There’s no question that legislation often follows new technology. Regarding the auto industry, new startup auto manufacturers are getting pushback from franchise dealers regarding direct sales. In a way, it’s your local Chevrolet dealer vs. Tesla for the future of auto sales.

Direct Sales Woes

Historically, auto manufacturers are not allowed to sell directly to customers. Instead, they have to go through third-party sellers. That means you can’t buy a brand new Silverado 1500 from GM. You have to go through a Chevrolet dealer, even if you’re pre-ordering an upcoming model.

The important thing to note is that it’s not that a manufacturer won’t sell directly to its customers; it can’t. There are a number of laws that prohibit direct sales. Furthermore, it’s also illegal for an auto brand to open its own dealership. That means your favorite Chevrolet dealership is privately owned and not connected to Chevrolet.

This arrangement is great for auto dealers who are able to add a markup to the vehicle’s price. For example, let’s say Chevy spends $10,000 to make a brand new Malibu sedan (just for example). Your local Chevrolet dealership gets a fleet-rate deal and buys a dozen Malibu models for $13,000 each. The dealership lines them up and adds a sticker that says $23,400, which is what Chevy recommends as the MSRP. If it’s a buyer’s market, you might go in and negotiate the car down to $22,000 and feel like you got a great deal. The Chevrolet dealership still walks away with a nice profit.

As you can imagine, shoppers would love to cut out the middle man and just buy direct. This, of course, is illegal, so we’ve just learned to live with the current process.

What About Tesla?

“Wait,” you might think, “my neighbor bought his Model 3 directly from Tesla. How is that possible?” Tesla figured out a loophole in current legislation. Tesla sells directly to consumers using an international importer. You see, the laws regulating direct sales only apply in the U.S. It is perfectly legal to buy a car directly from the manufacturer in countries that allow it. Tesla doesn’t technically have dealerships. They have showrooms.

When you decide to buy a Tesla, an international warehouse sends the car overseas directly to you. This cuts out the middleman, reduces costs for the consumer, and gives Tesla more control over its products.

The Push For New Legislation

As you can imagine, the owners of that local Chevrolet dealership in town don’t think it’s fair that Tesla can sell directly to customers. Chevy’s new line of forthcoming EVs will have to compete against Tesla, which isn’t an even playing field.

Dealerships and some manufacturers are pushing for new laws that would limit the ability of Tesla to use current loopholes. Some manufacturers would enjoy offering a direct sales line, even if it’s only for upcoming EVs. Cutting down costs for the consumer makes buying an EV more attractive.

Nothing has been signed into law just yet, but we can be certain that some kind of new legislation is coming. The question is to whom the benefits will go.