Industry News: Tesla Gets Sued By Dealer Associations In Two States

[William Maley]

William Maley

Staff Writer - CheersandGears.com

October 22, 2012

Earlier this month, we reported that four states; Illinois, Massachusetts, New York and Oregon were complaining about Tesla and their stores.

"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," said a report in Automotive News.

Tesla didn'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. 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," said George Blankenship, Tesla's vice president of sales.

Now, two states have filed suits against Tesla. According to Automotive News, New York and Massachusetts' dealer associations have filled lawsuits against Tesla. Massachusetts dealer association is asking the court to shut down Tesla's store in Boston. New York's dealer assocation has filled suit against Tesla and the New York Department of Motor Vehicles, stating that the two "violated state franchise law by seeking, in Tesla's case, and granting, in the department's case, a dealership license for a Tesla store in Westchester, N.Y."

"The big question for a lot of the states is do they have the kind of statute that addresses the issue of who's allowed to be licensed to sell cars for their particular state.Tesla is a good poster child because they're setting up all over the place," said Mark Schienberg, president of the Greater New York Automobile Dealers Association.

Tesla still stands behind their defense of saying their stores are just a place to look at the vehicle. If you want to purchase a Tesla, you can do that on their website.

"They claim they're operating under the guise of a nonsales showroom, and we call that out as an outright scam," said Robert O'Koniewski, executive vice president of the Massachusetts dealer association.

Earlier this afternoon, Tesla CEO Elon Musk posted a piece on the Tesla Motors blog defending their retail strategy.

"Automotive franchise laws were put in place decades ago to prevent a manufacturer from unfairly opening stores in direct competition with an existing franchise dealer that had already invested time, money and effort to open and promote their business. That would, of course, be wrong, but Tesla does not have this issue. We have granted no franchises anywhere in the world that will be harmed by us opening stores.

Regrettably, two lawsuits have nonetheless been filed against Tesla that we believe are starkly contrary to the spirit and the letter of the law. This is supported by the nature of the plaintiffs, where one is a Fisker dealer and the other is an auto group that has repeatedly demanded that it be granted a Tesla franchise. They will have considerable difficulty explaining to the court why Tesla opening a store in Boston is somehow contrary to the best interests of fair commerce or the public.

It is further worth noting that these franchise laws do not even exist in the rest of the world, where almost three quarters of premium sedan sales take place."

Source: Automotive News (Subscription Required), Tesla Motors Blog

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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[G. David Felt]

I see these as legal challanges by the estabilshed core who are afraid of the change this will bring.

Some like myself love going to a dealership and test driving before I decide if I want to buy. Others love the web and will buy with no consideration to the drive. They look at auto's as an appliance and as such look to have a very different buying experiance.

In time, these franchises are going to have to change yet for the time being we will see these stupid lawsuits.

[pow]

I'm fine with paying MSRP if everyone else is paying MSRP too. It keeps residuals up.

The fact Apple never slashes prices and only sells desirable goods means that I'm able to enjoy a product that retails for 50% more at the same cost over the long run.

[Drew Dowdell]

..if left unchallenged, ultimately threaten the franchise system," said a report in Automotive News.

GOOD!!!

Tesla didn't see a problem with their stores.

Nor do I.

[G. David Felt]

..if left unchallenged, ultimately threaten the franchise system," said a report in Automotive News.

GOOD!!!

Tesla didn't see a problem with their stores.

Nor do I.

+1 of total agreement.

[PurdueGuy]

I agree - the dealer franchise system is hardly something to avidly protect. Let it be challenged so it will adapt. The consumer wins.