NPR: Car Dealers Sue Tesla, Citing State Franchise Laws

[ElSupreme]

NPR Morning Edition had a story on the Dealer lawsuits in MA and NY. They didn't go into the 'gallery' versus 'store' designation. But it seemed pretty good.

Car Dealers Sue Tesla, Citing State Franchise Laws

The audio says it will be available at 9:00 AM EST. It played a little before 8:00 on WABE Atlanta this morning.

 

[EdA]

Thanks, probably would have caught it but I'm WFH again today

PS: I put my Model S deposit down almost exactly 2 years ago based on an NPR story...

 

[jcstp]

Each brand represents another manufacturer that can require expensive equipment and training. Not having to meet those various needs, O'Koniewski says, gives Tesla an unfair advantage.

"Those dealers are investing millions of dollars in their franchises to make sure they comply with their franchise agreements with the manufacturers," he says. "Tesla is choosing to ignore the law and then is choosing to play outside that system."

Wierd way of thinking!

As I understand it TESLA should comply with Porsche or GM franchise agreements to be able to sell TESLA's ???????

 

[ElSupreme]

Wierd way of thinking!

As I understand it TESLA should comply with Porsche or GM franchise agreements to be able to sell TESLA's ???????

Or that somehow they won't comply with their own 'franchise' requirements when setting up a store.

 

[jcstp]

WOW those dealerlaws are confusing!
Was america not the country of the free market?
This law resembles communist China! (you can not sell in China unless cooperating with a Chinese constructor!)

 

[Bardlebee]

America, where you do business and if you can do it better and make the product more appealing you will succeed!

Well... unless you go against the establisment...

EDIT: In all seriousness though, besides the laws being there. I see no reason why people would want to fight this. This is one of the reasons I live in this country, and its sad to see how much influence other established firms have over their respective markets. It's things like this that is shameful to America.

 

[sublimaze1]

Funny this:

(a) wasn't an issue in the Roadster sales years (when the roadster was just a plaything)

(b) coincides with some nice press from establishments considering the Model S the car of the year

(c) wasn't an issue until dealerships got scared by free market competition.

This is male cow dung. Can't remember what the right term for that is ....

 

[Bardlebee]

Funny this:

(a) wasn't an issue in the Roadster sales years (when the roadster was just a plaything)

(b) coincides with some nice press from establishments considering the Model S the car of the year

(c) wasn't an issue until dealerships got scared by free market competition.

This is male cow dung. Can't remember what the right term for that is ....

To be fair, did they have show rooms when they had the roadster? I mean more then 1 or 2?

 

[vfx]

Each brand represents another manufacturer that can require expensive equipment and training. Not having to meet those various needs, O'Koniewski says, gives Tesla an unfair advantage.

The manufactures of traditional Internal Combustion cars and their dealers have an unfair advantage. They have thousands of convenient locations and multi million dollar advertising budgets. Why worry about small upstart with a few stores?

The stories we hear about the Leaf and Volt (and the old EV1) is that salespeople become irritated having to explain EVs to customers. Potential purchasers have a thousand questions about the new technology. These are questions that salespeople don't have to answer for a customer buying a traditional gasoline powered car. All that extra work trying to convince a customer to make a major purchase with "untried" technology (certainly an untried lifestyle) cuts into their commision on selling more cars per day. They just steer customers away from the EVs because it's too much trouble and less profitable..

Tesla is a technology company with online ordering. Technology has changed the state of retail on many fronts. Not only Travel Agencies, but Bookstores, and Electronic sales warehouses.

Entertainment technology has seen the demise of record stores and video rental shops. Electric Vehicle technology will bring the loss of Muffler shops, drive in Quick oil changes, Transmission repair facilities and of course, Gasoline stations.

 

[sublimaze1]

To be fair, did they have show rooms when they had the roadster? I mean more then 1 or 2?

Show rooms ... sure. But to be equally as fair, it was a niche product. Not really competitive with any other homologated brand. The S is making waves in the luxury and near luxury market.

 

[vfx]

To be fair, did they have show rooms when they had the roadster? I mean more then 1 or 2?

Eventually. We ordered online and test drove a year later when the LA store opened. Stores have been selling Roadsters from stores for a coupla years since.

 

[DaveVa]

The manufactures of traditional Internal Combustion cars and their dealers have an unfair advantage. They have thousands of convenient locations and multi million dollar advertising budgets. Why worry about small upstart with a few stores?

I don't think the concern is actually so much about Tesla, it is about the precedent it sets. If other manufactures move to an internet based sales model, they would follow the playbook established by Tesla. Dealerships are very threatened by alternate sales models. I think Audi is also experimenting with direct sales.

 

[Teslawisher]

And if it (unfortunately) ever gets to the point where Tesla has to follow along with some crappy antiquated system, sign me up to work at the first "dealership" to sell Tesla in my area. I'll be more than happy to answer those hundreds of questions to help inform people to make the right choice for them.

 

[ElSupreme]

I don't think the concern is actually so much about Tesla, it is about the precedent it sets. If other manufactures move to an internet based sales model, they would follow the playbook established by Tesla. Dealerships are very threatened by alternate sales models. I think Audi is also experimenting with direct sales.

I agree with this. I think it mostly has to do with cheap/free distance communication becoming rampant. Before the internet it was really important to have a local source of advertising and information. But it is so much less so. So direct sales become much more feasible, and much less worrisome for the consumer. It is easy for GM or Tesla to get tons of information from individuals all over the world now, while they sit in Detroit or Fremont. That wasn't really the case 20 years ago. Dealers are on the wrong side of this. Right now they still have their maintenance/warranty work, and inventory storage roles to fill. But their business is being threatened.

You can save on overhead by doing things from a central location. You can control quality much better at a home location also. I think most business will go this way. The only thing that seems to still be safe are items where you need to buy something same day, like groceries, or things you need to touch and feel, like clothes and shoes. Sure stores will still exist to allow in person knowledge to transfer, but you don't need more than samples to do this. I think you will see more 'galleries' from other companies, and you actually get your products via UPS/FedEX the next day.

 

[Zzzz...]

And if it (unfortunately) ever gets to the point where Tesla has to follow along with some crappy antiquated system, sign me up to work at the first "dealership" to sell Tesla in my area. I'll be more than happy to answer those hundreds of questions to help inform people to make the right choice for them.

This might sounds crazy, but if they HAD TO go and use dealerships, how about setting up nonprofit organizations to be Tesla dealers?

 

[SteveG3]

I don't think the concern is actually so much about Tesla, it is about the precedent it sets. If other manufactures move to an internet based sales model, they would follow the playbook established by Tesla. Dealerships are very threatened by alternate sales models. I think Audi is also experimenting with direct sales.

I agree, and I think the reporter brought this out in the piece.

but I think (not surprisingly), Elon is positioning Tesla quite well. I wrote this to a friend who decided to buy Tesla stock last night...

Elon Musk, the CEO, wrote a blog a couple weeks back (link below). if what he wrote is accurate, I think he's described good strategic protection for the company to at worst have a good settlement with the dealerships.

The Tesla Approach to Distributing and Servicing Cars | Blog | Tesla Motors


I think what is key in Elon's blog is in this section


The U.S. automotive industry has been selling cars the same way for over 100 years and there are many laws in place to govern exactly how that is to be accomplished. We do not seek to change those rules and we have taken great care not to act in a manner contrary to those rules.
Automotive franchise laws were put in place decades ago to prevent a manufacturer from unfairly opening stores in direct competition with an existing franchise dealer that had already invested time, money and effort to open and promote their business. That would, of course, be wrong, but Tesla does not have this issue. We have granted no franchises anywhere in the world that will be harmed by us opening stores.


Elon clearly takes the position that Tesla sees it as wrong for a manufacturer to open stores in direct competition with existing franchise dealers that had already invested in selling the manufacturer's car. In other words, Elon is basically saying this is legal for us to do, but it would be illegal and wrong for GM, Mercedes or any of the other existing carmakers to drop out of the dealership system and copy us because the dealers have already put time and money into marketing existing carmakers products.


So as the real worry of automakers is there existing 17 million cars sold converting over to the Tesla Model, Tesla is saying it would be illegal for them to do so. this is why I think there is tremendous room for Tesla and the carmakers to cut a deal. Tesla selling 20,000 cars outside their system is a miniscule concern compared to the existing car manufacturers using Tesla as a precedent to break out of the dealership system.

 

[Bardlebee]

Show rooms ... sure. But to be equally as fair, it was a niche product. Not really competitive with any other homologated brand. The S is making waves in the luxury and near luxury market.

Oh yeah, I definitely agree with you and I agree that these lawsuits are recoils from the establishment being hit by disruptive, and better, technology. Frankly, getting Automobile of the year from Automobile magazine and who knows even Motor Trend is something pretty serious when an upstart does it. It's kind of salt in the wound so to speak.

 

[Norbert]

"Those dealers are investing millions of dollars in their franchises to make sure they comply with their franchise agreements with the manufacturers," he says. "Tesla is choosing to ignore the law and then is choosing to play outside that system."

I don't see how this is an argument at all, let alone a good one.

- They say they have brand specific showrooms. So will Tesla (in so far as "showroom" applies to showing the car and its features, and not to selling).
- They say they have to spend some amount of money to fulfill the requirements of the manufacturer. So will Tesla, as, of course, Tesla's showrooms will have to fulfill Tesla's requirements.

So what's the advantage? And why would it be "unfair"? And would that be the merit of the law? Does the law say something about "unfair" advantages? How would that be different than any manufacturer operated store, outside the car business?

I guess the legal questions are
a) Is Tesla allowed to sell cars over the internet, from California?
b) How is it affected by having local service centers?
c) How is it affected by having local advertisement, promotion, showrooms?

For example, are you, as a Massachusetts resident, not allowed to travel to Germany, buy a BMW or Mercedes, and then ship it to Massachusetts? If you are, then how is that different from buying a Tesla from California?

 

[sublimaze1]

For example, are you, as a Massachusetts resident, not allowed to travel to Germany, buy a BMW or Mercedes, and then ship it to Massachusetts? If you are, then how is that different from buying a Tesla from California?

Aside from EPA/DOT, you are spot-on. The barristers simply see dollar signs and are not having a problem with five and six digit retainers. They are happy to file. Happy to sit around and talk about it. Happy to bill you for it.

Silly, I say. Simply silly ...

 

[jerry33]

The only thing that seems to still be safe are items where you need to buy something same day, like groceries, or things you need to touch and feel, like clothes and shoes.

I buy a fair amount (over 50%) of my clothes off the internet. The roof I have on my house came from the internet (although a local installer did the installation).