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 6:05:56 PM
There are a few problems:
1) The margin on electric cars is much lower than gasoline cars, so dealers would have an incentive to try to sell gasoline cars instead of electric cars
2) Dealers make most of their profit from maintenance, and electric cars tend to require less maintenance since they have less moving costs
The problem is not that dealerships can't work for Tesla, just that they can't work right now. Only when electric car production costs have been driven down (increasing margins) and consumer demand is high enough to negate the maintenance disincentive will it be a viable option.
The dealers don't actually care about Tesla selling their cars. Tesla is such a tiny portion of the car market that they're not even a drop in the bucket. What the auto dealers are worried about is that Tesla will set a precedent, and that somebody like Toyota or Ford or GM might start trying direct sales.
RE: Why the Fight?
7/1/2013 12:19:08 PM
Most states have a provision that any manufacturer that sells less than a certain amount of vehicles (say 5k/month) do not need to have a dealership. This is due to the overhead that is involved if you are just a niche player (which Tesla is right now). The problem comes from the NADA trying to change the law in several places to force Tesla to use dealerships, and effectively insert a guaranteed middleman instead of allowing sales directly. In Texas, they already had something on the books, and Tesla tried to change it to allow them to sell direct.
I have no problem if car companies want to sell through dealerships, I just have a problem with government (of any level) requiring the use of a middle man. If I want to buy a car direct and save some money, I should be allowed to, if the manufacturer agrees.
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