ELI5: How does forcing car companies to sell through dealers "protect the consumer"?

It doesn't. The claim that Tesla's business model is bad and will hurt consumers is mistaken because Tesla cars and, for example, Ford cars developed very, very differently. They are almost different products even though both are cars. The Ford Mustang's ancestor is an old car called the Model T, like the old lady car, Lizzie, in Radiator Springs where Lightning McQueen hangs out. The Tesla Roadster's ancestor is a very cool old car called the Baker Electric that suffragettes used to drive. This spring I will take you to see both of them at the Car and Carriage Museum, and we can also read a book about suffragettes. Yes, like the mom in 'Mary Poppins,' exactly right.

When cars were first invented, it was necessary to have someplace special with people who knew all about cars to get them fixed and maintained. There were no Jiffy Lubes or Meinekes when the Model T came out, so people who got the special permission to sell cars often offered maintenance and repair services. Over time, this turned into the modern full-service dealership, and for some people, like your grandparents, a conventional dealership is still a good place to buy a car. They will send people reminders of when it is time to maintain their cars, they have access to all the parts their cars need and they can repair the cars when they break. They also usually get first priority on parts in the event of a manufacturer recall, so if something was wrong with a car from the factory, they're a good place to get that fixed.

In exchange for maintaining all those options, though, they charge more for the cars they sell than you would pay if you just bought the car directly from its' manufacturer. The salespeople in nice suits, the free coffee, the waiting room with comfy chairs, a table with some toys and crayons and a TV that plays all day...the money for all that has to come from somewhere, and that place is what we call the 'retail price.'

You see, the maker and the dealer are two separate people, despite the maker's name being over the dealer's door. The maker makes the car, the driver drives the car, and the dealer just stands in the middle like that game you play at recess with a ball. And as with all middlemen, you're going to see the price go up where the middleman needs to eat. If the maker wants $30,000 for a red car that they just made and the dealer pays exactly that much to buy it from them, the dealer has to charge more than $30,000 from the customer who buys that red car in order to make a profit. If the dealer wants five thousand dollars of profit from that red car, then $35,000 is that red car's retail price. This applies to everything you buy from stores, not just cars, and it is why grownups make a big fuss over getting a good deal on anything, because money is valuable and the better a deal you get, the more money you get to keep.

It's why the price between a used car from a dealership and a used car from a private owner is so different, even for same-age cars with the same number of miles. The dealership checks their used cars over and fixes things, whereas a private owner might not, and you pay extra for that convenience...or, if you know how to fix and diagnose cars yourself and don't feel like paying extra, well, you don't. Remember when your uncle and I bought our white car and when your mom and dad found out how much it cost, they were all "phwoar! We need to take you with us to the dealership next time we buy a car!" and we were all "what dealership? We don't need no stinkin' dealership!" and everyone got distracted talking about old movies? That was why. We never go to the dealership. Ever. This is called 'radical thrift' and it is how I can afford to spoil you and your baby cousin absolutely rotten sometimes. I will teach you how to do that if you are good.

Anyway, Tesla cars are much more like iPads or smartphones than gasoline-burning cars. When somebody needs to fix or change all the Teslas, the way other cars do recalls, the company can just send out a software update and fix every Tesla car on the road using the Internet. It's like when your Android tablet gets firmware updates, you remember that, with the little green guy's belly opened up and the bar showing all the new ideas going inside him? For all their fanciness, Teslas are more complicated in their brains than in their bodies. Electric motors are a lot simpler than internal combustion engines that burn gasoline, and while Tesla has very, very fancy computers to make their cars run right, the car itself is mechanically a lot simpler. They don't need the big, fancy service departments and warehouses with miles of shelves full of parts that ordinary car dealers do because A. there are only two kinds of Tesla, soon to be three, compared to 20+ models of ordinary car made by each make, and B. a lot of the maintenance and repair on Teslas can be done very easily. You would be surprised how easily.

For such a wonderful, fancy car, a Tesla Model S really has a lot more in common with your Power Wheels Barbie Jeep than you'd think, which is partly why your uncle was able to make it go faster and stay charged longer, and how I was able to help you put on those fancy LED lights that change color and that old hand-me-down iPod Touch and speakers so it would play music and you could pretend to have GPS. Electric cars are so simple that engineering students build them in college sometimes, and there isn't as much difference between the very best and biggest electric car and the very smallest and most pink electric car as there is between big, fancy gas cars and little toy cars for kids. Your one neighbor's Cadillac Escalade uses gas, but his little boy's Power Wheels Escalade, even though they are both marked 'Cadillac,' well, the little one is really electric, just like a Tesla! Cars for younger people are strange that way.

You know, I really don't know why there aren't Scion xD or Kia Soul Power Wheels. Your Grandmama and my Mom ought to write in and ask them to make little kid cars shaped like theirs.

Something else that's cool to know, Tesla cars have a touchscreen computer inside, just like the old iPod Touch we helped you put into your Barbie Jeep with Sugru and stick-on Velcro strips. It is about as easy for Tesla people to fix Tesla cars as it is for you to hand your Android tablet to your uncle and ask him to beat a hard Angry Birds level. He doesn't need fancy tools, he doesn't need free coffee (though if you brought him some the next time he does that, it would be nice of you, wear the good oven mitts,) and he doesn't need a fancy building full of salespeople. So Tesla doesn't have any of those, either. It's a lot like the Apple Store.

That fancy computer programming that makes the Tesla cars go like the little green Android in your tablet makes it play games is very, VERY valuable. It would be very dangerous for Tesla to license that programming to separate dealers, who might not be as careful protecting it as they should. Because electric cars, even good, well-made electric cars, are so much simpler, there is a big risk that someone could copy a Tesla car's program at a dealership and sell it to bad people who wanted to make fake Tesla cars. This is called 'counterfeiting' or 'knockoffs,' and it is very bad, especially because the bad people who make knockoffs don't always make their cars safe for people to ride in.

That bad word I used that one time about counterfeit Takata airbags, that was about knockoffs. Don't say that word, it isn't nice and I was a bad auntie to say it where you could hear. When you can change a head gasket by yourself, then you may say that word.

So Tesla would rather just open their own stores and sell their cars directly to the drivers, rather than make the drivers go to a middleman like a dealership. Remember how the Ford dealership who buys a $30,000 red car from Ford has to charge more than $30,000 to make a profit? At Tesla, that doesn't happen. Tesla people both make the car and sell the car, and it's all the same company, so their $70,000 red Tesla Model S and their $109,000 Tesla Roadster cars cost the same for everyone, whether you're a used-car dealer who is planning to sell that Tesla he just bought to someone else, an auntie who plans to drive it to visit you (don't I wish!) an astronaut who wants to park it next to his space shuttle or Mr. Timothy Hutton on that show 'Leverage' we let you watch sometimes when you're good.

Now why don't we watch some cool videos on how Tesla cars and electric motors in general work, and if you can keep an eye on your baby cousin while you watch them, I can bake us all some cookies and then, since you were so patient while I explained all this, I will read you the story of a Real Princess who learned how to fix trucks and drive ambulances back during World War II. Really. Yes, a really real princess, with the castle and everything. You know the little baby Prince and Princess in your mom's celebrity magazines? This princess is the Queen now, and she's those babies' great-grandmother. Really. Fixing cars is totally a princess thing to do, I have pictures to prove it is.

/r/explainlikeimfive Thread