The absurd state of auto dealer laws 4

From Indiana Explained global headquarters in downtown Indianapolis, it’s pretty easy to get a sandwich.

In a five-block radius, I can access seven different Subway restaurants. There’s the one with the crazy lady by the Statehouse. There’s one in the Hyatt, where the crazy lady doesn’t work, but they don’t serve Flatizzas. There’s one in Circle Centre, which is great for people watching. There’s one in the Chase Tower, one at Illinois and New York, one by the City-County Building, and one on South Street.

All these options, yet, if I became a franchisee, there would be no law preventing me from opening up another Subway right downtown. I might even be able to open a Subway inside of an existing Subway.  I would be able to stay open whatever hours I want whatever days I want. And if a competitor wanted to enter the market, I would have no legal way to muscle them out.

Yet, if I wanted to open a car dealership it would be nearly impossible, a fact illustrated by a brewing war between Tesla and GM at the Statehouse.

Tesla Motors Inc., which has long skirmished with auto dealers over its practice of selling cars directly to consumers, has accused General Motors Co. of being the driving force behind a bill to kick Tesla out of Indiana.

Tesla is licensed to sell directly to consumers in Indiana, and has operated a store in Indianapolis for two years. Indiana state Rep. Kevin Mahan has introduced a bill that would “provide that a dealer license issued to a manufacturer expires after 30 months and may not be renewed.” Tesla would have to find franchised dealers to sell in the state after 30 months.

The legislative battle comes as both companies prepare for a head-to-head competition to sell lower-priced electric cars that target the mass market next year. GM’s lobbying helped create the proposal, which some have dubbed the “Kill Tesla” bill because the legislation is specific to manufacturers of all-electric vehicles.

Selling cars in Indiana – or any state, really – is a regulatory nightmare. It’s a system set up to keep competition out. Tesla has other ideas, but notice that instead of asking for the same freedom Tesla has, Detroit is asking policymakers to burden them with the same shackles.

If you were building an auto dealer regulatory system from scratch, you’d never have the same restrictions that are in place today.

Now, the National Auto Dealers Association (Newton’s 3rd Law of Associations: If there is a thing, there is an association for the thing) say the auto industry is special. It’s not like a sandwich. You don’t need a license to eat a sandwich or insurance to buy one. You don’t trade in your last sandwich when you want to upgrade.

It’s true that there’s nothing wrong with a legislative body passing laws about this industry. But why must these laws toss all common sense and free market principles out the window when doing so?

Take, for example, the 2012 legislative battle out of Fort Wayne. There, a Chevy dealership wanted to move down the road. The problem was that it was illegal for a dealer of one brand to move within six miles of a dealer of the same brand. A lawsuit was filed, and then lawmakers filed a bill to pre-empt the lawsuit. It was a mess.

What can I do to get you into this bill today?

The bigger question: why in the hell is there a law that says one auto dealer can’t be close to another? If dealers and manufacturers don’t want that sort of competition, let them make that call, but to put it in the law is overkill. My kids don’t like their corn to touch their mashed potatoes, but they aren’t hiring a lobbyist to codify it.

Basically, states have put into law the preferences of the auto industry over the years, whether it makes sense or not. Possibly the most egregious example of this is the ban on Sunday sales.

No, I’m not talking about alcohol. That’s at least understandable, even if you don’t agree with it. You have two competing industries completely disagreeing about the public policy: liquor stores vs. grocers.

I’m talking about the prohibition against buying a car on Sunday, which pits auto dealers against…against…well…nobody. Nobody is stopping them from closing on Sunday, yet they want a law mandating it.



Fourteen states currently ban selling a car on Sunday. In Indiana, it’s a Class B Misdemeanor to open your doors on a Sunday. That’s a criminal offense punishable by a $1,000 fine and 180 days in jail. For being open for business!

Side note: I think Andre Johnson should retire and open a car dealership. He hasn’t been open on Sundays since coming to Indy anyway.

Some dealers complain about banks not being open on Sundays. Others say it will overwork their employees. Others say it’s the Sabbath. I’m pretty sure there’s a passage in the Gospels where the Pharisees criticize Jesus for buying a Honda on the Sabbath and he answers, “Seriously guys? Chick-fil-A is closed today, but it’s not part of the Mosaic law.”

The problem with regulations such as these is that you sacrifice a little bit of the free market every time you pass one. Policymakers might think, “Well that’s harmless. It won’t hurt anyone.” But then the world changes while the law remains static. One day, you wake up and there’s an innovative company that wants to do something that was outlawed oh-so-many years ago for reasons that no longer make complete sense.

Backing out of those regulations presents its own set of challenges, because entire industries have been built based on how things used to be. They come to the statehouse and say people will be laid off and communities will suffer because the psuedo-free market system that was built has artificially propped them up for too long.

What a mess. I think I’m going to go get a sandwich.


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4 thoughts on “The absurd state of auto dealer laws

  • Paul Sparrow

    What the hell? Sales people at these dealerships work on commission so we’re do they get long hours? That is the down side of commission jobs.

  • Karen

    Indiana is, no doubt, one of the most “backwards” States in the Union…not being able to buy or trade a vehicle on Sudays makes absolutely NO sense!! The “powers that be” should be ashamed that this law is still on the books – for the love of God people, get rid of this antiquated law!!

  • Donald R Kellum

    New automobile purchasers have to pay sales tax on rebates given to the purchaser by manufacturers when buying a new car. Who in the hell came up with this idea of a ghost tax. The rebates are never a real cost of the vehicle. No money ever touches anyone hands, except for the tax the purchaser has to pay. Everyone, (that is not in a state of sleep), knows the MSRP on a $60,000. pickup truck contains at least $10.000. in rebate sooner or later. But, if they don’t know to wait longer for a good deal then let them pay the bigger tax bill. But, to pass a bill to pay sales tax on rebates is about as small minded as passing a tax on the air we breathe. Actually, as i think of it, we can feel the air. My wife said i should stop with this writing before i give our political mines more ideas of taxing.


  • Susan Sturdivant

    Know your eight’s…word state only definition THE WELLBEING OF THE PEOPLE.
    Constitution only law of this land, prohibits man to pass law upon us.
    Man only duty was to protect means to survive mother earth for our children’s future for generations to come.
    We failed our duty, children no future and unsafe by greed of man.
    This law is null and void.