"Plan B" Thoughts/Proposals for Mixed (i.e. franchise/factory) Dealer Model

[igotzzoom]

I know for some this may sound like capitulation to the strong-arm tactics of NADA and its state associations, but rather than fight these tedious and cumbersome legal battles state-by-state, I've thought of a few scenarios that might be perceived as less antagonistic by the dealers, and radically expand the potential distribution channels for Tesla.

1) Pre-Qualified Franchisees:
Although maybe it couldn't explicitly come out and say as much, Tesla could use its leverage and relationship with Mercedes and Toyota, and "short-list" top-tier Lexus and Mercedes-Benz franchise owners that have top-rated customer service as candidates to have stores. The buying experience at luxury-brand dealerships is usually much different and better than "mass-market" brands. I would think dealers with experience selling luxury brands could handle the sales, marketing and service (both customer and vehicle) responsibly and effectively.

2) Strict Location/Sales Requirements:
One of the items that Musk has said makes him uneasy about the franchise model is selling EVs side-by-side with ICE vehicles. Make one of the franchise requirements be a stand-alone location, not co-located with another brand or franchise. I don't know if Tesla could legally require it as part of the franchise terms, but maybe even make the salespeople non-commissioned.

What are everyone's thoughts?

 

[bollar]

On 2, the Texas dealers have already agreed:

Both sides are not underestimating the determination of the other to prevail.

"I sat down in Palo Alto with Elon Musk, hat in hand, and said we want to partner with you, you can have it exactly as you want it — 'Tesla of Austin,' " said Wolters of the Texas dealers association. "You can do it just as you want to, within our law, you just can't own the showroom."

Musk, Wolters recalled, didn't cotton to the suggestion, leaving the room quickly, but not before pledging to spend an inordinate amount of money to battle automobile franchise laws.

Wolters noted, however, that he was taken for a nice drive in one of Musk's Teslas before heading back to Texas.

"He's just determined to do it his own way," Wolters says.

. Tesla Rides High, But Faces Formidable Foe: Car Dealers : NPR

On 1, I like the many Mercedes I have owned over the years, but I do not trust my dealer to successfully sell Teslas. The sale and service experience are so different, I don't think the dealer could adapt. Definitely couldn't adapt to the no-profit service model.

Maybe one could find some out of work Saturn employees to come close.

 

[Doug_G]

The moment they have any franchised dealers, all sort of laws would kick in and they probably wouldn't be able to have any stores.

Also I really do think that selling Tesla through ICE dealers is doomed to failure. If they do go to a franchise model, they will have to insist that their dealers sell ONLY electric cars.

This is disruptive technology and I believe it HAS to be distributed through separate organizations in order to be successful.

 

[treehugger350]

Agreed with the first two responses. As much of a headache as this has made, Tesla has the resources to hire good lawyers and fight this battle. I think at this point it would compromise the integrity of the company to back down to the auto dealers. Also, I think Elon's reaction to the dealers at the shareholder's meeting will do as he thinks in that customers in the states where Tesla is currently being blocked will eventually not put up with it. Imagine hearing about friends and family owning a Model S and you have to drive out of Texas or NC to go get one. You'd be pretty upset pretty quickly.

 

[igotzzoom]

For what it's worth, I'm with you guys in wanting to see Tesla prevail against the dealers, who I think are being unreasonably obstructionist. I think the success will depend on if it wins a federal case. I think the company has one heck of a case on the basis of interstate commerce, especially with the North Carolina rules. Guess we'll have to wait and see.

 

[gregincal]

For what it's worth, I'm with you guys in wanting to see Tesla prevail against the dealers, who I think are being unreasonably obstructionist. I think the success will depend on if it wins a federal case. I think the company has one heck of a case on the basis of interstate commerce, especially with the North Carolina rules. Guess we'll have to wait and see.

It's only North Carolina that's actually trying to prevent Tesla sales directly. In all the other states the only issue is around running the showrooms. The worst outcome is that the dealers actually prevent Tesla from having a showroom in the state (however, they currently have failed to prevent Tesla from opening a showroom in any state, despite trying). The secondary outcome is prevent Tesla from giving test drives (which they have prevented in a few states, and which presumably has some impact on sales). The final part is having a slightly more cumbersome purchase process in those states, but I don't see that as a huge deal.

 

[PeterB]

How about offering free flights/accommodations to a neighboring state for delivery?

Not sure it could work, and definitely more snotty, but register the cars in a neighboring state so NC loses out on the sales tax revenue. :smile:

 

[jeff_adams]

Elon made an excellent point at the shareholder's meeting. There hasn't been a successful new car company that used established dealers in the last 90 years. How can he possibly trust them to be as committed to the sale as Tesla is? Ask Coda and Fisker how that worked out.....

 

[igotzzoom]

I think Coda's problem was that it was a P.O.S. car based on a 10 year-old Mitsubishi platform. Who would want to sell it?

 

[bollar]

How about offering free flights/accommodations to a neighboring state for delivery?

Not sure it could work, and definitely more snotty, but register the cars in a neighboring state so NC loses out on the sales tax revenue. :smile:

Well, VA is out, but in another thread, I suggested, somewhat as a joke, that Tesla setup a delivery center on the SC side of Carowinds. Unfortunately, SC only has a $300 tax, so NC will still get their revenue.

 

[igotzzoom]

How about offering free flights/accommodations to a neighboring state for delivery?

Not sure it could work, and definitely more snotty, but register the cars in a neighboring state so NC loses out on the sales tax revenue. :smile:

I think this may be the route they take with customers living in states with especially draconian dealer franchise laws. NADA should be careful how hard it pushes on this issue. They could end up shooting themselves in the foot.

 

[stopcrazypp]

Like Doug G says, having just one franchise completely knocks down one of the main arguments Tesla is using: that they have NO franchises and thus existing laws designed to prevent unfair competition that ban factory owned stores/dealers do not apply to Tesla. That's what Tesla used to win court cases in Massachusetts and I'm sure there are other states have given Tesla a dealer license on similar grounds. Just one franchise will knock that down and it seems to me NADA is having a US-wide strategy to bait Tesla into franchising in select states (NC is the clear example, Texas is less severe but also one).

 

[brianman]

Like Doug G says, having just one franchise ...

"Please go out with my roommate. She's got a great personality. It's just 1 date. What harm could come of it?"

 

[voidptr]

How about offering free flights/accommodations to a neighboring state for delivery?

Not sure it could work, and definitely more snotty, but register the cars in a neighboring state so NC loses out on the sales tax revenue. :smile:

NC collects the sales tax when you register with the DMV. It doesn't matter if you take delivery from Tesla in another state, they get their cut when you go to put plates on it.

 

[bollar]

NC collects the sales tax when you register with the DMV. It doesn't matter if you take delivery from Tesla in another state, they get their cut when you go to put plates on it.

NC does have reciprocity with other states -- so if you purchased and took delivery in another state, paid sales tax in that state AND the taxes were higher than NC's taxes, then NC wouldn't get anything. Problem is there aren't any convenient states that fit that bill -- Maryland, Georgia and Tennessee, I guess.

 

[voidptr]

NC does have reciprocity with other states -- so if you purchased and took delivery in another state, paid sales tax in that state AND the taxes were higher than NC's taxes, then NC wouldn't get anything. Problem is there aren't any convenient states that fit that bill -- Maryland, Georgia and Tennessee, I guess.

I don't see too many North Carolinians lining up to pay more taxes to another state and stiff our own on the sales tax, just to make a point. If forced to take delivery out of state, I think most people would just go to the nearest bordering state and pick it up.

However, I'm not even sure that's likely. Even under the proposed bill, I think they'd get away with the current state of affairs where the purchase actually took place in California as an export, and it's already "yours" once it's on the truck; if the worst happens I hope they'll keep as they are and dare the state to take them to court.

 

[BenTesla]

My feeling is that these dealership organizations are deep pocketed and don't want to lose as much as Elon wants to win, Am I right?

I guess my question is will Tesla have to continue to fight this battle when they begin to sell more and more cars overseas? Do they have similar laws?

 

[igotzzoom]

My feeling is that these dealership organizations are deep pocketed and don't want to lose as much as Elon wants to win, Am I right?

I guess my question is will Tesla have to continue to fight this battle when they begin to sell more and more cars overseas? Do they have similar laws?

My understanding is that these very protective dealer franchise laws are a uniquely American institution. I don't think they will face as much opposition opening factory-owned stores overseas. I think long-term, NADA knows they're fighting a losing battle. They know public opinion is OVERWHELMINGLY against them, yet they keep trotting out these insipid, hollow talking points about "looking out for the customer." Believe it or not, I think the fact that the Texas legislature convened before the bill could be voted on is actually a good thing. When it re-convenes, it'll be closer to the on-sale date of the Gen-III, and it may result in a more rational law, as well as increase public pressure to increase availability of the cars.

 

[jkirkebo]

My feeling is that these dealership organizations are deep pocketed and don't want to lose as much as Elon wants to win, Am I right?

I guess my question is will Tesla have to continue to fight this battle when they begin to sell more and more cars overseas? Do they have similar laws?

Nothing like this anywhere in Europe, to my knowledge. Certainly not here in Norway.

 

[gregincal]

I don't see too many North Carolinians lining up to pay more taxes to another state and stiff our own on the sales tax, just to make a point. If forced to take delivery out of state, I think most people would just go to the nearest bordering state and pick it up.

However, I'm not even sure that's likely. Even under the proposed bill, I think they'd get away with the current state of affairs where the purchase actually took place in California as an export, and it's already "yours" once it's on the truck; if the worst happens I hope they'll keep as they are and dare the state to take them to court.

I don't even see how the state could take them to court, since what they are doing they are doing in California. It seems to me all the state could do is arrest the consumer for violating the law, since they are the one who illegally ordered a car over the internet.