Industry News: Tesla's Factory Stores Draws Ire From Dealers

[William Maley]

William Maley

Staff Writer - CheersandGears.com

October 9, 2012

The way Tesla sells their vehicles is very different from other automakers. Their seventeen stores are modeled after the Apple Store; most are in malls for anyone to walk in and look at the vehicles. If you want to order a Tesla, you can do an online reservation.

This has drawn the ire of dealers and dealer organizations, which have begun legal efforts to make Tesla's factory stores illegal. Their argument: "Tesla's factory-owned stores present unfair competition for rival dealerships, are inconvenient for consumers needing repairs and, if left unchallenged, ultimately threaten the franchise system," according to a new report from Automotive News.

"If a manufacturer sees that Tesla is successful with this kind of business model, who's to say they don't break out their own EV product lines and create a separate system that bypasses dealers? It's extremely problematic," said Bob O'Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association.

Four states (Illinois, Massachusetts, New York and Oregon) have complained about Tesla's business practices and are looking to the law to fight it. Other states have brought questions dealing with Tesla's stores.

"Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model. Other companies such as Daewoo did. All companies should be complying with existing laws in the same way dealers are required to," said Montana dealer and NADA Chairman Bill Underriner in a statement.

Tesla doesn't see a problem with their stores.

"We do what we're capable of doing, and we do whatever they let us do. It's unique for each location. If we can't be a dealer in a mall, we won't do reservations on-site. We tell people where to go on our Web site to make a reservation." said George Blankenship, Tesla's vice president of sales. "We just want to locate in high-traffic locations and interact with people when they are specifically not thinking of buying a car. We have no motivation to change the laws or how the car industry does its business."

Source: Automotive News (Subscription Required)

William Maley is a staff writer for Cheers & Gears. He can be reached at [email protected] or you can follow him on twitter at @realmudmonster.

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[David]

Interesting concept by tesla and it does bring up customer service questions about if it will succeed or fail. While this scares the auto association due to the rules and what they have in place is all about keeping things static. Yet even the auto industry needs to evolve.

I think Tesla will find they need a hybrid of retail store to service center, I do wonder how the states will take this on.

It also could be the start of a whole new JIT for buying auto's. You have a selection of demo models at a retail location people can come in and test drive and then order up what they want and have it delivered X weeks later so that every auto becomes a true custom order of only what you want.

Draw back to this way is you loose the ability to have instant gratification by driving off in your new auto that day or night.

Is the population ready to change buying habits? Are they willing to only accept a small defined version of an auto? Do they want true custom order of only the features one wants or dictated set lemming packages like Apple?

Eventually we will see what wins out, I am placing my bet on Tesla having to change to a model closer to the current dealer networks but in a hybrid that give more choice by being a bit more service / retail driven.

Dealerships need to wake up as I see a fundamental shift coming in the way auto's are sold and marketed.

[Drew Dowdell]

Moderator's note: Please steer clear of the EV debate in this thread. There is a very good debate to be had about the way franchise laws are set up and I don't want that to go off the rails by us getting back into the Value of the EV debate. There are plenty of other threads for that.