Tuesday, January 19, 2016 | 12 comments

Utah Automobile Manufacturer Prohibited from Selling to Utahns


Editor’s note: The following is a lightly edited interview with Steve Hall (owner) and Daniel Boyer (director of marketing) of Vanderhall Motor Works—a vehicle manufacturer located in Provo, Utah. The company is legally prohibited from selling their vehicles to Utahns.

Libertas Institute: Tell our readers about your company.

Steve Hall (Owner): I’m the owner of Vanderhall Motor Works. We’re located in Provo, Utah. We’ve been in business for about six years, developing a three-wheeled motorcycle, or auto-cycle. We’re here to build something exotic, something special, that isn’t in the market right now—and we want to sell it in Utah.

Daniel Boyer (Director of Marketing): It’s an exotic auto-cycle that has a bespoke build. Bentley and Rolls-Royce have a process where you can come in and they don’t restrict you on your choice of color, interior, exterior, etc. You get to create what you want. We create the same experience for our customers, but at a much lower price range. Our customers—as long as they’re not from Utah—can come in and go through this build process with us, and come out with a customized auto-cycle at a flat fee of $77,000.

LI: Your website indicates that Utahns are not allowed to contact you for sales information. Why? 

SH: Utah’s franchise laws, put in place in the 1990s, prohibit a manufacturer from applying for a dealer’s license in the state. You’re forced to go through a third-party franchise, and there are hundreds of franchise laws that are pretty restrictive. So we, as a small manufacturer, cannot support a Utah franchise dealer, because our facility will only build about 250 units a year—and we have a lot more demand outside Utah than within it.

Vanderhall Motor Works indicates on their website that they are unable to sell to Utahns.
A notice on Vanderhall’s website informs viewers about their legal inability to sell to Utahns.

So we don’t fit in this law at all; I don’t think anybody fits in this law. But if you’re a big auto dealer in the state, you want this law so the manufacturer can’t come in and take over your franchise rights and sell direct to customers. It’s the same problem that Tesla is having, and that’s why they now have a dealership in Utah that they can’t sell any cars out of.

LI: It sounds like your business model is not at all conducive to the franchise/dealership experience, anyway.

SH: That’s right. It’s more of the European model. In America, the model is “build, build, build,” and speculate. If you go to Europe, the majority of people design their own car, wait three months, and then it’s ready to pick up. Ours isn’t a speculation, franchise model—it’s individuals designing their own car, using their own creativity to build something special for them.

LI: Why do you suppose that these laws were passed in Utah to begin with? What arguments do its proponents use to support it?

SH: Their argument is that it protects consumers from the manufacturer. I don’t buy that argument at all. If the manufacturer is so separated from the customer, how do manufacturers understand them? Their customer, really, is just the franchise—which is speculating on massive amounts of inventory.

They make it sound like there’s no possible way for a car manufacturer to sell direct to the customer. That’s not true at all. Look at any other business. There’s a great mountain bike manufacturer in Utah that does the exact same thing that we do—people are custom ordering a bike directly with the manufacturer, and they sell them all over Utah, and throughout the United States.

Their argument is that it protects consumers from the manufacturer. I don’t buy that argument at all.

We’re asking for the same thing, but we can’t do it because our licensing is under the Motor Vehicle Enforcement Division of Utah. The bike company does the same thing as us, it’s just that we are motorized, so we have all these regulations apply to us.

LI: Last year, Representative Kim Coleman sponsored legislation to legalize direct sales of vehicles. Would that bill have solved this problem for you?

DB: It would have helped—it would have been a start. Do we feel it goes far enough? No. We’d want more. But because of how influential the New Car Dealers Association is, it creates a situation where smaller changes are more feasible.

When I described the bill to Steve, he said “Why?! Why can’t we get the whole thing right away?” I explained that we’d need to take baby steps to get it accomplished.

We feel that if we can let people know about the issue, we’ll get enough traction and the bill will go through—but it is just a step in the right direction. More needs to happen.

LI: How do you feel, as a small manufacturer, seeing your competition—large car dealerships—use their political connections to prevent you from selling to Utahns? 

They’re afraid that if we jump on this, then Tesla will be able to come in. The dealers are deathly afraid of that.

SH: I don’t know how we’re a threat to them, other than it being all about Tesla. We pose zero threat to them; our product is totally unique and isn’t cross-shopped with anything they sell. They’re afraid that if we jump on this, as a Utah manufacturer fighting to change Utah law, then Tesla will be able to come in. And Tesla is the only one that is going to show a large manufacturer that you can sell direct to a customer. The dealers are deathly afraid of that. In a word, it would put them out of business.

LI: You had a booth this past weekend at the Utah International Auto Expo where your auto-cycles were going to be featured, but you were shut out. What happened?

DB: It was an exciting opportunity for us to highlight our manufacturing capabilities—since we can’t demonstrate our sales capabilities to Utah residents. (We have to specify that, otherwise we could get into trouble.)

In December, I acquired a booth and went through all of the paperwork. There were multiple communications back and forth. At one point, the regulations for the area we were going to reserve require that you only put one vehicle in it, and we were considering backing out of the event due to that limit. A couple weeks later, they told us they would allow two vehicles, and indicated that they wanted us to be there.

Vanderhall set up a booth at the Utah International Auto Expo
Vanderhall’s booth at the Utah International Auto Expo before being walled off from public view

After setting up our booth, I got permission to include three vehicles. So I went back down to Utah County, and while driving got a call from somebody at the New Car Dealers of Utah asking me who our franchise was. We don’t have a franchise, and we’re not currently selling in Utah.

So he told me that we couldn’t come—we couldn’t be part of the Expo. We got into a big argument, and so I drove back to the event, delaying myself a bit until Steve could show up.

SH: When we arrived, I had a discussion with Craig Bickmore (president of the New Car Dealers of Utah), and I told him that they’d have to forklift the cars out, because I wouldn’t take them out. They couldn’t do that at the last hour to us. They had the right to do it, but it’s the way they did it. So they walled off the booth and told us to pick the vehicles up the following Monday.

Vanderhall's booth at the Utah International Auto Expo was shut down
Vanderhall’s booth after being walled off by Expo officials

I don’t know what threat we are to them, other than we’re opening the door for Tesla. That’s the only thing I can think of. We are a small manufacturer compared to any of the other guys at the Expo.

LI: If you had two minutes to address the Utah Legislature, what message would you convey?

SH: In a state where we preach being pro-business, we have probably the most backwards franchise law I’ve ever heard of. The FTC has already said that these laws are not constitutional and should be reversed immediately. The Governor agrees.

And we’re the king of direct sales in Utah—and we can’t do if we fall under the Motor Vehicle Enforcement Division? It just makes no sense. This is totally unconstitutional and anti-trust is written all over it.

If it were up to me, I’d repeal the whole thing—there’s not one part of it that protects consumers at all. It just protects the dealers and that’s it.


8 comments
antodav
antodav

This is a clear and classic example of crony capitalism, and why it's laughable to say that we live in a truly free-market society. This law exists literally ONLY to support the interests of dealers collectively lobbying for protection from the government at the expense of both entrepreneurs and consumers. Utah, what is WRONG with you?

mcpace
mcpace

Is there a petition to sign yet? Now I'm motivated, what can I do?

Ken Krogue
Ken Krogue

@mcpace I put in a link below to get Governor Herbert and lawmakers to address this...


SunSparc
SunSparc

I agree. This is ridiculous and needs to be changed.

Paul t Chavez
Paul t Chavez

If you guys start a petition to allow manufacturers to sell directly to customers in UT, I'll help get signatures. This is total BS!

-Paul Chavez, godogetter@gmail.com

vanderhallusa
vanderhallusa

That's an interesting thought. I can see the power in that. But what would also really help is if you repost this or share one of our posts with a call to action for residents to call their representative and ask them to support Representative Kim Coleman's Amendment.

Trackbacks

  1. […] And if you want to see how things can get even weirder, go read about how their exhibit at the Utah International Auto Expo got walled off. […]

  2. […] recently, a local vehicle manufacturer has been caught up, forcibly prohibited from selling its vehicles to Utahns. The need is clear for […]

  3. […] even better example is Tesla, the popular auto maker who is legally prohibited from selling their cars directly to Utahns. These vehicles feature a touchscreen device mounted to […]

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