That's not the right way to think about it. Taxes are only a small portion of the economic activity a bunch of car dealerships in a state generate. A dealer gets to keep some of that profit margin that Tesla gets 100% of right now. They then pay the dealership owner (1 job), the receptionist (2 jobs), the finance guy (3 jobs) and pay the commission to the sales guy (4 jobs) and then you bring back the car to the repair center manager (5 jobs) the mechanic (6 jobs) the car wash guy (7 jobs). There's also the sales tax on the car + the income tax for those 4 people + the consumption taxes on those people as they go about their daily lives. All those people then go out in the local economy and eat pizza and do whatever other local economic activity people do with their money. Which also generates more jobs.
In the Tesla model, you eliminate all those for a "test drive experience genius" or whatever they call it, 3 or 4 to a "test drive experience center", NJ gets the sales tax on the car, and whatever they can squeeze out of the 3 or 4 guys who work at the Tesla dealership and the 2 mechanics who work in back.
If Tesla, an extremely minor player in the industry right now, gets to do this, why doesn't everybody else? Overnight all those endless seas of car dealerships, representing millions upon millions of dollars NJ wants to capture into it's state economy go bankrupt and now nearly all of the money is going to CA, Japan and Detroit with a handful of in-state jobs to man the direct-to-consumer "test drive centers". And now for the out-of-work accountant or phone engineer? He used to have a chance to at least work a commission only car salesman job for a few months till he found better work. Now he has nothing to go to in the interim and overall state unemployment ticks up a half percentage point.
As an engineer I see lots of built-in inefficiency in all this. So I understand the HN outrage. But NJ doesn't want efficiency, they want people in jobs and off welfare. Each person in a job is a chance for the State to capture a few hundred dollars off of each car sold -- not as taxes, but as GDP (which will eventually float the government's coffers as taxes anyways), rather than paying out for social welfare programs. It's in the interest of good governance to have an inefficient system, so that there's lots of places citizens in the state can reach into the car-to-consumer pipeline and extract some money from it. And they can do all this without having to put in place unpopular social welfare programs or increase taxes or some other public works program because they can regulate the private market to force it to be more inefficient than it should be.
From a macro perspective, NJ's behavior here is completely rational. I don't agree with it personally, I think there's better ways to do this. But it's easy to explain without resorting to name calling or disparaging thinking about the competency of NJ's governing officials.
But in this case the amount (it is also time/frustration but lets keep it simple) I would save due to not having to deal with shitty car dealerships is x times lower than what I'll spend on the EV due to its much higher cost. Granted it is a better car etc., but from the point of view of the above argument, I'm not left with 6 francs I could spend on other things; I just spent 36 francs on the EV and am short of 30 francs I could save on other things. Of course if you can say that the additional taxes Tesla will pay due to this will go around/trickle down etc. but I think from NJ politician's point of view, that is a much longer/circuitous route compared to be seen as saving local accountant/receptionist jobs (which is attractive from election/vote point of view).
To be clear, I'm not supporting the move. EVs are the future and the sooner we embrace them the better. Just trying to see it in the light of the argument made above.
> A dealer gets to keep some of that profit margin that Tesla gets 100% of right now. They then pay the dealership owner (1 job), the receptionist (2 jobs), the finance guy (3 jobs) and pay the commission to the sales guy (4 jobs) and then you bring back the car to the repair center manager (5 jobs) the mechanic (6 jobs) the car wash guy (7 jobs). There's also the sales tax on the car + the income tax for those 4 people + the consumption taxes on those people as they go about their daily lives. All those people then go out in the local economy and eat pizza and do whatever other local economic activity people do with their money. Which also generates more jobs.
Other than the dealer keeping the profit all of those jobs and people would be in NJ if there was a Telsa dealership in NJ. Now there won't be and those jobs won't exist.
So where does the dealer live? In the current model, most of them live in NJ. Which means they spend that money in NJ.
Tesla's "dealer" lives in CA.
GM's "dealer" lives in MI and Italy.
Honda's "dealer" lives in Japan.
Hyundai's "dealer" lives in South Korea.
BMW's "dealer" lives in Germany.
Mercedes' "dealer" lives in Germany.
Toyota's "dealer" lives in Japan.
Ford's "dealer" lives in MI.
Suburu's "dealer" lives in Japan.
and on and on and on: Alfa Romeo, Aston Martin, Audi, VW, Cadillac, Fiat, Jaguar, Kia, Nissan, Porsche etc.
I don't know how many dealerships are in New Jersey, but let's say there's 1,000. You give Tesla the ability to sell direct to consumer, then everybody else will want to do the same. Franchise dealerships don't get their contracts renewed and every car maker moves to direct to consumer. Congratulations State Legislator jonknee, you've just cost New Jersey a minimum of 1,000 very lucrative jobs.
To give you an idea of how important 1,000 jobs are to a state economy, when Alabama was fighting for Hyundai to come open up a plant for 2,000 workers, with an average salary of just $40,000, Alabama offered around $253 million in incentives or over $115,000 per job. This is because of all the economic activity having just 1,000 employees running around with cash in their pockets would create and the network effects therein. Over 5 or 10 years, Alabama is set to make up that investment in spades.
I don't know how much your average car dealership owner makes, but I bet it's quite a bit over $40,000. I bet a 1,000 out of work bankrupt dealership owners is a pretty big slice of state economic pie. Over 5 or 10 years, I'd hazard they represent way more than $253 million in activity to New Jersey.
So congratulations, you've just cost New Jersey hundreds of millions of dollars in GDP and economic activity just by counting only the dealership owners and not all the rest.
Now you and I both know that when you go to 47 in Vineland, and there's mile after mile of car dealerships. They don't just have 1 or 2 sales guys. Each of those places employs a dozen to two dozen sales guys. A dealership can do that because they don't pay these guys almost anything except commission, so they can afford to keep a bunch of them around, grooming their power ties. So let's say there's an average of 12 sales guys for New Jersey's 1,000 dealerships or 12,000 people employed just selling the cars.
Well a Tesla style dealership doesn't want high pressure commission only power tie wearing salesmen. They want "car information experts". So they hire say 4 guys to mill around and direct potential customers to the interactive information kiosks. Let's say NJ is able to get all 4 of these guys from the pool of current car sales guys. What happens to the other 8?
So we have about 8,000 guys out of work. Congratulations. Let's use Alabama's model, you've just cost New Jersey a few billion dollars in economic losses. And now all those food trucks and restaurants and tie shops have to figure out how to get by with 1/3rd the number of customers. So that's even more people out of work and more economic losses.
How much economic damage are you willing to cause New Jersey, legislator jonknee, just so consumers don't have to haggle a bit when they buy a car every 7 years on average?
In the Tesla model, you eliminate all those for a "test drive experience genius" or whatever they call it, 3 or 4 to a "test drive experience center", NJ gets the sales tax on the car, and whatever they can squeeze out of the 3 or 4 guys who work at the Tesla dealership and the 2 mechanics who work in back.
If Tesla, an extremely minor player in the industry right now, gets to do this, why doesn't everybody else? Overnight all those endless seas of car dealerships, representing millions upon millions of dollars NJ wants to capture into it's state economy go bankrupt and now nearly all of the money is going to CA, Japan and Detroit with a handful of in-state jobs to man the direct-to-consumer "test drive centers". And now for the out-of-work accountant or phone engineer? He used to have a chance to at least work a commission only car salesman job for a few months till he found better work. Now he has nothing to go to in the interim and overall state unemployment ticks up a half percentage point.
As an engineer I see lots of built-in inefficiency in all this. So I understand the HN outrage. But NJ doesn't want efficiency, they want people in jobs and off welfare. Each person in a job is a chance for the State to capture a few hundred dollars off of each car sold -- not as taxes, but as GDP (which will eventually float the government's coffers as taxes anyways), rather than paying out for social welfare programs. It's in the interest of good governance to have an inefficient system, so that there's lots of places citizens in the state can reach into the car-to-consumer pipeline and extract some money from it. And they can do all this without having to put in place unpopular social welfare programs or increase taxes or some other public works program because they can regulate the private market to force it to be more inefficient than it should be.
From a macro perspective, NJ's behavior here is completely rational. I don't agree with it personally, I think there's better ways to do this. But it's easy to explain without resorting to name calling or disparaging thinking about the competency of NJ's governing officials.