2013 has been a big year for Tesla motors. Not only has the company turned ten years old, it has turned its first profit ever. There also have been ups and downs on the legal front. This is not because of fault in the vehicles, but because of the radical manner in which Tesla sells its vehicles. Since the dawn of time, people have bought their cars through a dealership. The dealer is the middle man between the consumer and the manufacturer. The reasoning behind having a dealer is to increase competition. Tesla want’s to break this mold and sell directly to the consumer, but they have met stiff resistance from lawmakers and the dealers that line their political pockets.
Tesla’s main legal issue is a law that exists in almost all states that prohibit car companies from competing with their franchised dealers. This was originally created to stop car company stores from running dealers out of business. Tesla argues that it is within the law because it has no dealerships whatsoever, so it cannot be in competition with them. Dealerships have no reason to market an electric vehicle over a standard combustion engined one, therefore rendering a dealer ineffective. This law has been interpreted to mean that a manufacturer cannot sell directly to consumers. Recently, Tesla issued a major political bill in North Carolina when a auto dealer-backed bill was struck down in the state legislature. But Tesla has also been blocked from selling in Texas and Colorado. I’m sure Tesla will continue its fight and eventually succeed it changing the way we buy cars.
Tesla’s business model has been met with so much resistance from dealers because the dealers can make so much money off of a vehicle. When purchasing from the dealer, there are dock fees, loading fees, etc. that not only pad the pockets of the dealer, but are completely unnecessary. I wouldn’t be surprised if there was a bee keeping fee buried somewhere in the mountain of fees they charge, as if they can only guarantee a car can bee-free by surrounding it with a cash fort. Dealers are threatened by this change and their loss of easy money. If auto-manufacturers could sell directly to the consumer, the prices of vehicles would actually fall because they would be standardized. If I go to Walmart in my home-town and buy bread, I know I can go to the next town over and buy bread at the same price because the bread is standardized. Walmart may not bake the bread in this example, but it acts as a single entity that sells at a standardized price. If there were bread dealerships and bread-tie fees tacked onto the bread costs, I’m sure everyone would bake their own bread. The problem is we can’t bake cars though. We have to rely on people with the tools and skills to assemble these now complex vehicles.
Tim Jackson, president of the Colorado Automobile Dealers Association, makes three points in his argument for the crusade against Tesla Motors, two of which I have issue with. The first, and logical one is if Tesla were to go out of business, there would be no parts or support for existing Tesla customers. The next is that Tesla could use the money it spends on stores to display and inform their customers instead in product development. I have issue with this because no one but the investors should try to tell any company how to spend its money. If Tesla wanted to build submarines to store its cars in, that’s the companies business, not a dealers. The last, and most strange sounding, is that if Tesla fails, this will somehow destroy the reputation of all auto dealers. How could a company with no dealer can hurt all dealers by failing is beyond comprehension. The only way dealers will be hurt is if Tesla succeeds and shows that they are in fact hurting the competition they say the protect. Competition is the selling of competing products, not the same product at different prices; the only competition is between dealers to see which can make the most money with gimmicks and fees. Dealers don’t need Tesla’s help hurting their reputations; they do that with unnecessary fees, sales pressure, and their attitudes. I have never met a car salesman without a vast superiority complex, and I greatly enjoy using my engineering knowledge to pull apart their egos and everything good they feel about being a salesman bit by bit. Tesla doesn’t have that in their shops. All they provide is information. Tesla allows the customer to make a choice to purchase without any pressure, as compared to the verbal-waterboarding dealership’s customers are forced to endure. Tesla’s future is bright and the company’s vision of electric vehicles is the future. But the money-hungry dealers, scared of change and loss of profits, are afraid of that future and what they stand to lose. If Tesla can win this fight, maybe we can not only have a better future for the environment, but also a better, simpler future for the car buyer.
Written by J. Potts, Automotive Contributor for The Spirited Drive
Edited by JRB, Editor-in-Chief of The Spirited Drive
http://www.greencarreports.com/news/1084622_tesla-loses-legal-battles-to-texas-north-carolina-dealers/page-2 by John Voelcker at Green Car Reports.
http://www.greencarreports.com/news/1080001_auto-dealers-fight-against-tesla-stores-elon-musk-weighs-in/page-2 by John Voelcker at Green Car Reports.
http://www.engadget.com/2013/06/27/tesla-victory-north-carolina/ by Melissa Grey at Engadget.
http://www.teslamotors.com/about by Tesla Motors.
http://www.huffingtonpost.com/2013/05/09/tesla-profits_n_3244814.html by Deepa Seetharama at the Huffington Post.
Source not used, but is very interesting: