Print 54 comment(s) - last by vitp.. on Sep 19 at 3:27 PM

Texas just shut Tesla down on the state level

Tesla CEO Elon Musk is determined to win the dealership fight by any means necessary -- even going to the feds.

A new report from Automotive News 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 North Carolina -- 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 supporting 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 State Impact, 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.

Sources: Automotive News [1], [2]

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: Nope
By ihateu3 on 9/17/2013 11:28:13 PM , Rating: 2
So the new car dealerships are there for no reason at all? They exist to make no profit???

If they made no profit off of new cars, then they just would not offer new cars at all, plain and simple. They would only be a used car lot like any other millions of used car lots out there...

So going on your philosophy, all new cars sold have no profit at dealerships, but used cars do, so they choose to sell new cars for no reason at all, and sustain themselves from used. Then why do they even offer new cars at all?!?!?

RE: Nope
By Shig on 9/18/2013 3:15:34 PM , Rating: 2
You're mistaken on your logic. The end of the tunnel is that dealerships as a whole in their current form are now obsolete. Automakers need to think of another use for the dealership.

Take Nissan for example, they are turning their dealership network into an EV charging network for the Leaf EV. So while you're charging up for free at the 'dealership' you can go look at the new products they have and have a cup of coffee.

You'll obviously still need dealership networks for maintenance and repairs. Stop being so short sighted.

RE: Nope
By Shig on 9/18/2013 3:17:24 PM , Rating: 2
Edit - By obsolete I mean the sales people are obsolete in their traditional aspect. They'll be more like sales people at the Tesla Motors stores, where you go in, they talk about the car, then if you like it you'll go online and order it, cutting out the 'dealership markup'. Innovation is key, you have to think about dealerships in another light now.

Elon Musk changed everything in only a few business quarters. Silicon valley baby.

RE: Nope
By Motoman on 9/18/2013 5:38:09 PM , Rating: 2
Where in the f%ck do you get the idea that dealers would have to sell cars for no profit?

If GM/Ford/et al wanted to remain in the dealer-centric model, then their cars would all get sold via dealers, and the dealers would make money. The point isn't that dealership employees don't deserve to make a living - the point is that the assertion that dealerships are "necessary to provide price competition" is f%cking retarded.

As I have already noted, dealerships serve useful purposes for distributing inventory, and providing access to warranty services and of course regular maintenance and repair.

If GM et al decided to sell directly to consumers, like Tesla does (and like vast numbers of manufacturers in other industries), then maybe things change at dealerships. Maybe all GM cars sell at a fixed rate, and all dealerships get a fixed % of that sale when the car comes out of their inventory...just to think of one example. Or maybe the dealership model stays the same, and dealers try to compete for car sales based on out-servicing the customer. Ooooo...scary idea - gaining customers by providing better service.

Ultimately GM et al would still need the dealer networks - they can't possibly function without them. They *have* to have the inventory distribution, and they *have* to have the availability of warranty services. If stuff changes, the industry will change with it, and dealerships won't be going anywhere.

Only the a$$-smackingly stupid idea that dealerships keep costs down for consumers.

"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki