By on December 20, 2013
Tesla retail store in Columbus, Ohio

Tesla retail store in Columbus, Ohio

Car dealers trying to head off Tesla Motors’ attempts to set up factory-direct showrooms in Ohio lost a round last month when a dealership licensing amendment that would have blocked Tesla from selling vehicles direct to retail customers in the state wasn’t voted upon in the state legislature. Now the dealers are trying the litigation route, suing Tesla and state agencies to have Tesla’s retail license voided. The defendants are Tesla, the Ohio Department of Public Safety and the Ohio Bureau of Motor Vehicles. The plaintiffs include Midwestern Auto Group in Dublin, Ohio, and Ricart Automotive Group, of Groveport, Ohio.

Earlier this month Tesla opened up its first Ohio store in a mall in Columbus, along with a service center in the same city, presumably to service the cars sold at the mall. The EV company says it will open a second store in Cincinnati by the end of the year. To bolster it’s case with the Ohio public, Tesla announced that the expansions will mean another 26 jobs and “add an initial $7 million in direct economic activity.”

James Chen, Tesla’s VP for regulatory affairs and the automaker’s associate general counsel, called the dealers’ actions “bullying”, using a current buzzword. “This is the same kind of bullying from the dealers we’ve faced in other states. The dealers, when they’re defeated in the court of public opinion, in the media and in the legislature, they then go to the courts.”

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66 Comments on “Dealer Groups Sue Tesla, State Agencies Over EV Maker’s Ohio Retail License...”


  • avatar
    JD321

    Unless Tesla signed free-market/non-duress contracts with dealership gangs, the dealership gang members have no right to interfere.

    • 0 avatar
      challenger2012

      Where are all those “Get Gob’mint out of my life, right wing, GOP, tea bagger types” when you need them? Isn’t this about free enterprise? Right to work? Get government out of the way. Let the market determine the winners. Now, the right wing GOP business types want more government regulation, restrictions to limit competition, thus interfering with people trying to make living in an open market.
      And you thought Obama was a socialist? How the worm turns?

      • 0 avatar
        srh

        What on earth are you talking about?

        • 0 avatar
          challenger2012

          Please read the article, then my comments. It will make more sense than just making comments without reading. But I will drop it a level or two to try and help you understand. There is one political party that has droned on for years about how oppressive government regulations interfere with business that the government should not pick winners and losers in the market place i.e. GM and Chrysler, that unions are bad for they drive up costs and restrict who can work and where in business that people should be free to work their professions without excessive government regulations.

          Do any of these concepts look similar to what one political party in the US often states publicly over and over again? You know that same political party that sees anything it does not like as socialism? That one party whose member’s coined the phrase “Government Motors” in its opposition of saving GM and Chrysler? Whose members wear old clothes with tea bags on their hats who want less government controlling their lives. Do you see the comparison from my first paragraph to the second? Does any of this look familiar? Never seen any of this before? Never heard of Rush, or FOX NEWS?

          Now, contrast this to the article where a business and business cartel are asking for government protection and regulation from competition, wanting the government to assist in picking winners and losers, wanting to keep people from working in their professions. Need I mention that business interests often side with this political party more often than the other.

          And finally, I ask where are the people in the first paragraph? Where did they go? Why are their voices silent? Where are the protests over government regulation?

          • 0 avatar
            3Deuce27

            Damn! challenger2012,

            Sure glad somebody else gets it. I feel less alone…col!

          • 0 avatar
            thelaine

            You think auto dealers belong to the Tea Party?

          • 0 avatar
            Luke42

            “You think auto dealers belong to the Tea Party?”

            In real life, no.

            It’s just that there are a lot of different kinds of Republicans, but they try to puit up a united front. Car dealers probably come from all political persuasions, with most coming from the big business branch of the party (which doesn’t seem to mind big government, just so long as they get what they want). On the other hand, a lot of the loudest Republicans tend to be from the tea party faction. This puts the Republican coalition in the situation of having their actions not match their rhetoric.

            The Democratic party is a coalition, too, and the same thing happens. It’s just that, say, environmentalists and social liberals can both get what they want with fewer contradictions. Thee big business Democrats aslso dfo s better job of laying low and playing ball on ideology on that side of the fence…

            But, yeah, for all of the Republican (tea party) criticism of government power, it’s fair to call them out when Republicans (big business) defend an anti-free-market regulation such as those that prevent competition between dealers and their suppliers. The Best and Brightest can and do debate whether these regulations are are a good idea all day, and those are good debates. But if anyone says “I’m a Republican, so I favor retaining artificial limits how cars are sold”, they have as lot of explaining tho do – because that contradicts all of that public talk about small government and the free market.

            Note that none of this has anything to do with whether lergasl protection for the franchise deasler system is as good idea or not. Such practical qeustions clearly have no place in the politics of our day…. Clearly… Never mind that this is the question that actually matters!

          • 0 avatar
            Pch101

            Campaign contributions by car dealers and their lobbying organizations go overwhelmingly to Republicans. The ratio of Republican to Democratic contributions isn’t even close.

            http://www.opensecrets.org/industries../indus.php?ind=T2300

      • 0 avatar
        SCE to AUX

        @challenger2012: I don’t know what ignited your insulting political diatribe, but I agree with you that there are forces at work with compromised principles.

        Personally, as part of the Vast Right Wing Conspiracy, I think Tesla has every right to compete in the manner they’re attempting to.

      • 0 avatar
        Hummer

        Funny didnt know the big 3 were all of a sudden so extremely right of center, learn something everyday.

        I haven’t heard anyone on the right say they “hope” tesla fails, perhaps optimism, rightly so since they have yet to make profit on their vehicles, but not outright sabotage thought.

        It seems that to you the only time right wing politics are needed are when liberal ideas don’t push far enough, so of course blame the right for being in your way!

        • 0 avatar
          challenger2012

          Hummer Does “Let Detroit Go Bankrupt” sound familiar? The GOP presidential candidate Romney wrote an editorial in the NYT’s concerning GM and Chrysler. I can also provide you with GOP Senators, mostly from the South, that wanted to kill off any money to bailout GM and Chrysler, also the rants on AM radio and RUSH, and FOX. I know you saw it, for I saw it as well. But to be open on the topic, list the DEMS, who wanted to kill of GM and Chrysler. I bet it will be a very short list.

          • 0 avatar
            Hummer

            So what happened to the whole tesla deal…..

            You completely switched topics…

            Detroit should have went bankrupt, they would be better off today if they had, but that has nothing to do with tesla.

            Focus on what’s at hand, not what your msnbc tells you to spew.

    • 0 avatar

      The dealers have every right to try to interfere but probably no right to win…. PLUS they’re making huge fools of themselves.

  • avatar
    Bowler300

    When your business model requires legislation in order to keep out competition and to survive, your business model is broken.

    • 0 avatar
      Lorenzo

      When your business model makes you wealthy and enables you to be a major source of political contributions, you call in your political chits and do whatever else it takes to keep the gravy train rolling. The model isn’t broken, it’s a cartel arrangement, and it works pretty well. Sure, the customer is overpaying, but if the cartel is broken, who will sponsor the local parades, little league teams and charity events for widows and orphans? Who will keep the local print, radio, and TV media in business with incessant advertising? Who will provide the cash for politicians’ late hit pieces? Car dealers have woven themselves into the fabric of their communities. Will Tesla step into the breach to support the local yokels like the car dealers? I think not!

    • 0 avatar

      The traditional business model is so broken there will be about 16 million vehicles sold the old way this year. Dealers are concerned their OEMs will get ideas about a mixed system. They should just let it go. What Tesla is trying to do won’t work for the long haul and poses no threat to franchise dealers.

  • avatar
    stckshft

    This begs the question, what are the plaintiffs afraid of? If Tesla succeeds at operating their company owned dealers this bolsters competition in the industry as a whole. Or Tesla may find it to costly to operate it’s own dealer network. From a consumer standpoint I have heard of factory owned MB stores in Canada that offer FAR worse service experiences than franchised ones. I say let the market decide.

    • 0 avatar
      redav

      Instead of asking what are the plaintiffs afraid of, perhaps more pertinent is “How are they harmed?” If they cannot point to specific damages or injury, what is their grounds for suit?

    • 0 avatar

      The plaintiffs are afraid their own OEMs will try to install factory owned stores in competition with them. What Tesla is doing has nothing to do with that concern UNLESS Tesla somehow establishes some precedent that somehow results in traditional auto OEMs from establishing company stores.

      • 0 avatar
        Luke42

        I agree that the all or nothing approach to franchise dealers is fair to all stakeholders.

        As a hasppy customer of Ford and Toyota franchise dealerships, as well as someone eager to own a Tesla, I accept this compromise.

        This compromise would be more resillient long term if there were a legal path from one model to the other, such as as court-reviewed plan spin off factory stores, or a mechanism where the dealers could agree or disagree as a group to be to be bought out by the mothership. But that’s just icing on the cake, looking forward to the unpredictability and innovation of the next 100 years.

  • avatar
    zamoti

    Ooh, an opportunity to complain about MAG?! Sweet.
    One upon a time, I went to MAG to check out a used e39 wagon. It was in fantastic shape, but had nearly 200k on the clock. Drove it, liked it, talked to the sales guy and all was well, could have very easily been persuaded to buy it.
    Wasn’t going to buy on the spot, was an impulse to look at it in the first place. As I’m leaving the sales manager, who introduced himself but did not bother to ask my name, basically tells me that he will not allow negotiating on the price and that if I’m smart I will buy it right now. He also reminded me of the $7000 worth of work they did (they replaced a few gaskets and hoses–for $7k?!) and how they were doing me a favor.
    I walked and never came back. Screw those guys.

  • avatar
    OneAlpha

    I’ll just paraphrase The Red Green Show here:

    Red: “My wife dragged me out to see this movie last night. Oh man! It was about what dinosaurs would do if they were around today.”

    Harold: “OH! I know! They’d form a cartel to sell cars and sue anybody that tried to horn in on their racket!”

  • avatar
    SCE to AUX

    Ruggles: GO!

  • avatar
    Astigmatism

    It’s great to see that Democrats (Midwestern Auto Group) and Republicans (Ricart) can reach across the aisle and work together to try to screw consumers and stifle competition.

  • avatar
    bomberpete

    I’m no Elon Musk fan, but if he can break down a cartel/extortion model that even the Mafia envied, bless his heart.

  • avatar
    stryker1

    I consider myself a Tesla Skeptic, but if they’re drawing this kind of dirt from the dealers, they must be on to something.

    • 0 avatar
      Pch101

      The enemy of your enemy is not necessarily your friend.

      Tesla sells cars at full sticker. The website cost calculator tries to convince the (naive) prospective customer that a $1,000 per month payment equates to $600 for a variety of bogus reasons.

      And if you want to buy a Tesla, then there’s only one place to go. Who more closely resembles the monopolist in this equation?

      • 0 avatar
        srh

        Yes, Tesla sells cars at full sticker. If you don’t like that, then go buy a different car. There are a lot of cars you can choose besides Tesla.

        The only place I can buy an Auntie Anne’s pretzel is at Auntie Anne’s, but that doesn’t make Auntie Anne a monopolist.

        • 0 avatar
          SCE to AUX

          +1. What you said.

        • 0 avatar
          Pch101

          People complain about dealers because they feel overcharged. As it turns out, Tesla will overcharge you, too.

          People complain about dealers because of the games that they play with numbers. As it turns out, Tesla’s sales model revolves around trying to convince you that your payment is lower than what it really is.

          The difference is that you can’t play Tesla dealers against one another, since there is no competition among Tesla outlets. This is actually worse than the system that consumers love to hate.

          If one is going to refer to the car sales business as a “cartel”, then it would make sense to know an ubercartel when it’s hiding in plain sight. There’s no retail competition for Tesla sales, which far more closely resembles a monopoly than a system with thousands of independent dealers.

          • 0 avatar
            Astigmatism

            I don’t complain about dealerships because I feel overcharged. I’m pretty sure I did quite well on the last couple of cars I bought. I’d complain about the dealerships trying to use the power of the state to force another car company to only be able to sell its cars through independent dealerships. If that model works for them, they should have at it, but if not for Tesla, then why should Tesla have to? Why should a consumer only be able to buy a car from a middleman?

          • 0 avatar
            SCE to AUX

            @PCH101: You’re playing fast and loose with words.

            Tesla won’t overcharge you – it’s just that a Model S is expensive.

            Tesla’s advertised cost calculator may or may not be accurate, but it doesn’t alter the actual sales contract. Everyone understands the difference between advertising and actual cost to the consumer.

            The competition for Tesla is… everybody else; they don’t need to compete against themselves, and neither do the consumers.

          • 0 avatar
            Pch101

            It’s funny how those who loathe the usual dealers will feel warm and fuzzy about Tesla when it engages in similar practices.

            If the local Chevy dealer tried to convince you that your $500 payment was $300, you’d be calling the Better Business Bureau and complaining across the internet. Yet when Elon Musk does it, you want to be his best friend.

            All car dealers should be regarded with suspicion. Tesla is no exception. The company-owned model invariably leads to higher prices, and the reasons for that should be obvious.

          • 0 avatar
            Pch101

            “If that model works for them, they should have at it, but if not for Tesla, then why should Tesla have to? Why should a consumer only be able to buy a car from a middleman?”

            I seriously doubt that the dealers care about Tesla, per se. Their concern is that Tesla sets a precedent for the major automakers.

            What dealers don’t want is to have the suppliers of their inventory cherry pick their best territories once the dealers have gone to the trouble and expense of building a franchise. If you spent a couple million bucks and a lot of time building a business, then you wouldn’t want the multibillion dollar corporation that controls your product and livelihood to start competing against you, either — you couldn’t possibly win.

          • 0 avatar
            mcs

            There’s currently a 2-3 month wait for Model S. If dealers were selling it, you can bet it’d have a healthy added dealer markup attached. Same thing if they manage to produce a 35k Model E. You’d never see them for MSRP.

          • 0 avatar
            marman

            how is tesla trying to convince you that your payment is lower than it really is?

      • 0 avatar

        Good point. The FTC doesn’t allow franchise dealers to conspire to fix prices. The way around that is for the factory to own all of its outlets so they can LEGALLY set prices. The average consumers, and most on this thread, don’t understand that. Saturn dealers could fix prices legally in their own markets. Tesla wants to be able to do that nationally. Consumers benefit from being able to play Chevy dealers off against each other. There are some folks who consider themselves enlightened who think fixed pricing is a way to please auto consumers. Be careful what you wish for…….

        But these dealers are just making fools of themselves.

  • avatar
    Felix Hoenikker

    “Tesla sells cars at full sticker.”
    Lookis like I’m out. They don’t have a big enough crow bar to get full sticker out of me. Matter of fact, no dealer or manufacturer does.

    • 0 avatar
      bball40dtw

      And this is a big part of why we still have dealerships.

    • 0 avatar
      bikegoesbaa

      Would you prefer that they bumped the sticker price up by 10 grand and then gave you a $10k discount?

    • 0 avatar
      SCE to AUX

      Scion has no-haggle pricing, and so did Saturn.

      Why does it bother you with Tesla? Is it just the high price?

      • 0 avatar
        redav

        Or why limit the discussion to just cars?

        When was the last time you haggled price in a grocery store?

      • 0 avatar
        Felix Hoenikker

        The largest percent discount I ever got on a new car was from Saturn. All I had to do was ask what incentives were being offered.

      • 0 avatar

        Scion and Saturn are both failures. The kids are buying Kias and potential Saturn buyers instead flocked to Camry, Accord, Fusion, etc. They eschewed the Saturn purchase experience for something else.

        • 0 avatar

          Actually, Scion pricing is NOT “no haggle” especially if you have a trade in. The financing is still a hassle for most folks. Why? Because most Scion buyers don’t have fast trackable credit scores. A surprising number of Scions are NOT bought by Gen Y, but by “geritol setters” like myself, who pay cash.

          • 0 avatar
            EchoChamberJDM

            Scion pure price = dealer quotes a no haggle price on the new Scion, and quotes a realistic trade in offer. No haggling, no discussion. The margins on a Scion aren’t worth the dealers time to haggle back and forth over $50 or $100.
            If you can fog a mirror or have a parent to co-sign, anyone can get a loan thru the TFS captive or their local bank.

        • 0 avatar
          marman

          Saturn was junk. the cars were horribly built, full of problems, cheapo GM interiors, etc… They did not sell because they sucked. The dealership experience was the only thing Saturn customers loved.

          • 0 avatar
            28-Cars-Later

            “cars were horribly built, full of problems”

            This is inaccurate. The only notable problems of the SL series were the oil consumption problem (d’oh), power window regulators (which at least half of Saturns never had in the first place), and a weaker auto transmission (which I am told is less of an issue if you changed the fluid and filter on schedule). I got 164 out of my auto tranny before I replaced it with junkyard one. The car runs fine at almost 166 and is still using mostly factory parts outside of the radiator, water pump/pulley/serp, fluids, and a couple of sensors.

            “cheapo GM interiors”

            You bet, but so was most of its competition of the period. Escorts and J cars were just as cheap, I can’t remember gen 1 Neons in terms of interior. Corollas weren’t any less cheap, Civic may have been the only one with a nicer interior comparatively speaking.

    • 0 avatar
      marman

      you think you are not paying more than “full sticker” at a dealership? ROFL. Any number you see at a dealership is way over the true cost and minimum price the dealer will sell the car to you for. I love people like you who think you are getting a good deal. LOL. dealers love you too.

  • avatar
    ceipower

    Boo-Hoo Dealers!! Just as greedy and narrow minded as our Congress. Go Tesla.

    • 0 avatar

      Yup! Those greedy dealer who make about 3% net profit on sales.

      • 0 avatar
        mcs

        >> Yup! Those greedy dealer who make about 3% net profit on sales.

        Yet somehow manage to make enough to become billionaires:
        http://en.wikipedia.org/wiki/Herb_Chambers

      • 0 avatar
        bikegoesbaa

        If they add value and/or are truly necessary to the car sales process then surely they can make it without using the courts to mandate their own existence, right?

        • 0 avatar
          Pch101

          The territories that are most lucrative are also the most desirable territories to poach.

          The OEMs are generally not interested in retail, since they have better skill sets in production and because the returns are low. But if they were going to take a few territories, then they would want the best ones.

          The average dealer would not be able to take on a multibillion dollar automaker that also has the power to deprive them of their inventory. If you spent $1-2 million to set up a franchise, then you would want to protect it, too.

      • 0 avatar
        marman

        source?

  • avatar
    JK43123

    And I hate Ricart. What a zoo! Last time I was there I specifically said I did not want a stick since it was for my wife, and the guy kept showing us stick shifts. “I can teach her!” No you can’t buddy, she’s handicapped, don’t you get it? Terrib.e.

    John


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