TCS Daily

Car Wars

By Max Borders - August 1, 2006 12:00 AM

What if I said you could save $1000-$2500 the next time you buy a car? What if I told you that you didn't have to haggle with a lot lizard in the process? In fact, you could use the Internet to shop around for a new car instead of driving from dealership to dealership, and then buy at your leisure.

Well, you can't. Know why?

What stands between you and these benefits is your state government. According to a panel recently hosted by the Mercatus Center in Arlington, Virginia, the primary reason for these regulations is collusion between "licensed" car dealers and state legislatures who mandate dealer licenses. Such is the case in all fifty states. Legal and economic scholars are trying to figure out how this happened and how to change it, for the sake of both economic freedom and benefit to customers.

Regulatory barriers to buying a car online are a textbook example of "rent-seeking" -- when an interest group hollers, stomps and lobbies the state until politicians cave. Car companies that might offer cars at a lower price -- with a better shopping experience -- are blocked from doing so.

A question from the audience helped me understand how this all could come to pass; it put me inside the mind of a regulator:

"If all of a sudden people are buying cars online, what will happen to people like my mother? Dealerships will go away. She won't know how to buy online and she won't be able to trust the product unless she meets a salesperson."

But if people really demand shopping for cars offline, dealerships have little to fear since they actually provide that service.

What dealers know full well is that entrepreneurs will find all sorts of ways to make the services dealerships offer redundant -- which will benefit you and me. Consider the question of how people will test drive cars in an Internet purchasing environment. We can imagine automakers offering smaller test-drive centers. And we can also imagine delivery and logistics networks for cars so that people can pick up their cars quickly once they buy them -- or have them delivered to their driveways.

What justifies dealership protection? This is what legal and economic scholars are currently looking into. The Supreme Court has held that, under the so-called "dormant" Commerce Clause, a state is prohibited from discriminating against interstate commerce by passing laws that treat in-state businesses more favorably than out-of-state businesses. Such treatment is permitted, however, if a state can convince the Court that the law advances a "legitimate state interest."

John Delacourt, a legal expert on interstate trade issues, explains it as follows:

"Where the businesses receiving disparate treatment are identical but for their geographic location (for example, a Virginia winery and a New York or Michigan winery), this [appeal to 'state interest'] generally is not possible. However, where there are real and demonstrable differences between the two businesses (for example, an automobile manufacturer and an automobile dealer), a discriminatory law may survive a Commerce Clause challenge. Indeed, in the 1978 case of Exxon v. Governor of Maryland, the Supreme Court expressly held that curbing the disproportionate market power of manufacturers vis-à-vis franchised dealers constitutes a legitimate state interest."

So, does the "state interest" argument for protecting middlemen boil down to the fact that smaller players may not be able to compete? OK. But when it comes to the interest of consumers, isn't that the idea?

We just happen to be living in a time when major US auto manufacturers are hamstrung by cannibalistic unions, stiff competition, and federal regulators. Obstacles to direct-to-consumer sales represent another hard hit against an ailing industry. But even if the US auto industry was doing swimmingly, why should states get in between you and your new car to the tune of a couple of thousand dollars?

Such an unnecessary financial burden to consumers, if relieved, could go towards filling our tanks. It may take a courageous state-level politician to make this a voting-day issue if we're ever going to do anything about it. That's because the only thing as stronger than special interests are voters and enlightened leaders -- the latter of which are so often in short supply. But if somebody has the guts to stand up to them, states may be able to do consumers a real service and win political capital at the same time.

Max Borders is TCS Daily Managing Editor.

(Find more on this subject here.)



Silicon Valley Reinvents the Car
The Tesla Roadster (a 100% electric sports car) will be the innaugural vehicle produced by Tesla Motors of San Carlos, California. The car will be available for purchase at any of the five "Customer Care Centers" (Chicago, Miami, New York, Northern & Southern California) but Tesla Motors recommend that "the most convenient way to purchase the vehicle will be here at our website in late 2006."

Packed with almost 700 lithium-ion batteries, the car can accelerate to 60 mph in 4 seconds and 70mph in first gear (two gears total). The car ships with a connection system (needs to installed by a qualified electrician) that allows the vehicle to be fully charged at home in less than four hours.

Most the of the car's components are off-the-shelf parts from global manufacturers with final assembly to be done in the U.K. under contract with Lotus. Price is expected to start around $80,000 -- making it a competitor of the Porsche 911 Carrera.

Tesla's next vehicle will be a 4-door sedan, perhaps as early as 2008, targeting the $50,000 luxury models. Based on the success of their first two offering, a third vehicle will be launched at the mass-market.

Welcome to the future.

starting at $80,000
Another example of a plaything for the self-indulgent class.

Yet another car that can't go anywhere, can't get there in a reasonable amount of time, and couldn't carry anything if it could get there anyway.

No Subject
"...why should states get in between you and your new car to the tune of a couple of thousand dollars?"

Many business-related laws and regulations are anti-competitive and harm consumers. However, the intended benefits of the these laws/regulations may outweigh the negative impacts. Given the pace of business, technology and societal change, I believe most laws and regulations should be SUNSETTED...thus forcing a periodic review and the opportunity to eliminate/modify laws/regulations that are currently ineffective, outdated or were inane to begin with. This process should commence with a systematic review of every law/regulation currently on the books of ALL levels of Government.

the vast majority of govt regulations are designed to benefit the few, at the expense of the many
Because of dispersed cost, and concentrated benefits, it's politically impossible to get rid of such regulations.

Faster & Cheaper than Ferrari
Not so shocking
The Economist, July 27, 2006

...The car's design alone is likely to turn old-fashioned notions of electric vehicles on their head. Beyond that, Tesla makes three audacious claims. The first is that the vehicle accelerates from nought to 100km (60 miles) per hour in just four seconds. THAT IS FASTER THAN A FERRARI. The second is that it can travel 400km on an overnight charge from an ordinary 240 volt socket. The third is that it is more environmentally friendly than a petrol-driven equivalent.

...Tesla, though, aims to be even greener than that, according to Dr Musk. The firm plans to offer OPTIONAL SOLAR-PHOTOELECTRIC SYSTEMS, to be set up as a car port at home, that will be able to power the cars for 80km a day without having to draw on the grid. Given that the average driver travels less than this, the idea promises, as Dr Musk puts it, to "MAKE OUR CARS ENERGY POSITIVE" -- for those with Santa Monica's reliable sunshine, at least.

Enjoy the Sunset
I said essentially the same thing last week in reply to Superheater:

"Agreed, which is why I believe it's important to create a timeline for specific goals to be met, at which point it sunsets. In fact, I believe this should be an essential part of legislation in general."

For those who can afford an $80k, this seems like just another toy for rich liberals. I would have beeen more convinced if the company had started on a low end version, say small vans, etc. like some kinda new volkswagen.

They can't
Not if they are using lithium/ion batteries. At least 70K of the 80K price is batteries alone.

Then you have to replace them in a couple of years.

distance vs. speed
Sure it can go 400km, as long as you don't go above 30mph, use the radio, headlights, AC, or heater.

Bursting to 100km/hr in 4 seconds probably drains 20 to 30% of available battery power all by itself.

A Ferrari is the definition of a rich man's play thing.

"A Ferrari is the definition of a rich man's play thing."

You say that like it's a bad thing.

nothing wrong with it
However, since very few of us are rich, the existence of such cars doesn't make a dime's worth of difference.

Nothing Wrong with an Electric Future
As I said previously, the Tesla roadster is the first step in the company's plan to develop a mass-market, all-electric vehicle.

Batteries Included
by Joshua Davis
Wired Magazine, August 2006

...Of course, an expensive two-seater isn't going to have much effect on an industry that sells 17 million automobiles in the US each year. Sure, every VC will have to get one, and George Clooney will probably be seen piloting one down Sunset Boulevard. But selling a few thousand cars won't help Eberhard build a dominant 21st-century car company.

That's why he's ALREADY PREPARING A SEDAN, codenamed White Star, which could hit streets as early as 2008. Of course, the sedan won't be as lightweight or aerodynamic as the Roadster, so its range is likely to drop significantly. Eberhard's response: maybe with today's tech. But battery power is improving steadily, and several companies say they may soon double battery life. By the time the sedan comes out, he says, batteries will be ready to deliver: "WE'RE GOING TO RIDE THAT TECHNOLOGY CURVE ALL THE WAY HOME."

Hybrid Battery Myth
Behind the Hidden Costs of Hybrids
By Bradley Berman, 2006

...Jim Francfort, principal investigator at the Idaho National Laboratory in Idaho Falls, which is operated for the Department of Energy, has been talking about it. His hybrid battery tests showed that 160,000 MILES OF USE HAD NO EFFECT ON FUEL ECONOMY effect on fuel economy.

Andrew Grant, the Vancouver, Canada, taxi driver who DROVE HIS PRIUS FORE MORE THAN 200,000 MILES IN 25 MONTHS, tells all about his Prius, which has taken a pummeling and kept on humming. At industry conferences, engineer after engineer will tell anybody who bothers to ask that hybrid batteries are, in fact, over-manufactured for their task...

the only thing wrong with it is it's a figment of a few fevered imaginations.

I notice that you are trying to change the subject again.
Now you want to talk about batteries used in hybrids.

Not the same as batteries used in all electric cars.

The Drain from Draining
Not at all.

I can't give you the data on the battery life of the Tesla Roadster, given that it is still months away from availability, however similar claims were made in the past regarding hybrid vehicles:

Hybrid Batteries: None the Worse for Wear?
Consumer Guide, June 23, 2006

...there have been WELL OVER A QUARTER-MILLION PRIUS HYBRIDS sold in the U.S., making it by far the country's most popular hybrid. And Toyota claims that NOT ONE HAS REQUIRED A BATTERY REPLACEMENT due to malfunction or "wearing out." The only replacement batteries sold--at the retail price of $3000 -- have been for cars that were involved in accidents. Toyota further claims that the nickel-metal hydride (NiMH) battery packs used in all Prius models are expected to last the life of the car with very little to no degradation in power capability. the case of most electronic devices, the batteries tend to get fully charged, then nearly fully discharged before being charged again. For the power pack in the Prius, at least, Toyota says this would greatly shorten the life span of the battery. [But] in normal operation, the system usually lets the charge level vary only 10-15 percentage points. Therefore, the battery is rarely more than 75% charged, or less than 45% charged.

According to Toyota, the life of the Prius battery pack is DETERMINED MORE BY MILEAGE THAN BY TIME, and it has been TESTED TO 180,000 MILES.

How it's done

I'm with you on this one. As long as they are selling these cars at some mark-up over cost and not receiving and tax breaks, etc. this is how it's done. It's trite but true that VCR's and Betamaxes were once only the toys of the rich but now even those in 'poverty' are likely to own a VCR. The market will drive this if it truly has value and we will be better off for it.

do you even read the articles you post
The article states that in electric vehicles, batteries are deeply discharged. In the Prius (and probably all other hybrids) the batter charge only varies by 10-15%. This is much easier on the batter than deep discharge.

The article you posted proves my point. That the way batteries are used in hybrids cannot be compared to the way batteries are used in fully electric cars.

Care to try again?

Empty, Full, Empty, Full...
"The article states that in electric vehicles, batteries are deeply discharged"

Try reading that passage again. I've reposted that sentence for your convience. Can you spot the difference?

Hybrid Batteries: None the Worse for Wear?
Consumer Guide, June 23, 2006

...For those of us who have cell phones and other devices with NiMH batteries, that claim may sound unrealistic. Over time, the battery's charge longevity seems to wane, resulting in shorter and shorter usage between charges. Eventually, the battery becomes worthless and we buy a replacement.

But in the case of MOST ELECTRONIC DEVICES, the batteries tend to get fully charged, then nearly fully discharged before being charged again...

Since you insist on playing the village idiot, I'll try to explain it real slow
I posted that batteries did not last long in electric cars.

You posted an article that claimed that batteries lasted a long time in a Prius.

I accused you of changing the subject, since the wear characteristics on batteries differ dramatically between electric cars and hybrids.

You try to prove yourself right, by posting an article that talks about the wear differences between electrics and hybrids, and how hybrids are so much easier on their batteries.

Let me reiterate. The article you posted, proved MY point, not yours. It even told us why hybrids are easier on batteries. Hybrids don't deep draw the batteries.

Your most recent article also makes the same post, that batteries that are fully charged, then fully discharged do not last as long. This is the behavior seen in electrics, which is what the $80,000 car you highlighted in your first post is.

It is not the behavior of batteries in hybrids, which is what your defense against my attack tried to switch the topic to.

Are you man enough to admit your mistake, or am I going to have to get you some more shovels so that you can dig your hole all the faster.

Explaining the Tesla Roadster
...And the very first post in this thread is not about any electric car from the past, but the TESLA ROADSTER.

The 21st Century Electric Car
by Martin Eberhard & Marc Tarpenning
Tesla Motors Inc., July 28, 2006

...Lithium-ion batteries (such as those in most laptop computers) have three times the amount of charge capacity as that of lead-acid batteries of the same physical size, and, at the same time, weigh substantially less. Additionally, lithium-ion batteries WILL LAST WELL OVER 100,000 MILES, while lead acid batteries need to be replaced about every 25,000 miles.

...A 250-mile range is much more acceptable even for a sports car enthusiast. The only shortfall of such an electric sports car is the inability to take long trips, since there aren't any recharging stations along the highways, and since it takes time to charge batteries.

Until we develop a charging infrastructure (even one that only consists of simple 240-volt electrical outlets in convenient places), electric cars are best suited for local driving -- around 200 miles from home. This is pretty much how sports cars are driven anyway: when it's time to take a long trip, take your other car...

As I said, the roadster is a pure electric vehicle, so your evidence regarding hybrids was of subjec
As to the batteries lasting 100,000 miles, I'll believe that when it happens in a few dozen cars.

Until then I'll file it with all the other false promises made by electric car manufacturers.

Traditional car manufacturers like Toyota are going with the bottom-up approach: hybrids, plugin hybrids, electric vehicles. So while people like me can only dream about getting behind the wheel of a Tesla Roadster, we drive something that is a fair compromise.

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