Tesla Factory Stores Under Fire From Dealer Groups

Derek Kreindler
by Derek Kreindler
tesla factory stores under fire from dealer groups

Tesla’s sales model, with factory-run outlets selling directly to customers, is coming under fire while dealer groups such as NADA are citing the apparent illegality of factory-owned sales outlets.

Dealers are worried that Tesla’s method, which allows for online reservations of vehicles in addition to the shopping mall showrooms, will marginalize their way of selling vehicles. This fear was articulated by Bob O’Koniweski, executive VP of the Massachusetts State Automobile Dealers Association, who told Automotive News

“If a manufacturer sees that Tesla is successful with this kind of business model, who’s to say they don’t break out their own EV product lines and create a separate system that bypasses dealers?…It’s extremely problematic.”

Tesla has apparently bypassed existing dealer franchise laws by offering online reservations if sales cannot be conducted on site. Dealers have asked four states to conduct investigations into the legality of Tesla’s sales model. Meanwhile, the chairman of NADA issued this rather ominous statement

“Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model…Other companies such as Daewoo did. All companies should be complying with existing laws in the same way dealers are required to.”

Tesla has denied that it is trying to reboot the existing sales model, with George Blankenship, their VP of Sales, telling AN “That’s the last thing on our agenda.”

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  • Krhodes1 Krhodes1 on Oct 09, 2012

    I think a point is very much being lost here, particularly by PCH101 - it is not that franchises or direct sales are any better, it is that the states have passed laws MANDATING how it must be done. Let the market decide. I look at it this way - ALL competition is ultimately healthy. I can buy an Apple laptop directly from Apple over the Internet. Or I can buy one from Apple in their own retail store. Or I can buy one from Best Buy. Or I can buy one from some other Internet Apple Reseller. Or a local VAR. All have their plusses and minuses. Best Buy might be offering no interest no payments for 36 months. Apple might be having a sale. Or maybe I just really want to talk to the geniuses. Or maybe I am buying a package deal of a whole office full of them with installation and support of custom software from a VAR. Each sales channel has its place, Apple would be FAR worse off if they only had ONE way of selling computers. I think the auto industry would be well served by a similar model. Buy direct if you want. Or buy from the local franchised Ford store if you need it TODAY. Or from CarMax. Whatever. No one method is going to replace all the rest. But the competition keeps EVERYONE on their toes.

    • See 6 previous
    • Mr Nosy Mr Nosy on Oct 10, 2012

      @leeboo1211 The iPhone,which if I'm not mistaken is now over 40% of Apple's product sales,is a product that is traded in every 17-23 months.Comparing a mobile electrical device with a two-year(Or three if you're,gasp, unhip.)lifespan to that of a product expected to last many more years before the scrap-heap,is truly one of Apple's greatest achievements.

  • Eric 0 Eric 0 on Oct 09, 2012

    "but if I want a corporate standardized quality Apple experience I know where to go, even if it may be slightly more expensive. Which is not usually the case, price parity on most Apple products is pretty even wherever you go." In fact, universal price parity is one of Apple's greatest achievements. They ruthlessly enforce it to the point that an Apple product costs exactly the same, to the penny, no matter where you buy it. This predictability in pricing is one of the most significant value adds that comes from either cutting out the middle man, or making him your bitch. A customer does not have to search around to look for the best price. There is only one. They don't have to worry that the price will drop suddenly as part of some promotion. It won't. This predictability removes any anxiety over whether the price the customer is paying is the right one. Car companies have tried for decades to establish "no haggle pricing" because customers prefer it. They never succeed for long, because unlike Apple or Rolex, they can't pull a dealers license without literally going to federal court. I predict Tesla will see a lot of success if they can keep their pricing absolutely consistent and predictable.

    • Daveainchina Daveainchina on Oct 09, 2012

      yay and yet another reason for these laws to be overturned. I cannot see how anyone can defend the laws governing this. It's about being forced and not being given a choice and in general with the exception of utilities (which is an altogether different animal) choice is what makes everyone better.

  • Mr Nosy Mr Nosy on Oct 10, 2012

    What can I add that hasn't already been said? To begin with,my experience has shown that you'll find products cheaper elsewhere than from the manufacturer of said product. As for Apple,besides their computers,it's a telecommunication device/surrogate love object that differs from cars in that they're usually replaced every 18-24 months.Tesla is not really a bellwether for the rest of the car industry,only for those who cash out their facebook stock(Quickly,before news gets out that tweeners consider it passe.). I realize some people will need to replace a car more urgently than others,requiring car lots for immediate purchase and test drives.However,I still foresee some change in the dealership v. manufacturer sales mix, based primarily on land use issues for urban areas.Drive-in movies are gone here in So Cal(Land ain't cheap,and the planet ain't gettin' bigger.). Additionally,why wouldn't manufacturers want in on a cash cow/downturn hedge that makes a car dealership profitable-service,repair,and resale? Traditional dealers can survive by taking a lesson from Saturn.Not the car,don't be retarded,but their buying and service experience.I rented cars to a Saturn dealership.My God,they took ass-kissing to a whole 'nother level-I called it "theralingus". I've personally never needed such fawning treatment,as I have friends,am loved by my mother,and wasn't raised by wolves. As for Ayn Rand,that old hackster eventually proved that even she was incapable in living up to her own cold,soulless,and barren ideals.

  • Mickeypups Mickeypups on Oct 10, 2012

    I have a question... I have to wonder why any independent franchisee would want to sell Teslas.. First, volume is, and is likely to stay very low for quite some time (a result of the time it will take to ramp up production and demand is low). Secondly, I was under the impression dealers made very little from the sale of new cars, and really floated their entire business on vehicle service... what sort of long term service is a Tesla going to need, and will its service needs/costs be enough to provide requisite revenue for a dealer?