Elon Musk Steps Up To Defend Tesla Dealership Program


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I for one feel that in this day and age, the model of selling a car through a dealership franchise is outdated.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

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.

  • Mjyung

    This all doesn’t matter if Romney get elected as President as he will make sure Tesla and Elon will be destroy. Beside he needs to prove a point that he was correct to call Tesla a “loser” company, but also to save the 3 big three from spending money to keep up and to protect the dealership union, ie Tucker. Also to stop all these crazy alternative energy products that might actually work so that it might affect the oil companies. The big 3, dealership union and the oil companies have the biggest lobbiest group and is accounts for most of polititian campaign contribution and enjoy the best protection from new business domestic or foreign and also enjoy most of the tax loop holes. This will remain the same if Obama wins, but Tesla is personal to Romney as it will make him look like an idiot if successful. But I am sure he will twist it so that it was his effort that saved it if he can’t destroy it. This is the state of the union.

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  • Jolinar_cz

    Go Tesla!

  • Nathanael

    The laws about manufacturer-owned dealers were designed to prevent manufacturers from using the capital investment made of franchised dealers to gain market share, and then shutting the dealers out after the manufacturers had gained market share. A reasonable goal.

    This simply isn’t an issue with Tesla. Tesla is using its own capital to get market share.

    Accordingly, laws like the NY law on “franchised dealerships” simply do not apply to Tesla *and were never intended to*.