Posted: Monday, April 25, 2016 10:30 pm
At hearing, auto dealers say they could handle a Tesla franchise
By JOHN REID BLACKWELL Richmond Times-Dispatch
An administrative hearing on whether electric car manufacturer Tesla Motors Inc. should be allowed to open its own automobile dealership in the Richmond area has lasted for 16 hours, and it isn’t over yet.
On the second full day of testimony Monday, the Virginia Automobile Dealers Association presented its case for why Palo Alto, Calif.-based Tesla should be required to do what other auto manufacturers do in selling cars through the traditional network of independent dealers rather than directly to consumers.
During the eight-hour hearing at the Virginia Department of Motor Vehicles headquarters in Richmond, three dealership owners in Virginia testified that they want to sell Tesla’s vehicles and think they can make money doing so, despite Tesla’s argument that independent dealers would not make a profit on the company’s battery-powered cars.
“I currently have two pieces of land (in the Richmond area) where I could put a Tesla dealership, but I would be interested anywhere in the state,” said Dave Perno, president of Priority Automotive, which has Toyota, Nissan and Volkswagen franchises in the Richmond area.
Perno described himself as a big fan of Tesla cars, calling them “marvelous” and “neat.” He said he bought Tesla Motors stock several years ago.
“Tesla is going to change the automobile business, because of the engineering itself,” he said.
Perno and the other dealers — Liza Borches, president and CEO of Charlottesville-based Carter Myers Automotive Group, and Gardner Britt, general manager of Ted Britt Ford in Fairfax — said they believe the public interest would be served best if the company used independent dealers.
Six Virginia residents who own Tesla cars also testified Monday in support of allowing the company to open its own store in the Richmond area.
Tesla has high customer satisfaction ratings, and customers do not have to worry about haggling over the price, said Jonathan Fair, a Prince William County resident who bought a Tesla car last year.
“I am sure they (Tesla) have room for improvement, but I am not sure how dealerships can put themselves above the level that Tesla has set,” Fair said.
Tesla, founded by tech industry tycoon Elon Musk, first gained notoriety for its premium-priced electric cars. The company saw a surge in customer orders recently after it announced its more moderately priced Model 3, which has a starting price of $35,000.
Tesla sells its cars online, but the company has run into resistance trying to open retail stores in some states because of laws aimed at keeping the retail side of the business under the control of local owners.
A longstanding Virginia law prohibits automobile manufacturers from owning dealerships in Virginia, unless the DMV commissioner finds that there are no independent dealers in a community that could sell a company’s cars “in a manner consistent with the public interest.”
Tesla opened its only retail store in Virginia in February 2015 near Tysons Corner. The company was able to open that location only after going to court and reaching a legal settlement with the DMV and the dealers association.
The auto dealers group has filed a lawsuit in Fairfax County Circuit Court claiming that Tesla and the DMV have violated a legal settlement in which Tesla agreed to operate only one dealership in the state. The lawsuit seeks to stop Tesla from opening a second store.
Tesla has made it clear that it has no intention of using independent dealers.
On the first day of the DMV hearing on March 31, Tesla’s vice president of business development, Diarmuid O’Connell, testified that he could think of no scenario in which an independent dealer would make a profit on the company’s cars.
At that hearing, Tesla also had two auto industry experts testify that the company’s business model is not compatible with selling its cars through independent dealers.
On Monday, the VADA had two other auto industry analysts testify to rebut that argument.
The analysts also said independent dealers serve an important public interest by providing services to customers in local communities that automobile manufacturers might not provide, such as maintaining and repairing vehicles even when a manufacturer is in financial trouble.
“One benefit of the independently owned dealers is they don’t go out of business just because the manufacturer has,” said one of the analysts, Patrick Anderson, CEO of Anderson Economic Group in Michigan.
The DMV hearing is being held before an appointed hearing officer who will prepare a report on the evidence for DMV Commissioner Richard Holcomb, who then will determine whether to grant Tesla’s request for another store.
After eight hours of testimony on Monday, the hearing was continued. Tesla plans to present other witnesses at the next hearing. A date had not been set for that hearing, but it will likely be in mid-May.
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