What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing over the past few years, electric vehicles have disrupted the traditional automotive industry. Ev sales went from zero percent of total automobile sales in 2010 to almost 3. In 2019, while this might not sound like a lot is expected to increase exponentially over the next couple decades. A big part of this growth has come from tesla, which revolutionized the industry by providing affordable mass market ev's with the successful launch of their mass market model.

3 and model y tesla's sales have surged and they stand on track to make close to 1 million deliveries in 2021. Despite the global chip shortage, but not everybody is happy about tesla's success. Since inception, tesla has had to fight against corrupt established business interests, who have done everything in their power to see the company fail, despite their best efforts and entrenched advantages. Tesla is still beating them at their own game.

If you want to buy a car from pretty much any brand besides tesla, your only option is to go to a dealership in your local community. If you've bought a new car recently, you probably didn't have a great experience. You were probably greeted by an eager sales person who immediately tried to sell you the most expensive internal combustion engine car in the building. They'll also try to sell you a bunch of financing and insurance items that you don't really understand and probably don't need.

In theory, you can negotiate to try to get a better price, but when you're up against a professional salesperson, who's doing these types of negotiations for years, most people don't stand a chance. A nationwide poll conducted by harris in 2016 found that 87 percent of americans dislike something about the car buying experience and 60 percent of americans feel taken advantage of when they shop at a car dealership. The goal of a car company is to sell as many cars as possible, so it seems weird that they make a retail sales system, that's almost universally despised by consumers. A big part of the reason for this is that the dealerships aren't owned by the manufacturers they're.

Instead, owned by third-party franchises authorized to sell cars for certain brands, in fact, almost everywhere in the u.s, it is illegal for automobile manufacturers to directly sell cars to consumers. They are required by law to use independent dealerships. So why is this the case and how does it relate to tesla the laws? Restricting ownership of car dealerships dates back to the 1930s. Their purpose was to protect independent car dealerships from unfair competition from the automakers.

The idea is that an independent dealership might spend many years developing the ford brand, for example, in their local community. Ford could set up their own dealership in the same community and undercut the independent dealership on price. Thus, they'd be able to steal all the market share without having done the hard work of establishing the brand. The current franchise system in america is extremely inefficient.

The dealership needs to earn a profit margin on each car. They sell so they charge a markup over the price they buy it from from the manufacturer. Goldman sachs estimates that consumers could see end prices reduced by as much as 10 percent if the dealership system were abolished and manufacturers could sell directly to consumers. Despite this inefficiency, the american automobile market has functioned in this way for the better part of the past 100 years.

But then tesla showed up to disrupt the entire system. Tesla doesn't use independent dealerships. All of their sales are directly to consumer consumers can order a tesla directly from the tesla website. The prices are transparent and non-negotiable, so there's no need to haggle with a salesperson.

They'll deliver the card directly to your home, so you never need to walk into a dealership. So why does tesla use the direct sales system instead of using independent dealerships, like everyone else? Part of this is because they make the majority of their profit, not by selling new cars, but instead by providing services and repairs down the line. Electric vehicles are much simpler internally than internal combustion engine cars and have fewer moving parts. They also don't need oil changes.

This is great for the consumer, but disaster for the car dealership because they make the majority of their money through aftermarket services. There's a clear conflict of interest. The dealership will almost always recommend an ice car, even when an ev would be more appropriate to a consumer. Also, tesla's strategy has long been to vertically integrate as much of the value chain as possible.

This gives them more power over the consumer experience and it means that they internalize all the profit margins selling directly to consumers puts tesla at a huge advantage from a profitability perspective because they don't have to share any of the value with the independent dealerships. Tesla's success with direct-to-consumer sales represents an existential threat for the car dealerships. When people realize they can save a lot of time and hassle by buying cars directly from the tesla website, they will realize that independent dealerships probably don't need to exist, but the car dealerships weren't about to go down without a fight car dealership associations in almost every State have sued tesla over the years to try to ban them from selling directly to consumers. Currently, tesla is banned from directly selling to consumers in more than half of the states in america.

This includes texas, where they are building a gigafactory. The dealerships invoke long-standing laws prohibiting automobile manufacturers from directly competing with dealerships, and while they do technically have a legal grounding, they're completely distorting the spirit of the law for their own monetary gain. The entire purpose of these laws was to prevent auto manufacturers from unfairly competing against their own franchise dealerships and stealing the brand equity that they built in the local community when these laws were being drafted in the 1930s legislators didn't even consider a car company like tesla, Which doesn't use independent franchise dealers at all? It is impossible for tesla to unfairly compete against its franchisees because they don't have any. Thus, it makes no sense for tesla to have to abide by these hundred year old laws.

Car dealerships are major employers in almost every state and they thus have a lot of influence on state-level politics. Car dealership associations across the country spend millions of dollars on lobbying campaigns to influence legislation to be as unfavorable as possible for tesla. Even though tesla is banned from directly selling to consumers in most states, they have successfully found ways to get around these restrictions. If a consumer buys a tesla online and tesla ships it to them out of state, this is considered.

Interstate commerce and state laws cannot ban this through this method. Tesla has been able to get around the draconian restrictions to sell to consumers in every state, but it is still a painful thorn and tesla's side. Once giga texas is producing cars, they will have to be shipped outside of the state and re-shipped back in whenever a texas resident wants to buy a tesla. This is because texas did not allow direct sales to consumers, so they have to make an interstate transaction to get around this.

This just goes to show how absurd and efficient these laws are, while it's possible to order online. Many consumers want to see the car in person and test drive it before making a 50 000 purchase in states where it's allowed. Tesla has stores where consumers can buy the car directly in some states, such as texas, which do not allow tesla to directly sell cars. Tesla sets up galleries instead at the galleries.

Consumers can view the cars in person and ask a sales person about its features. However, they're not allowed to buy the car or talk about pricing in any way. Tesla revolutionized the auto industry, by cutting out the middleman of independent dealerships and going directly to the consumer and despite the incumbent's best efforts to stop them, tesla is winning. Consumers far prefer the simple process of ordering a tesla online and having it delivered to them.

The prices are transparent and they don't feel taken advantage of by a salesman at a dealership. This has allowed tesla to continue taking market share from the legacy automakers and, by extension, their dealerships and, in recent years, tesla's been winning at the courts as well. In almost all the blue states on this map, where tesla is allowed to sell directly, they had to earn this victory through years of battles and courts and state legislatures. Also in 2021, tesla is teaming up with rivien, lucid and lordstown motors to lobby state governments to formally allow direct selling.

It seems like the eevee makers are finally winning in the fight against the legacy. Auto establishment, alright guys that wraps it up for this video. What do you think about the independent car dealerships? Do you think it's reasonable that tesla is still not allowed to sell directly to consumers in more than half of the states in the us? Let us know in the comments section below, if you enjoyed this content, make sure to hit the like button and subscribe. So you don't miss future uploads as always.

Thank you so much for watching and we'll see in the next one wall, street millennial signing out.