At the very least, its better if the excess markup goes to the entity which can reinvest that into additional production to eventually saturate demand, rather than a middleman who adds no value but collects rent on regulatory capture (see: Texas laws banning non-dealerships like Tesla from selling cars unless they allow local rich families in the state to collect their rent)

> At the very least, its better if the excess markup goes to the entity which can reinvest that into additional production to eventually saturate demand, rather than a middleman who adds no value but collects rent on regulatory capture (see: Texas laws banning non-dealerships like Tesla from selling cars unless they allow local rich families in the state to collect their rent)

I'm not so sure. You're giving a rather tendentious account of the practice, and I'm pretty skeptical of handwaving "regulatory capture" as justification to get rid of regulation some corporation dislikes. As far as I understand, the dealership system was meant to engineer more competition into the auto market [1], and frankly I prefer something like that than giving more control to larger companies.

[1] And that passes the smell test, at least. A dealership is buying in bulk and can probably be assumed to be more savvy in negotiating with the manufacturer than a private consumer. And putting those dealerships in competition with each other should put downward pressure on prices.

You're basically asking: Does the dealer's negotiation reduce prices to consumers more than their cuts increase it. I don't think so, at least not for Tesla.

I'm pretty pessimistic on this. For one, middlemen traditionally increase costs, due to the reduction in inefficiency and well, their cut. Furthermore there already exists a competition layer at the manufacturer level.

In the supply constrained world, this is even more so, as middleman will happily arbitrage prices upwards (see GPU scalpers), meaning that they get to extract value, while providing minimal service of their own.

> You're basically asking: Does the dealer's negotiation reduce prices to consumers more than their cuts increase it. I don't think so, at least not for Tesla.

What do you mean "at least not for Tesla." Don't they famously lack dealers, so there's no point of comparison for them?

> as middleman will happily arbitrage prices upwards (see GPU scalpers)

That's certainly true for some middlemen, but I don't think that can be generalized into a rule. Naively, some people think that everyone in a market should act like price gougers, but that's obviously not true, and I don't think the the reason is that there's something special about being the original manufacturer.

My mental image of Tesla was that it was supply constrained. This argument probably doesn't apply if this has changed. However, if the assumptions hold, then traditionally middlemen arbitrage prices upwards in times of scarcity.

Or perhaps I'm just bitter about the GPU shortages, who knows.

But you still know what price you're going to pay ahead of time.

With dealers anymore, they make you hustle to get some of that markup knocked off, then once you think the negotiation is over, you're tossed into the next stage of the negotiation gauntlet.

I'd rather know up front that I'm going to pay $50,000 for a vehicle, rather than think I'm going to pay $40,000, then upon arriving at the dealership, find out the market price is $55,000, which goes down to $45,000 after negotiation, and after all that, have to deal with finance secretly adding $10k in options and fucking around with interest rates.

With Tesla you pay MSRP. With any other car you pay MSRP plus whatever the dealer wants to charge. I sincerely doubt that OP was referring to MSRP profit margin.

> With any other car you pay MSRP plus whatever the dealer wants to charge.

That's obviously not true. I've never paid MSRP for a car and I've never bought a Tesla.

With Teslas, you pay MSRP. With any other car you pay whatever the dealer wants to charge, which is usually dealer cost plus some markup, which is usually less than MSRP. On some rare occasions you can even buy a car for at or below dealer cost.

>That's obviously not true. I've never paid MSRP for a car and I've never bought a Tesla.

You obviously haven't tried to buy a car during the pandemic.