Tesla Motors Under Fire From Dealership Lobby


The Internet has revolutionized everything, from the way we shop to the way we date. But one thing the Internet has not done is change the way we buy cars. Tesla Motors is trying to emulate the success of Apple by eschewing dealership franchises in lieu of direct sales. This has some dealership associations suing, though their lawsuit could have the opposite effect.

Right now, 48 U.S. states have laws prohibiting carmakers from selling cars directly to customers. This is due in large part to the dealership lobby passing laws like those in California prohibiting competing dealers selling the same brand of vehicle within a mile of each other.

These laws have in part led to increasingly deceptive dealership practices, and it doesn’t take much Googling to find dealership horror stories involving everything from lead footed service technicians to sleazy sales practices. Since these are franchises that companies like GM has relatively little control over, your experience can vary widely.

Tesla Motors is trying a new model, selling cars directly to customers via 17 Tesla-owned stores centered in major metro areas. This is similar to the Apple Store, which is credited as being a large part of Apple’s wild financial success in the past decade. That is why Tesla hired the former Apple executive who came up with the Apple Store concept, George Blankenship.

This move to cut out franchise dealerships has Bob O’Koniewski, VP of the Massachusetts State Automobile Association up in arms. If Tesla is successful in selling cars directly to customers, why wouldn’t other automakers move to copy their success? It could bring the whole dealership structure crumbling, to the benefit mostly of consumers.

Imagine if cars were priced like iPads; a set price, where you select the options, no haggling, no lying, no need to try and eek out an extra profit. You pay the same price as everybody else. Isn’t that how car buying should be?

For Tesla’s part, the electric carmaker seems unwilling to budge. If they can’t have a store on site, they tell customers to make reservations online. Simply point and click. Why can’t we do this with other automakers? It is definitely to Tesla’s advantage, and I can’t be the only person who thinks the who concept of independently-owned dealerships is SO 20th century.

The lawsuit can go one of two ways; either dealerships get to keep their franchise model, or the walls come crashing down, opening the way for carmaker-direct sales. This lawsuit could bring into question the whole dealership franchise model, and public questioning of the reasons for these methods might put the pressure on automakers and dealers to come up with something better.

Like I said before, I can buy just about anything else online. Why not cars?

Source: Automotive News

About the Author

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he’s running, because he’s one of those crazy people who gets enjoyment from running insane distances.

  • These laws are antiquated, protectionist, and now only serve as an arbitrary barrier to protect a special interest group — the automobile dealers. Created prior to cell phones, ATM’s, microwaves, PC’s, the Internet, and especially Internet commerce; the laws no longer make sense in today’s modern markets. They were originally enacted to foster competition. But over time as our modes of commerce have been updated, these laws have come to do just the opposite. If we allow them to stay in place, they will continue to stifle true competition, thus harming market efficiencies and the productivity of the automobile industry as a whole. Today, we consumers end up paying a little bit more for our cars due to this now unwarranted and inefficient protectionism. These laws should have been changed years ago.

  • DaveD

    Thanks for the story guys. I can’t belive that I never even give a thought to dealerships considering the way I question everything else that doesn’t seem “fair or right” in life.

    What the hell do we need the dealerships for anyway? It’s certainly not like they give you a good deal on maintenance work. These laws stifle competition and force us do deal with a middle man even when they serve no purpose.

  • TemK

    Those laws have not created competition, they have created a business model.
    An antiquated protectionist business that makes cars cost much more than they should.
    Dealerships should become places to try a vehicle and look it over before buying, minus any pressure to buy. They should not offer financing, just offer to order a vehicle and have it delivered to the buyers house.
    As far as repairs, separate that out to local certified mechanics.
    Used car dealers are just that,”dealer-ships”, I’ll leave haggling to the those folks.

  • Mjyung

    Doesn’t dealers sell cars on line also, like eBay? Good luck getting the law change, dealers will lobby their congressmen to make sure the law stay, even the big three will side with the dealers. One they don’t understand the Internet, two due to their coverage they will have to spend billions to setup maintenance, third how else they going to stop these start ups who will caused them billions to keep up. Just look at the automobile industry historically, there has not been a real independent car company that manufacture more then 10,000 cars for at least 40 yrs, probably more. Tesla, probably only got this far because the big three was distracted with bankruptcy, if Tesla comes close to their target next year, you will see major attacks from the big three, not by creating a better product, but to kill it with laws and regulations such as the dealership law. Remember Mitt Romney already identify Tesla as a target to be destroy. American consumers will continue to be screw.

  • My brother-in-law already bought his Tesla online, via Ebay I believe… 😉

  • Scott

    Bought a 2012 Ford Focus and by the time I was done with my time share like experience I paid $25,000. Sure I got the extended warranty etc. but these guy’s took me to bank!!! It will take me 4 years before I can trade it or sell it I’m so upside down! You can easily say it’s my fault I signed the contract… …but how can the price difference be so great between myself and a more informed consumer? This was my first new car purchase. These guys feed on most consumers and the law lets them get away with it!!! A price of a new car should be the same for all consumers, need I say more!

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  • Tesla is amazing in that they are the first company to really change the way car sales have worked. The future of car sales is the internet, its just a question of how the experience will translate online.

  • Albert Sessions

    Besides having been funded via an organized crime scam, The Tesla car is a death trap, read this- http://wp.me/p2BJXK-b2

    The article says they paid bribes to get their fake “high safety rating”