From: Tesla a risky buy without dealer protection - Hartford Courant You can add comments to: Tesla a risky buy without dealer protection - Hartford Courant Tesla, the electric auto maker, wants Connecticut lawmakers to pass an ill-advised bill to allow direct sales of its cars outside of the current franchise dealership model, which has inherent and legal consumer protections. Connecticut's car dealers have offered to sell Tesla as we do all other electric vehicles. But Tesla touts its renegade status, and currently consumers can buy a Tesla only from the manufacturer in California. This doesn't offer the consumer protection of using a dealer. When it comes to recalls, warranties and securing the lemon law, dealers advocate for consumers when problems arise or car companies fail. The GM ignition switch recall and the collapse of Saab are two recent examples in which dealers advocated for consumers.The Yugo, a car from the 1980s, was briefly all the rage, but when the company went belly up, Yugo owners were left without a safety net. Saturn, Saab, Hummer — who expected these successful companies to collapse? Tesla wants to bend the rules without even reaching the business stability of these three cars. I like Tesla's vehicles, but it's a speculative company and the risk of it folding is greater than any other car maker. Should Tesla fold tomorrow, there will be a few hundred disappointed people in Connecticut, but the owners of most of these cars are among wealthiest 1 percent and this is typically their third or fourth car. However, if Tesla grows as the company predicts and it offers a less pricey car, then five years from now, many more people may own its cars. Then, should Tesla fold, there will be significant damage to the car owners. Why do the Connecticut auto dealers see this risk? Tesla has yet to earn a profit and has been heavily subsidized by the government from its beginning to today. Its business finances are supported by a speculative stock price. Here are the details behind that risk: •- In 2013, Tesla lost $65 million, its best year yet. Tesla's CEO Elon Musk recently mentioned 2020 as potentially the company's first profitable year. •- Tesla says it uses customer deposits for working capital. In its September SEC filing, Tesla had $227 million in customer deposits on future deliveries of autos. Financial disclosures describe these as $2,500 to $5,000 per vehicle, which equates to between 45,000 and 90,000 new cars. The company fell short of its plan to produce 35,000 cars in 2014. So, Tesla uses customers' deposits to help fund the company, but is not on track to produce the cars for which it has deposits. •- Tesla said in its 2014 annual report, "Our growth depends in part on the availability and amounts of government subsidies and economic incentives." Each Tesla earns $20,000 to $35,000 in Zero Emissions Vehicle, or ZEV, tax credits that the company sells to other manufacturers. In 2013, Tesla sold $129 million in ZEV credits. With state and federal credits, the subsidy nears $50,000 for each car. The car averages around $100,000 for sale, making it a $150,000 car when you add in the government subsidy. So the company generates profits by taking advantage of environmental credits rather than selling its cars. •- In 2013, Tesla issued $450 million in new stock to pay off a $465 million taxpayer-subsidized loan from the Department of Energy. Sounds good, but in turn, Tesla now owes the premium to Wall Street, not the federal government. Tesla sell its stock through great marketing and excitement about the product, but that cash infusion will dry up if it doesn't meet Wall Street's expectations. Monday, Ford was trading around $16, General Motors at $37, Tesla at $208. Ford and General Motors are making a profit. Tesla's success would be good for the electrical vehicle market, but we cannot ignore the tremendous risk that the company carries. Today, Tesla can work in the existing dealer system in Connecticut and sell its cars here with no changes to the law. My guess is that they will sell more cars if they try that first. James T. Fleming is president of the Connecticut Automotive Retailers Association, based in Hartford.