Tesla CEO Elon Musk Willing to Take Auto Dealer Fight to Federal Level
April 16, 2013 12:13 PM
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He'll either lobby Congress for legislation or file a federal lawsuit
Tesla CEO Elon Musk is determined to win the fight against auto dealers and sell his company's vehicles directly to customers, but if he doesn't succeed at the state level, he's willing to make it a federal case.
"If we're seeing nonstop battles at the state level, rather than fight 20 different state battles, I'd rather fight one federal battle," said Musk.
According to Musk, he will likely take one of two approaches if it comes down to a federal matter. He will either lobby Congress to pass legislation for the direct sales of EVs made by startup companies like Tesla (and tie it to an energy or transportation bill) or file a federal lawsuit to fight the state restrictions as unconstitutional violations of interstate commerce.
However, The National Automobile Dealers Association (NADA) said it will continue to defend franchise and consumer laws in the states.
"NADA will vigorously defend the franchise system," said David Westcott, chairman of the National Automobile Dealers Association. "A better option for Mr. Musk is to take advantage of the dealer network that already exists."
Musk has been
pushing support fo
r a recent bill
in Texas, called
House Bill 3351. This would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships.
He has gone as far as offering to
build a second manufacturing plant
in Texas, and is even trying to appeal to Texas consumers by discussing a design for an electric pickup truck that would be stronger than any current gasoline truck.
In addition to Texas, Musk has had issues persuading other U.S. states to allow the auto startup to sell its cars directly. Some of its problem states include Colorado, Massachusetts, Minnesota, New York and Virginia.
Musk could have a huge fight ahead, though. NADA said that 48 states have some sort of restricition on factory-owned dealerships. Musk went on to say that about 20 of those have restrictions that would make his business model difficult while about six others have restrictions that would make it extremely difficult.
Musk has called the new Texas bill (and this overall business model of selling directly) a "life or death" situation for startups like Tesla.
“For us this is life or death,” said Musk. “If we can’t go direct we will not be able to sell cars.”
In the past, Musk has said that he's open to a dealership model at some point when sales increase, since dealerships do promote competition and keep prices down. But at a startup level, he said this type of model isn't the best route.
Tesla currently sells about 10,000 cars in North America, where about 1,500-2,000 are sold in Texas.
Tesla is shipping over 500 Model S EVs weekly, and recently reported that
the company is now profitable
thanks to the Model S exceeding sales targets. Tesla Model S sales reached 4,750, which topped the sales outlook of 4,500 posted in the February shareholder letter.
In addition, the automaker is partnering with Wells Fargo and U.S. Bank to offer customers more financing options for Tesla’s vehicles.
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He is doing the right thing
4/17/2013 8:16:59 PM
Selling through dealerships should be a choice. State franchise laws that prevent manufacturers from selling their own products is ridiculous.
Dealerships are not going away, because many people need the services of a dealership. But it shouldn't be required.
Auto manufacturers don't want to send out thousands and thousands of cars that just sit on a lot month after month. But they have to. By selling direct they can align production with sales.
Auto manufacturers in the late 90's early 00's attempted to challenge state franchise laws that restricted them from selling over the Internet because the manufacturers saw the Internet as a great selling strategy.
Ford tried selling used cars online until Bush finally put into law that that was illegal.
GM tried setting up "special dealers" that were Internet only, but had to sell off everything because of new laws.
The federal government bailing out GM and Chrysler should be proof enough that dealerships aren't needed. How many dealerships did GM have to close? 2000!! And they didn't technically own the dealerships, but they couldn't afford to stock all of them either. GM wants to reduce even more, now that they see the benefit. Because many of these dealerships were fine selling a few hundred cars, let their dealership look like crap, and let GM fit the bill for many parts and labor, transportation, stocking, advertising, etc.
Reducing dealer count has paid in huge dividends for the manufacturers. Musk knows this, and is why he shouldn't have to open dealerships that will hurt his business in the beginning. The best way to have money is not to spend it. Especially on useless crap like this.
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