On Monday, May 25, Tesla opened its first store this year at the Westchester shopping mall in New York. Right from the start, NADA, the National Automobile Dealers Association, had issues with Tesla's Apple-like store approach, while many pointed out that 48 states prohibit company-owned car dealerships.
In litigation-obsessed America, it’s no surprise that the Greater New York Automobile Dealers Association has challenged Tesla’s three NYC stores. Its lawsuit was dismissed, but dealers in New York and Massachusetts sued Tesla last week claiming it was violating franchise laws.
Elon Musk, the company’s CEO and co-founder, yesterday posted an entry on his blog dismissing the dealers' accusations and defending the electric car maker’s novel strategy.
He wrote that Tesla doesn’t threaten the existing automobile franchise system and that it isn’t violating any state laws as it has taken “great care not to act in a manner contrary to those rules.”
Musk claimed that franchise laws prohibit factory-owned dealerships in order to avoid competition with independent dealers. This rule does not apply to Tesla, since “we have granted no franchises anywhere in the world that will be harmed by us opening stores”.
Moreover, he said that, if Tesla were to follow the existing strategy, traditional car dealers would have a conflict of interest: would they be willing to convince buyers on the merits of buying an EV, or would they simply stick with selling conventionally powered vehicles, which, after all, are the bulk of their stock?
From the consumer service aspect, which has also been challenged by the dealers, Musk pointed out that by the end of the year Tesla will have more service centers than stores, even in cities in which it has no retailers.
Last, but not least, he stressed that his company’s strategy is the way forward as far as electric vehicles are concerned. “In order to accelerate the adoption of EVs, we must be able to create and execute a business model that allows us to advance the knowledge of EVs in a convenient, accessible, no pressure environment.”
By Andrew Tsaousis
Story References: Automotive News
3 Comments:
I'm backing Tesla. These old American legacy systems have long since failed and there is no reason that Tesla should join their failure. The biggest benefit I see is that there is much less passing the blame between the manufacturer and the dealership that has so often been the case when a customer has a vehicle issue. Tesla's model is the future...the others are relics of the past.
America needs to wakeup and realize that matters have changed. NADA is a has-been of false security and a not longer needed organization. NADA is a remnant of "Too big to fail" that has already failed. Bye-bye.
This model for selling cars is long over-due. I would not be surprised if more boutique brands opt to try and challenge the traditional dealership model in the next few years as a means of improving a way of selling their cars. There is ample evidence of how frustrating/disturbing it can be in dealing with a sales-person in the current owner-operated franchise system. By changing the model to be one more like a retail experience where you pick your car, pick your options and pay the price at the end will be a far less stressful. Yes there is the likelyhood that moving to a retail model will likely also see the end of haggling over pricing (for the most part - some people will haggle on price for anything) but there is also the reality that for highly-sought-after models the traditional method of marking up the price of said car will also disappear. Overall I think this will ultimately be good for the car industry and for those that are dyed in the wool traditional car-sales people or buyers will still have that model around in the re-sale used car market, and there will always be an inventory of 1-2 year off-lease cars entering into that market.
I also agree with Bye-Bye Nada and others. Understandably, there are
dealership franchise laws that protect franchised dealerships from a
manufacturer that wants to compete with the dealership. But in this
case, Tesla is not served by any franchised dealership and NADA seems to
be bending the law to apply where it does not.
Since Tesla is
not competing with a franchised dealer, I would conclude that it is not
the dealerships that NADA is trying to defend, but the automakers, oil,
and gas companies that give NADA something to sell.
The
individuals behind these lawsuits should be fortunate for the financial
blessing that they have enjoyed to this point and either innovate or get
out of the way of those who will.
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