Tesla CEO Elon Musk May Make Dealership Fight a Federal Case
September 17, 2013 12:14 PM
comment(s) - last by
Texas just shut Tesla down on the state level
CEO Elon Musk is determined to win the dealership fight by any means necessary -- even
going to the feds
A new report from
says Musk may take the dealership fight to the federal level since working at the state level hasn't been completely successful.
Here's the deal: Musk believes that auto dealerships don't do a very good job at selling specialty cars like Tesla's high-end electric vehicles (Roadster, Model S). Hence, he's looking to run his own Tesla stores around the U.S. where he believes his cars will get a fair shot at being sold.
However, auto dealerships are fighting back. If Tesla were to succeed at opening its own dealerships, other automakers could try to do the same. The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers, and that it will continue to defend franchise and consumer laws in the states.
While Tesla has been able to fight off auto dealership assaults in some states -- like
-- it has had a more difficult time in others, like Texas. The state has laws that protect the franchise dealership system where car manufacturers are not allowed to run and own dealerships -- and Texas isn't looking to budge on that issue.
Musk has worked quite a bit to eliminate the conventional dealership model for his cars in Texas, going as far as
a recent Texas bill
called House Bill 3351, which would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. He also offered 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.
Tesla made a case before the state legislature this past session that Tesla should be one exception to the state laws, and be allowed to sell its cars to the public directly. The state legislature blew it off without even taking a vote, and that was that. According to NPR's
, the reason was because Tesla failed to lobby as much as the dealership associations. Tesla spent about $345,000 in lobbying while dealerships spent about $780,000.
Texas isn't alone in attempting to keep Tesla at bay. New York, Massachusetts and others have attempted to shut down Tesla's stores as well.
With that, Musk is looking into taking his fight to the federal level in order to bypass each state's restrictions. Musk may lobby Congress or file a federal claim saying that the state laws banning Tesla-owned dealerships are unconstitutional.
Musk said in April that he'd be willing to make the fight a federal battle.
"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.
Automotive News 
This article is over a month old, voting and posting comments is disabled
9/17/2013 3:20:25 PM
You are probably correct that the existence of "dealerships" is an inevitable cost factor in buying/trading-in, test-drive and servicing. Surely, Tesla must also include this cost in their business model.
However, the rest of the world, that is, all of the world that isn't the USA, manages to cope fine without the need to legally enforce the "right to profit" for middlemen, so wholly unconnected with the manufacturer. The most typical model is a franchise, quite often a multi-manufacturer franchise. But there is no good or logical reason why a manufacturer shouldn't be able to sell direct.
Viewed from outside, this part of US law is
and clearly of no defensible benefit to anyone but the dealerships themselves.
9/17/2013 3:33:34 PM
Well Texas banned sales of the Model S, yet people are still driving them in Texas. It's just like the drug war, prohibition, etc. If people want the product, they're going to get the product, you're just hurting your own economy by enforcing draconian rules.
If no one wanted the car it would be a different story, but the model S is the first American made sedan that can compete with BMW 7 series, Mercedes S class, and Audi 8.
Let me reiterate, IT'S AN AMERICAN COMPANY, MORE SALES OF IT IS A GOOD THING.
9/17/2013 4:50:15 PM
Yeap, now they have to go out of state, to a state that is not stupid, and pay sales tax on a 80k car to that state. A couple thousand of those and loosing the potential for a factory in their state to build a state of the art high tech car that is from an American company.
"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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