Tesla Motors Successfully Fights Off Auto Dealership Assault in North Carolina
June 27, 2013 2:36 PM
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Tesla Model S
A North Carolina House committee denied a bill that tried to stop Tesla from selling directly to consumers
Tesla Motors landed a major win in North Carolina this week when the state threw out a bill that attempted to block the automaker from
selling its vehicles directly to consumers
A North Carolina House committee denied the bill Tuesday, which would have banned Tesla from selling its Roadster and Model S vehicles to consumers instead of auto dealerships in the state.
Also, Sen. Bill Rabon (R-Southport) said a separate bill -- which would update franchise dealer regulations -- could be rewritten in such a way that Tesla's business model could be protected.
The Senate's Commerce Committee approved the bill to kill Tesla's anti-dealer model in May. The bill was unsurprisingly backed by the North Carolina Automobile Dealers Association (NCADA).
North Carolina Governor Pat McCrory and House Speaker Thom Tillis took test drives in the Model S back in May and were reportedly thrilled with the experience.
Tesla CEO Elon Musk has been fighting for the right to sell his clean vehicles directly to consumers without having to use auto dealerships as middlemen. However, auto dealers have been furious about this model because it takes business away from them.
Musk said he is open to a dealership model at some point when sales increase, since dealerships do promote competition and keep prices down. But that time isn't now.
Back in April of this year, Tesla CEO Elon Musk openly
fought for a Texas bill
that would cut out the use of auto dealerships. The bill -- House Bill 3351 -- would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. Musk even said that if the fight for the Texas bill
came down to a federal matter
, he would 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.
Tesla CEO Elon Musk
However, Tesla lost this fight in both Texas in Virginia.
But Tesla has been successful in other states, such as
, where a pair of bills (referred to as A07844 in the Assembly and S05725) tried to make it illegal to license -- or even renew licenses -- for all Tesla Stores within New York state borders. These bills were killed off on Monday.
This latest win in North Carolina further proves that Tesla is a force to be reckoned with in the American auto industry. The company was approved to receive a $465 million loan from the U.S. Department of Energy (DOE) in June 2009, which was part of the Advanced Technology Vehicles Manufacturing program. The loan was to be repaid by 2022, but in March of this year, Tesla received permission to pay the loan back five years early by mid-2017.
However, Tesla managed to repay the whole sum last month --
nine years earlier
than expected from the original 2022 due date. This was mainly due to its decision to issue more stock the week before. Tesla said it wanted to sell about $830 million in shares, and use $450 million in convertible senior notes (which are due in 2018) along with sales of 2.7 million shares (valued at about $229 million at the time) to pay back its federal loan. This is an especially crucial detail in Tesla's history, considering other plug-in hybrid electric automaker Fisker Automotive (which also received a DOE loan) has
Before that, Tesla started shipping 500 Model S sedans per week starting in March of this year, exceeding the sales outlook of 4,500 posted in the February shareholder letter. In fact, Tesla managed to sell 4,900 Model S sedans in the first quarter. The automaker plans to deliver 21,000 total for the year, which slightly exceeds previous forecasts of about 20,000.
For Q1 2013, Tesla reported a net income of $11.2 million (a huge increase from an $89.9 million loss in the year-ago quarter). Excluding certain items, Tesla's profit came in at 12 cents a share, which was a boost from a loss of 76 cents a share in Q1 2012. Analysts expected a profit of about 4 cents a share. Revenue also saw a huge year-over-year boost, totaling $562 million (up from $30.2 million in the year-ago quarter).
On top of profitability and being debt-free, Tesla has been working hard to push new tech in the EV sector, such as its recent
battery swap tech
that takes only 90 seconds to complete and costs $60-$80. This is meant to extend range when there isn't time for a full recharge on the road. Tesla realizes that easing customer worries associated with EVs will lead to increased sales, and it seems to be working for the company so far.
At present, Tesla has only sold about 100 vehicles in North Carolina.
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RE: Why the Fight?
6/27/2013 4:03:41 PM
An easy one is that would add unnecessary cost to the price of the car. They already have a high price on the car so they already have the task of convincing people it's worth it.
I think the most important reason is they'd relinquish control over their brand in terms of how and where the car is sold and marketed. If they were forced to work with dealers, wouldn't they have to wait for a potential dealer to agree to open one where they wanted?
Tesla would then also have to come to a contractual agreement with said dealer. Can you imagine how long and tedious that process would be? And they'd have to do this each and every time they worked with a new dealer...and maybe some dealers would agree to some terms and some would not, so you'd either have to manage varying agreements (and therefore introduce undesirable variability into the Tesla buying process) or try to force all dealers to the same agreement.
Again, it would slow them down, increase costs, dilute the brand...and what would the benefit be?
With the their current volumes and market position, it would make absolutely no sense to sell through the dealership system. It may be a different story when they get enough volume though.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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