Tesla seeking to open Richmond facility

[CatB]

Best of luck to you all today! Crossing my fingers and praying and sending we-shall-overcome vibes to Richmond!!

One more data point. My sister-in-law (yorktown, VA resident) needs a new car. I advised her that even with USAA car buying service, she'd still have to start now to get their "pre-negotiated discount" and then email all the dealerships in the area to figure out who would actually HONOR that discount, and she'd still have to play them all off each other to figure out where to get the best price. I don't envy her. Unfortunately, she can't afford a Tesla (even a CPO one), so she's stuck with this horrible process. So, point is: even when dealerships have an option to be cooperative, they're a PITA.

 

[hsctiger93]

Anyone have updates on the hearing today?

 

[techmaven]

It was ... a bit strange. I came away very frustrated, but in a different way than I was in the other two hearing dates.

For a moment there, it had appeared that Mr. Small, the hearing officer, had sustained an objection to all of Tesla's rebuttal due to the amount of material that was presented that really wasn't germane to the case. However, pretty much all of what he mentioned as not being germane was material that the VADA lawyer had introduced, including the NHTSA suspension investigation, the handling of recalls, and so forth.

Sigh.

Further, Mr. Small made the remark that the statute does not say anything about the dealership needing to make a profit. It was a perfect opportunity for Tesla to make an argument central to the case, and I felt the Tesla lawyer did a C- job at doing it. And then they proceeded to allow the VADA lawyer talk at length with no rebuttal.

Double sigh.

This might all be for naught anyways, as the minds might already be made.

 

[bhzmark]

Is it over?

Any input from the public ?

In other words any input from what is supposed to be the focus of the hearing -- the public interest?

 

[CatB]

Unbelievable, maybe all the evidence and testimony should have been sent to the local newspapers' op-ed pages .

 

[Only Trons]

I attended the hearing yesterday. About 10 owners there. Plus a couple of folks from an EV organization .... don't know their names or whether they are Tesla owners.

No input from the public was allowed. Instead, the process was formal with witnesses sworn in and examined/cross examined.

Different Tesla attorneys this time -- same law firm but different attorneys. I think the attorneys yesterday did a better job than the ones representing Tesla at the last hearing.

I'm not going to say too much in this open forum which ANYONE can access. Interestingly, the VADA attorney (near the end of the hearing) went off and grilled Professor Morgan (a Tesla witness who supports direct sales) about several things:

1. "Tesla clubs that are required to sign non-disclosure agreements." Morgan had not heard of this. I don't know what TMC (as an organization) might have had to sign, but I would expect that use of the logos or trademarks or similar would have been covered (see the copyright notes at the bottom of any TMC page). I am not personally aware of any local club that has had to sign NDAs.
2. About Model S suspension "problems." Most of us know about that one person who has filed several reports with NHTSA about "critical" and "catastrophic" failure of Model S suspensions. Morgan deflected this by noting that she was called to testify as an economics expert, not an expert on the design or mechanics.
3. About Tesla common stock prices, the announced proposed merger with Solar City, and whether the falling stock price and merger represented a company about to fail (please note that I didn't get the exact words so am paraphrasing here).

Following up on the comment from Techmaven above, specifically: ".....Mr. Small made the remark that the statute does not say anything about the dealership needing to make a profit. It was a perfect opportunity for Tesla to make an argument central to the case ....." ---- I agree with his thought that Tesla could have used this as an opportunity to make SOME argument (what argument, I am not certain, but they let it slide). However, it seems to me that this applies to ANY and ALL business that operate. With the exception perhaps of the "banks too big to be allowed to fail" or the bailout of car manufacturers (neither of which were Virginia organizations), any business that starts or opens stores/facilities/etc does so at their own risk. Should they fail, then customers that may have been patronizing that establishment lose that connection. Whether it be a grocery store or car store. If the underlying thought was that a car dealership or manufacturer that failed would leave customers in the lurch, that is the risk of entrepreneurship. Fisker is a good example -- they went bankrupt and there was nothing the dealers could do. Fisker owners had to go elsewhere for service -- whether such service would have been under warranty or not. So if Tesla Motors has their own stores and goes bankrupt, there is nothing different in the outcome if instead Tesla vehicles were sold through franchised dealers.

The hearings are over. There will be some time allowed to get the transcripts together from all 3 hearing dates. (BTW, these are available to the public --- as this was a public hearing --- for some fee). The two legal teams will make their closing arguments in writing. But the VADA attorney used his last moments at the hearing to reinforce several thoughts he has raised multiple times. I will paraphrase them here --- remember, these are his words and not mine:

a. "Tesla actions are inappropriate"
b. "State law requires manufacturers to advertise for dealers"
c. "Proper forum is for Tesla to go to General Assembly and seek to change the law"

 

[CatB]

Thanks for the update - so frustrating.

Does VA law require manufacturers to advertise for dealers? really? If so, I hope Tesla's lawyers get a clue in time to take this up to SCOTUS.

 

[Only Trons]

@CatB :

No, there is no language in the law that requires manufacturers to "advertise for dealers."

 

[DriveElectricRVA]

This was the first time I was able to attend the hearing, but I felt well informed thanks to all of you who have posted your notes and background links.

Here are my notes, which I will post in chunks to make it easier to digest.

Daniel Small, the hearing officer, noted that the last hearing went off on tangents by discussing marketing, engineering and whether Tesla will be profitable.

Next was the cross examination of Maryann Keller, a consultant and witness for VADA that authored a study for them (Maryann Keller & Assoc – About Us)

• Tesla's lawyer attempted to undermine Keller's credibility, noting she:

1. Isn't an economist;
2. Has numerous ties to auto industry, including speaking at dealer association meetings and being on the board of several dealer groups; and
3. Had strong opinions about Tesla before conducting her study of Tesla for the VADA.

• Keller's report was skeptical that Tesla's direct sales model would scale up. But, she admits that the model appears to be working today at low volumes of production.
• Dealers need to purchase vehicles from auto makers at a wholesale price that takes into account the risks that they take which the auto maker does not. Therefore, it would not be economical for them to buy a car from Tesla at the retail price. She also affirmed that current Virginia law has an exemption for direct sales in the event that a franchise could not sell a car.

Next was the rebuttal from VADA's lawyer:

• In general, a potential franchise receives information on standards of operation and other requirements that the franchiser designates. Eleven parties have sent Tesla letters of interest even though they don't know what the requirements are and may not be able to sell their car profitably. Keller argued that Tesla has been a success, so why wouldn't people in the car industry want to apply for a franchise?
• Keller can't understand why Tesla thinks auto dealers couldn't sell their cars. Dealers have to follow standards set by auto makers, so Tesla can set whatever standards it wants and decide if an applicant for a franchise meets them. GM created a new approach for selling Saturns that some dealers didn't want to be a part of ... But some did agree to sell Saturns and got high ratings from customers.
• She sees nothing wrong with the pricing of Tesla vehicles -- the car is the same price everywhere, although you can get a better price by buying used cars in the gallery or on the CPO website. That is the market at work. But competition between dealers leads to better prices -- you can email multiple dealers and visit the one with the best price.
• She is critical of the closed loop that Tesla maintains from the sale of the car to repairs. It's fine if they want to restrict who works on their cars since the technology is innovative, but that monopoly power enables them to set whatever price they want for service and designate the location and manner in which vehicles are serviced.
• People who sell used Teslas are on their own, while dealers sell used cars.
• When a manufacturer has to do a recall, it designates a time period in which customers bring their cars to a dealer for repairs that it will pay for. If the recall work is done improperly and the customer comes back, that additional work is on the dealer's dime. Also, dealers don't try to upsell customers when they bring their cars in for recall work. So, the idea that people don't bring their cars in for recalls because of dealer misconduct is spurious.
• Dealers wouldn't base their decision to sell Teslas on hypothetical sales for just a year.

Next was the final rebuttal from Tesla's lawyer:

• If Tesla advertised for dealers, Keller has no doubt they would get offers. But Tesla's lawyer pointed out that the model for franchises making money is selling a product at a wholesale price. If Tesla chooses not to sell vehicles at a price lower that the retail price, wouldn't it be impossible for a franchise to make money? She admitted that it would be a challenge for someone to have a sustainable business under such an arrangement, which she finds to be arbitrary and disingenuous.
• It would be up to Tesla to decide where the dealer could sell. If it didn't want the dealership next door to a bunch of other dealers, it could do that ... Though zoning often forces car dealers to be in one place.

The hearing continued with testimony from two dealers who wrote letters to Tesla expressing their interest in selling their cars ... after VADA contacted them I'll cover that testimony in my next post.

 

[Barry F]

Does anyone know the date VADA sent their email requesting dealers to write to Tesla asking to be a franchisee? I want to reference it in a letter to the Commissioner.

 

[Hodginator]

I believe Mr. Hall from the VADA sent his letter telling dealers to ask Tesla to allow them to be Tesla dealers on Feb 17th. I may be off by a day.

 

[Barry F]

2016?

 

[Hodginator]

2016?

Yup

 

[bhzmark]

As a reminder send emails and faxes to:
[email protected]
TELEPHONE - EXT (804) 367-6606
FAX (804) 367-2296

volume absolutely helps. Even a short note.


Mention that you and other VA car and especially the thousands of VA Tesla buyers will be better off buying from Tesla stores in Virginia instead of having to go to Maryland or NC or Penn, or buying from independent franchisers who don't understand hybrids and certainly don't understand electric cars.

The public interest will be harmed if Tesla cannot open its own stores here in VA.

If so inclined, you can also mention that pursuant to VA Code § 2.2-4007.02 you hereby register your interest in working with the Commisioner's office to ensure that they receive the proper and necessary input from the public that is legislated in VA Code § 2.2-4007.02 and is supposed to be the subject matter of the hearing. But the hearing officer did not allow sufficient public input at the hearing and the Commissioner must allow that or an adverse decision will be challenged.

You can also mention things like:
- you will go out of state to Tesla stores instead of patronize the unpleasant VA franchise dealers. That hurts the VA car buyer and the VA economy as Tesla business will have to go to nearby states.

- With Tesla's sales and service presence and their valet service, their loaner and car rental policy and other methods create good competition for VA dealers and perhaps they will improve their sales and service in response to competitors like Tesla.

- Free market depends on competition and the market will improve in response to competition from Tesla.

- Everyone, even the dealers themselves, but especially car buyers, will be better off with Tesla selling directly in the VA and improving the overall cur buying and service experience.

Also see information at:

https://www.ftc.gov/system/files/documents/public_events/895193/panel_3_-_maron.pdf

https://www.ftc.gov/system/files/documents/public_events/895193/panel_2_-_goldberg.pdf


https://www.ftc.gov/system/files/documents/public_events/895193/panel_3_-_crane.pdf

https://www.ftc.gov/system/files/documents/public_events/895193/panel_3_-_mckelvey.pdf

Also good info:

http://www.laweconcenter.org/images/articles/tesla_letter_icle.pdf

Send your input to

[email protected]
TELEPHONE - EXT (804) 367-6606
FAX (804) 367-2296

 

[Electric700]

Thanks for the updates. It will really be great if the authorities allow new Tesla stores in Virginia. If more people express their support for Tesla's position, all the better.

 

[adiggs]

Fantastic info you posted @bhzmark . Anybody that hasn't read the 4 or 5 linked items, they read pretty fast and are well written and informative. Highly recommended.

 

[GSP]

Fantastic info you posted @bhzmark . Anybody that hasn't read the 4 or 5 linked items, they read pretty fast and are well written and informative. Highly recommended.

Thanks for pointing out that @bhzmark links above are worth the time to read. Well worth it.

Everyone should at least read the first one. It is short, sweet, and powerful. Typical for a Tesla work product, I must say. Great info to inform any state legislator and their constituents.

GSP

 

[Xenius]

@bhzmark I'm not currently a VA resident by my immediate family still live in Williamsburg and as such I'd love to be able to stop by on my way through Richmond. I sent an email to the address you provided above to voice my support. I also plan to convert my Dad to a Tesla owner as well (Model X is in his future).

Cheers.

 

[Bifff67]

Hmmm -

Tesla dealership could be coming to Richmond area

 

[survivor]

So, would they at least be able to keep the building as a service center if the DMV does not allow them to open a dealership?