert Uber, or internet merchants. Exactly. The. Same. Argument.
Let’s stick with Tesla to finish the point. First, Tesla has lobbyists. Here they are. Good people, no shame in that. But pretending that Tesla is pure and the other side isn’t because they have lobbyists is a ridiculous argument, especially for readers of an inside baseball type of publication such as this. Please do not ever cite “they have lobbyists” as an argument as if this is a one sided, unique occurrence. It’s just dumb.
Then there’s the populist argument that’s pretty easy to make against car dealers. They are industry that’s pretty unpopular. Almost as unpopular as politicians. But you know who likes auto dealers? Politicians. Why? Because outside of metro Atlanta, most of them aren’t the corporate megadealers that you see all over Atlanta TV. They’re local, independent businessmen. They’re “good corporate citizens”. They sponsor little league teams and anchor local United Way pledge drives. And they employ people. Perhaps most importantly, they generate tax revenue. A lot of it.
They’ve also invested a lot into the current system. As have brick and mortar retailers. As have the owners of taxi cab medallions. Those orchestrating the PR campaigns based on the fact that somehow asking new entrants into industries to compete on a level playing field are killing the “free market” want you to ignore that there’s already a market, with people that have made investment decisions based on the rules, operating in the current “free market”.
We should always look at ways to deregulate any market where it is feasible. Of those mentioned above, the taxicab industry is perhaps the most ripe for that. But this shouldn’t be done based on the manufactured perception that a new entrant into an industry is special, and deserves to “compete” based on rules that it only wants applied to itself. That, quite frankly, is the opposite of the free market. And in this case, that’s exactly what Tesla is asking for. That, and for you to contact your representative for more incentives to buy their cars in a distribution channel only available to them. In a “free” market.
Frankly, I’m not sure if the law requiring auto manufacturers to sell through independent dealers is still required. There is an argument to be made that competition is actually increased under this model as the dealers must compete with each other on price and service if you want a Chevrolet, whereas there’s no negotiation with a Tesla. Or, one could argue that it isn’t a proper state role to create this barrier to entry.
The fact remains, the auto market in Georgia has had this barrier for decades. It’s how the market currently works. And any change to that is a fundamental change to how a lot of Georgia businesses/employers operate, with a lot of deployed capital on the line. As such, it deserves a serious debate. Not a PR campaign that screams “free market” with no understanding of the term.