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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 for 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. 

Source: Automotive News



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RE: Good for him
By Motoman on 4/18/2013 7:08:56 PM , Rating: 2
Yes, the whole dealership thing is a ridiculous mess. And they don't deserve essentially any of the special legal favors the laws have been woven to give them.

But you can do pretty well these days as an informed consumer with a small amount of research online. You can find out what the dealer invoice is for the exact vehicle you want, what dealer incentives are in place for it, so on and so forth to understand exactly what that vehicle actually cost the dealer. And then you can offer them what you feel is a fair price for them above and beyond that. Because they're not going to sell you a new car for $0 profit after you've accounted for dealer incentives and whatever else.

The last time I bought a new truck, I did all the research and figured out what the truck was going to cost the dealer to provide...it was something like $10,000 less than the ~$45,000 sticker price.

I walked into a dealership, gave them the documentation I'd printed out describing the exact truck I wanted, and that showed the dealer invoice, incentives, cashback allowances, so on and so forth, and then told them what I would pay. Which was exactly $1,500 more than what their final cost was. And no, I'm not paying for any "doc fees" or anything else. Out-the-door, you can make $1,500 off of me, or I'll move along to the next dealer.

Maybe I could have gotten the truck for less margin. But that was a price that I was OK with and that the dealership agreed to pretty quickly, once they realized I wasn't kidding, and wasn't budging. And there's little point in pissing off the dealer, granted that you may find yourself needing to go back there for repairs and whatnot at some point.

Naturally you can find all kinds of info on the net about the games dealers play with buyers...4-square worksheet things, financing tricks, so on and so forth. But it doesn't take much effort anymore to just sidestep that whole little circus and be an informed buyer.


"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs














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