California New Car Dealers Seek DMV Probe Into "Egregious" Tesla Advertising

TTAC Staff
by TTAC Staff

Tesla factory owned store in Newport Beach, California

In the continuing battle between Tesla, which wants to sell cars directly to consumers, and car dealers, who are using state laws to keep the EV startup from opening factory outlets, the California New Car Dealers Association has asked that state’s DMV to “investigate and remedy several egregious violations and advertising and consumer protection laws” by Tesla.

According to Automotive News, dealers say that Tesla advertising that includes “packed external savings” like fuel costs, incentives and federal tax credits, in calculating the cost of ownership is misleading. For example, the dealer group says that the available $7,500 U.S. federal tax credit should not be included in Tesla’s advertising since only 20% of taxpayers pay enough taxes to qualify for the tax credit.

The CNCDA membership is comprised of 1,100 franchised new-car and -truck dealerships in California, which is the largest individual state or provincial market in North America. In an interview, Brian Maas, president of the dealer association said, “We don’t have any quibble with Tesla’s ability to sell cars, it’s how they are selling cars that is the problem.” Tesla declined to comment on the suggested investigation.

Tesla has run into problems trying to sell cars directly to consumers in Texas and New York but California law permits car manufacturer direct sales as long as they follow advertising guidelines and other consumer protection regulations imposed on traditional dealerships.

“The general thrust is that Tesla is misleading consumers into thinking the monthly cost that you’re going to pay for one of their vehicles is substantially lower than the actual money” that consumers will have to pay, Maas said.

“It’s misleading,” Maas added. “If you checked every box on their true cost of ownership series of inquiries, they claim you can get a Model S for $114 a month, which is lower than the cheapest [new] car available in the United States, the Nissan Versa — which would cost you, with a lease deal, about $139 a month.”

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  • Jimbob457 Jimbob457 on Sep 19, 2013

    Wow! Buying an item with a ten or fifteen year useful economic life creates an ongoing relationship between buyer and seller(s). That said, car dealerships are still modeled after 19th century livery stables and animal sales. A dog eat dog environment to say the least. Personally, I think Tesla is getting roughed over by the established car dealers, at least in some jurisdictions. Maybe things will work out for Tesla. Maybe their mail order customers will all end up happy. Then again, maybe Tesla will fail, and its customers will end up getting screwed. This is America! Tesla's potential customers are not the little sisters of the poor. Let it happen. If they do end up with the short end of the stick, so be it. Big boys and girls should be able to take care of themselves.

  • Wolfpv Wolfpv on Sep 30, 2013

    As a Tesla Model S owner I have the perspective of personal experience. Buying process was fine, delivery well handled, and the car is fabulous. Some of the economic claims are far-fetched, but generally based on factors which are presented accurately, if not prominently, in Tesla's marketing materials. If anyone (including the dealer networks) feel that Tesla's claims are dishonest, they are welcome to file complaints - but like many of you, I think the irony of car dealerships complaining about misleading advertising is delicious. What should by now be clear to everyone is that the sales paradigm has shifted. Local retailers, dealers and distributors must add significant value in order to prosper. Maintaining their role by legislation may be a short-term solution, but it's bound to fail in the long run. Incidentally - and off topic - if you plan to purchase an electric or plug-in hybrid, and you own a roof, get solar. It's quite cheap now (especially if you do-it-yourself) and the environmental and economic benefit of an electric car really "shines" (pun intended) with photovoltaics.

  • Teddyc73 As I asked earlier under another article, when did "segment" or "class" become "space"? Does using that term make one feel more sophisticated? If GM's products in other segments...I mean "space" is more profitable then sedans then why shouldn't they discontinue it.
  • Robert Absolutely!!! I hate SUV's , I like the better gas milage and better ride and better handling!! Can't take a SUV 55mph into a highway exit ramp! I can in my Malibu and there's more than enough room for 5 and trunk is plenty big enough for me!
  • Teddyc73 Since when did automakers or car companies become "OEM". Probably about the same time "segment" or "class" became "space". I wish there were more sedans. I would like an American sedan. However, as others have stated, if they don't sell in large enough quantities to be profitable the automakers...I mean, "OEMs" aren't going to build them. It's simple business.
  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.