It recently came to light that Tesla Motors was coming under fire for opening several company-owned dealerships in areas like Boston and New York City. This has traditional franchise dealership associations up in arms, with lawsuits flying Tesla’s way. Elon Musk, chairman and CEO of the electric automaker, has taken to his blog to explain why Tesla Motors must sell cars differently.
Tesla recently opened stores in both Boston and New York City. While 48 states have laws against automaker-owned dealerships, there is a loophole that Tesla can exploit because it is not competing with any other franchise-owned Tesla dealerships. The way the law is written, automakers can’t compete with existing dealerships…but if there are no dealerships to compete with, no problem, right?
The franchise associations see it differently, and one has to wonder what has them so worried. Tesla’s approach to selling its products is a lot like what Apple is doing, selling products directly to customers. In his blog post, Elon Musk explains that the salespeople do not work for commision, so there is no “push” to sell the product. Instead, their job is to explain the fundamental differences between electric and gas-powered cars.
Tesla could not control salespeople at a franchise though. They would be less inclined to sell a product, especially when many customers shopping for a car already have a brand and model in mind. Getting new customers won’t be easy for Tesla as it is; trying to do it through franchise network would make it even harder. Tesla claims it already has an image problem thanks to Top Gear’s “review” of the Tesla Roadster, though that lawsuit went nowhere.
I for one feel that in this day and age, the model of selling a car through a dealership franchise is outdated. I can buy almost anything in the world via the Internet…except a new car. Rather, I have to go, search for the best deal, try to haggle a few more bucks off, so on and so forth. It’s a hassle…why not let me buy the car I want right from the automaker itself? It could shave thousands of dollars off the price of a car, and the U.S. is the only nation with such archaic franchise laws in place.
I think Tesla will be fine, though these dealerships may experience backlash for this overreach of the law.
Source: Tesla Motors Blog