Tesla Motors, Ohio Auto Dealers Come to Agreement on Direct Sales
March 27, 2014 3:50 PM
Tesla can continue selling its EVs directly
In a big win for Tesla Motors' auto dealership battle, the state of Ohio will allow the automaker to sell its electric vehicles directly to customers. According to
, Tesla Motors and the Ohio Automobile Dealers Association negotiated the deal Tuesday, and it was approved by a Senate panel.
This means that Tesla can continue selling its $69,900+ Model S sedan EV directly to customers in both of its existing Ohio stores -- which are in Columbus and Cincinnati.
Even better news for Tesla is that it can open a third store Cleveland as well, but it won't be allowed to open any more than that.
The bill also made sure to prohibit other automakers from opening manufacturer-owned stores in the state of Ohio. This ensures that others can't follow Tesla's path and try to get rid of auto dealers altogether.
Tesla CEO Elon Musk said 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.
The problem is that auto dealers don't want to sell Tesla vehicles, and they're also barring Tesla from selling its own vehicles (with the exception of online, where customers can physically touch or test drive the EVs).
Elon Musk [SOURCE: Green Optimistic]
But auto dealers say that they are necessary middlemen between auto manufacturers and consumers. They've insisted that their role provides fair play for consumers when it comes to warranties and service issues.
Tesla was granted authorization by Republican Gov. John Kasich through the Bureau of Motor Vehicles to sell its EVs directly to customers via an issued license.
Earlier this month, it was reported that Ohio auto dealers were
supporting a bill
that would stop Tesla from opening stores outside of its only two locations in Ohio.
It recently came to light that Ohio Sen. Tom Patton (R-Strongsville) backed the anti-Tesla bill -- called Senate Bill 260 -- which aims to prevent Tesla and any other automaker from "applying for a license to sell or lease new or used motor vehicles at retail." What's interesting is that Patton received at least $42,825 between 2002 and 2013 from state and national auto dealership owners, employees, and political action committees.
But this recent agreement with Ohio auto dealers is a win for Tesla, especially when other states -- like New Jersey -- are giving Tesla the boot.
Earlier this month, New Jersey Gov. Chris Christie’s administration
proposed a new rule
, which requires a person to have a franchise agreement with an auto manufacturer in order to be granted a license to sell.
A week later, the New Jersey Motor Vehicle Commission voted in favor of the ban of direct auto sales. Tesla already operates two stores in New Jersey, and had plans to open more before this new rule. These now need to become showrooms as of April 1.
On the other side of the country, states like Texas and Arizona are
rethinking Tesla's direct sales model
(which they currently ban as well) in order to secure Tesla's giant new Gigafactory for EV batteries. The factory aims to supply batteries for up to 500,000 EVs by the year 2020. The gigafactory would cost $5 billion USD, span as much as 1,000 acres, and employ about 6,500 people. It would also largely be powered by renewable energy, hence its need to be in a Southwestern state.
"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan
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