North Carolina Rejects Tesla's Dealership Application

[William Maley]

The latest way Tesla has been trying to get around states that ban direct sales (Michigan for example) is to apply for a dealer license. But this plan appears to not be working.

 

Automotive News reports that North Carolina's Division of Motor Vehicles has rejected Telsa's application to attain a second dealership license and said the automaker must go through a third-party dealership group. The ruling states that Tesla didn't meet the specific requirements to become exempt from a state law prohibiting manufacturers from owning dealers.

 

Tesla already has one store in North Carolina in Releigh and was hoping open a new store at their service center in Matthews (suburb of Charlotte).

 

The DMV order signed by signed by Administrative Hearing Officer Larry Greene, said there are “at least three independent dealers” in the market that would be able to own and operate a Tesla dealership “in a manner consistent with the public interest.”

 

The news gets slightly worse for Tesla. Earlier this month, The Detroit News got their hands on documents between the state of Michigan and Tesla ranging from 2014 to early 2016 detailing the saga of Tesla trying to sell vehicles in the state. The most recent development saw the Secretary of State’s office requesting Tesla to provide proof that it is a franchised dealer. If not, the state will not rule on the applications.

 

Secretary of State spokesman Fred Woodhams in an email said this it’s “an explicit requirement in state law.” Tesla doesn't see it that way.

 

“We don’t harm any franchised dealers by selling directly; we have no relationships with any franchised dealers we would be unfairly competing against. Unlike if General Motors opened up their own store-owned dealership across the street from a franchised dealer that they gave rights to,” said Todd Maron, Tesla's general counsel.

 

We highly recommend checking out The Detroit News piece to get the full picture of this mess.

 

It is becoming very clear the only way for this to be settled once and for all is for it to go to the courts.

 

Source: Automotive News (Subscription Required), The Detroit News

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[Drew Dowdell]

I applaud Tesla for continuing to challenge this outmoded business model 

[ccap41]

I applaud Tesla for continuing to challenge this outmoded business model 

Agreed. 

[hyperv6]

What the issue is here is this. 

GM is not so much against Tesla selling direct as they are opening the door for anyone to sell direct. This is what gets lost in this argument. It is not the cause they are against the effect. 

I wish i could find it again but it was laid out well in a story a while back. Automakers are not against Tesla but they are against selling direct if they are not able to shed the dealers they have now. 

GM is a good example. First they generally now have way to many dealers as it is. During Chapter 11 they were not permitted to close the dealers they wanted to close. So while they lost some closing divisions they still have way too many Chevy. Cadillac and Buick dealers. 

 

Now if you open the door to any new MFG coming into our market and letting them sell direct in a limited number of locations they would be at a distinct advantage over any existing dealer network. Well if it is not China that is scaring them who is? The Chinese MFG's that are just wanting to come into to this county with cut rate prices already and the ability to leverage even more profit selling direct. It is not Tesla's 50K-100K cars when ever they get there but the Cars Chinese MFG can bring in and sell in the millions. 

 

Think the Chinese can't do that then look at Hyundai and were they were 20 years ago in this country and look now. 

 

Now if the government would give the ability to let automakers end their franchise deals with the dealers with no penalties and protect them from lawsuits then they would be all in on the selling direct. The problem is there is a snow balls chance the government will permit this so the MFG are willing to force the issue and keep a level playing field with the new incoming MFGs. 

 

You can call it out dated and past its time but it also is a Pandora's box that was opened decades ago that was much easier to open than close. 

 

I would love to see selling direct or even on Amazon or what ever but I do not want to see any American Automaker put at a disadvantage to a maker that could come in with the unfair advantage. 

On top of this you have the dealer associations fighting this as they know they are dead meat if the government gives any automaker the ability to sell direct. There is a lot of money in some of these dealer networks anymore as they are national chains not just some mom and pop store. People like Penske and Hendricks have invested billions and do not plan to lose their cut. 

 

I just wish more people would look beyond the Elon cheer leading and learn what all is going on here and just what all is at stake for each party and you can better understand why they are fighting this. To think it is all about Tesla is foolish. It is the 8000 pound gorilla on the other side of the Pacific they are more concerned  about not Bonzo in California. 

 

People are tired of high car prices and the market is ripe for cheap models from China that people will buy because it is all they can afford. Their entrance to our market would be devastating if they could retail from Walmart or even Amazon if all MFG could not participate. 

 

This is a deal it has to be everyone or no one and there is no in between. 

[Drew Dowdell]

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

[G. David Felt]

Let Tesla sell direct, the one big issue for me is their using a crappy company, Pet Boys to service their expensive auto's and Pet Boys has terrible service.

 

Let this force the existing auto companies to step up their game with quality world class service as I want to have my auto taken care of be it my trailblazer AWD SS or any of my Cadillacs in the same high quality manner.

 

I like dealerships where I can go and view the options, talk to a person and then test drive and either buy or order up my new ride. I see no difference than Tesla having their own stores and needing to service them. I would have liked them to have their own service shop but instead they took the cheap way out of subcontracting it out to  a joke of a auto company.

[FAPTurbo]

I expected this to be about bathrooms. Because NC is a toilet. 

[ocnblu]

You've been there?

[G. David Felt]

I expected this to be about bathrooms. Because NC is a toilet. 

Did you remember to flush?

[regfootball]

what i don't like about GM still, is many of their dealers are still old, and operate in the old ways of business.  Meanwhile, the Euro and Japanese mfrs have really brought out the artillery with nice new push dealerships, polished standardized sales approaches (that are often one price or more customer friendly) and have huge inventories.

 

I have a Chevy dealer right in my home town and another about 5 miles away.  Both are run by old school empires that are small end or perhaps little arms of bigger ends.  But their sales and service tactics are 1970's still.  Very few Chevy dealers have really customer friendly operations IMO.  I can't buy from the 4 or 5 closest Chevy dealers to home because of their environment and tactics.  not at all modern.

 

I think this is where Chevy is in a pickle.  Lots of their old guard slowing their ability to change.  Remember the buickmans of the world.

Edited May 25, 2016 by regfootball

[G. David Felt]

Agree, Lately it seems that all Detroit based auto companies have taken up the hated Used Ford Sales approach and really lack any common sense customer service focused sales approach.

 

GM need to reboot the dealer and if the dealer is not willing to change, invest in updating to be a modern dealership, then they loose their dealership rights and become independent (non auto focused franchise, like a generic used car lot) or close down.

[hyperv6]

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

 

See that argument falls apart as Tesla can do like everyone else was forced to do and sell dealer franchises like everyone else. 

[hyperv6]

Agree, Lately it seems that all Detroit based auto companies have taken up the hated Used Ford Sales approach and really lack any common sense customer service focused sales approach.

 

GM need to reboot the dealer and if the dealer is not willing to change, invest in updating to be a modern dealership, then they loose their dealership rights and become independent (non auto focused franchise, like a generic used car lot) or close down.

 

You do realize all the tactics that GM employs to try to force and leverage dealers to obey the agreement. 

The surveys they send out they do not expect good or above average as they want perfect reviews. If a dealer fails these numbers they are cut from dealer hold back programs and discounts. Also saturation programs on what cars go where get directed to high scoring dealers and poor performers get cut back on hot models. 

 

They have tied to force poor dealers out many other ways too. I have a co worker who worked sales for 25 years at a top performing dealer and he has told so many stories on what GM tries but the dealers tend to know how to counter and often fight back with legal and political threats. It is a constant tug of war. 

 

Even in the bail out just look a what happened there. They tried to kill so many under producing dealers and poor dealers but yet the dealers cried to DC and made GM a villain for trying to close these bad dealers down. 

 

Now for the better dealers GM will even pay for the updates to help them. I have a GMC used to be Pontiac dealer locally. They are near a very bad Chevy, Buick dealer. GM would love the GMC dealer to take control of the bad dealer but as of yet not been able to force them out. The GMC dealer is so good that they are making money hand over fist just selling GMC trucks. I have never worked with a dealer that was so good to work with. 

[hyperv6]

I expected this to be about bathrooms. Because NC is a toilet. 

 

Actually NC is really one of the best places in this country to live. 

[regfootball]

 

Agree, Lately it seems that all Detroit based auto companies have taken up the hated Used Ford Sales approach and really lack any common sense customer service focused sales approach.

 

GM need to reboot the dealer and if the dealer is not willing to change, invest in updating to be a modern dealership, then they loose their dealership rights and become independent (non auto focused franchise, like a generic used car lot) or close down.

 

You do realize all the tactics that GM employs to try to force and leverage dealers to obey the agreement. 

The surveys they send out they do not expect good or above average as they want perfect reviews. If a dealer fails these numbers they are cut from dealer hold back programs and discounts. Also saturation programs on what cars go where get directed to high scoring dealers and poor performers get cut back on hot models. 

 

They have tied to force poor dealers out many other ways too. I have a co worker who worked sales for 25 years at a top performing dealer and he has told so many stories on what GM tries but the dealers tend to know how to counter and often fight back with legal and political threats. It is a constant tug of war. 

 

Even in the bail out just look a what happened there. They tried to kill so many under producing dealers and poor dealers but yet the dealers cried to DC and made GM a villain for trying to close these bad dealers down. 

 

Now for the better dealers GM will even pay for the updates to help them. I have a GMC used to be Pontiac dealer locally. They are near a very bad Chevy, Buick dealer. GM would love the GMC dealer to take control of the bad dealer but as of yet not been able to force them out. The GMC dealer is so good that they are making money hand over fist just selling GMC trucks. I have never worked with a dealer that was so good to work with. 

 

yes the dealer in my hometown here was slated for  closure and they contested it with all their might, and ended up keeping it.  Even with another dealer 5 miles away.  And they have not changed their dealings one bit.  Facility still sucks.

[hyperv6]

Here is more evidence that GM has no love for some dealers and that they are more of a pain for GM the more they try to enforce the franchise agreement. 

 

http://gmauthority.com/blog/2016/05/new-york-court-ruling-puts-general-motors-dealer-sales-performance-metric-under-review/

[hyperv6]

 

 

Agree, Lately it seems that all Detroit based auto companies have taken up the hated Used Ford Sales approach and really lack any common sense customer service focused sales approach.

 

GM need to reboot the dealer and if the dealer is not willing to change, invest in updating to be a modern dealership, then they loose their dealership rights and become independent (non auto focused franchise, like a generic used car lot) or close down.

 

You do realize all the tactics that GM employs to try to force and leverage dealers to obey the agreement. 

The surveys they send out they do not expect good or above average as they want perfect reviews. If a dealer fails these numbers they are cut from dealer hold back programs and discounts. Also saturation programs on what cars go where get directed to high scoring dealers and poor performers get cut back on hot models. 

 

They have tied to force poor dealers out many other ways too. I have a co worker who worked sales for 25 years at a top performing dealer and he has told so many stories on what GM tries but the dealers tend to know how to counter and often fight back with legal and political threats. It is a constant tug of war. 

 

Even in the bail out just look a what happened there. They tried to kill so many under producing dealers and poor dealers but yet the dealers cried to DC and made GM a villain for trying to close these bad dealers down. 

 

Now for the better dealers GM will even pay for the updates to help them. I have a GMC used to be Pontiac dealer locally. They are near a very bad Chevy, Buick dealer. GM would love the GMC dealer to take control of the bad dealer but as of yet not been able to force them out. The GMC dealer is so good that they are making money hand over fist just selling GMC trucks. I have never worked with a dealer that was so good to work with. 

 

yes the dealer in my hometown here was slated for  closure and they contested it with all their might, and ended up keeping it.  Even with another dealer 5 miles away.  And they have not changed their dealings one bit.  Facility still sucks.

 

 

Yes GM tried and is trying to cut the number of stores but they are stopped with legal actions and government intervention. 

 

I have a local dealer here that should have been killed years ago. Not only are they small and very low volume but they are the classic rip off dealer with the old bait and switch tactics and other games, 

Ford has had  similar issues here as one dealer here was making deals to discount cars more if the buyer signed an agreement to take all the dealer work else where. Ford tried to shut them down but could not. Ford even tried to have a dealer here that they owned to sell all their lease turn in cars. It was a loop hole till it was challenged and now it is gone. 

The fact is Detroit automakers have no love for the dealer system but they also want all automakers on a level playing ground So if they are forced to sell cars with one arm tied behind their backs they want all new comers to have to play by the same rules to if they can not be permitted to close down dealers. 

 

The only way GM and the others can lose dealers is to buy them out and can you imagine what that would cost. That would take money they just don't have or is needed to be spent on something else. 

[Drew Dowdell]

 

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

 

See that argument falls apart as Tesla can do like everyone else was forced to do and sell dealer franchises like everyone else. 

 

 

That horse left the barn over 100 years ago.  It's time to update the rules.

[ccap41]

 

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

 

See that argument falls apart as Tesla can do like everyone else was forced to do and sell dealer franchises like everyone else. 

 

Just because it is the old way of doing things doesn't mean it is the right way or fair way of doing things. 

[hyperv6]

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

 

See that argument falls apart as Tesla can do like everyone else was forced to do and sell dealer franchises like everyone else.

 

That horse left the barn over 100 years ago.  It's time to update the rules.

I fully agree it needs to change but how do you do it and not put any of the MFG that have been forced into this 100 years ago not be left at a disadvantage? How do you yank dealerships some good but low volume 80 year old family businesses away from them?

To just open the door to new MFG would be unfair to the old ones you forced into this in the first place.

It would be like going to Indy and telling the teams like Penske and Foyt that you started racing when wings were not legal and you are no longer permitted to use them. But any new team coming in can use all the wings they want to use.

Now if you chose to run with wings we will take you to court and file a law suit you will not win.

The fact is this is not just some simple knot you can cut out or untie easily. There are many sides to this and to roll this back to a level field to the satisfaction of all parties is very difficult to next to impossible with out someone losing big here.

Then you factor in any car company not in the market now that would come in from China or India at much cheaper priced and even lower overhead with no dealers to share cost with. That would finish off most of the standing brands here that are not strong and weakening the strong brands we have left.

Toss in on this that the media pounds the automakers as the evil empires taking on the poor mom and pop dealers they find to do a story on and no one in Washington will touch this to undo the knot they tied.

Finally never underestimate the dealer associations. This group is very powerful much like the Teamsters but in their case very wealthy people who own large groups of dealers. Names like Penske, Hendrick Buffet, Spitzer and other large and powerful owners are involved here. They will not let their dealers lose any advantage easily.

Note too if Elon dropped this tomorrow the fight would still go on till the government levels the field for the MFG. If they do that and let the MFG end all agreements they would take this deal as fast as they could shake on this.

But the biggest issue is people think you can either just open the door to new MFG and not address the old dealer issues and they miss the repercussions of not addressing it.

There is a lot of money at risk for the dealers and the MFG do not want to give new coming MFG any more advantages than they themselves can get.

This is why when we change or make laws we really need to see if there are ways to undo them later if needed. Otherwise you get stuck with them and no easy way out.

Now do you see DC giving new MFG from China an advantage over the companies they just spent billions on to bail out? As for now Tesla is making the noise but they are not the point of concern just their goal is.

[ccap41]

Maybe the dealership network should sell itself to the public and just make going to a dealership a good experience rather than one that people dread. Just be the best they can be as opposed to forcing their system on other companies.

[Drew Dowdell]

It's rather simple.... if McDonalds, Marriott, Apple, etc can have both corporate owned and franchised stores, then so can dealerships.   Car dealerships deserve ZERO special accommodation to protect their businesses from competition.  I can't think of a single other business that has such archaic laws aside from the liquor laws in some states.

[hyperv6]

That argument falls apart though in that there are no independent Tesla dealerships for Tesla Corporate to compete with. I can somewhat see the argument against GM owned stores when there are lots of GM independent dealers out there... But that's not the case with Tesla.

 

See that argument falls apart as Tesla can do like everyone else was forced to do and sell dealer franchises like everyone else.

Just because it is the old way of doing things doesn't mean it is the right way or fair way of doing things.

Never said it was right or fair.

What I am trying to get across is that this is a business situation that many people have a lot of money and power tied up in this and it will be a bloody financial mess to undo it.

The Dealers and the well financed dealer associations are not going to go quietly.

The automakers can not afford to buy out dealers but they can fight to keep the rules to where a new incoming MFG can not take advantage of a reform they can not share in.

And the politicians are not going to want to be seen as aiding Import and Chinese MFG's come in and do damage to Auto MFG they just spent billions bailing out.

You tell me how you undo this to where the automakers are not hurt, The dealers can not file lawsuits and politicians are not afraid to support and then you have it made. But at this point there is no way without some losing and losing big.

Keep in mind this is not unlike the Nuclear Proliferations. This would be much better world if everyone got rid of them. But the truth is while they may agree to deals to limits they will never give up all of them or give up what they feel is an advantage. We have had them for 60 plus years now and once the Genie was out of the bottle there is no way to get it back in again.

To change this to where everyone is in agreement money has to go to the dealers to buy them out but who has the money or is willing to do it? No one. The Automakers can not afford it and the government is not going to do it so you are left with them kicking the can down the road. Note the larger the national dealers become the more power they will hold. Hell even Penske considered buying Saturn at one point. They are not the local mom and pop dealers of old anymore.

[ccap41]

How to do it without hurting the manufacturers? Make dealerships worthy of making people want to go to them. Keep their dealership network but make them good. Don't make them hostile, dirty, crummy employees/salespeople. Beat the competition the way they know how(or should know how), great customer service. The best businesses/corporations out there all have one thing in common, great customer service. McDonald's, while employing idiots at times, know how to make a customer happy at the end of the day. Kiss the customer's ass and give them the free crap they feel entitled to(right or wrong) and boom customer leaves happy. Treat a potential 15-100k spending customer like they are about to spend 15-100k not like they're(the salesperson) about to receive a $200 commission check.

[Drew Dowdell]

The very BEST thing that could happen is that manufacturers start competing with existing dealer networks. 

[ccap41]

The very BEST thing that could happen is that manufacturers start competing with existing dealer networks. 

Exactly! 

[hyperv6]

The very BEST thing that could happen is that manufacturers start competing with existing dealer networks.

But that is not an option as the government will not permit this.

This is a three way deal and it does not work that way.

Also Mc Donald's service sucks at many outlets and the food is nothing to write home for anymore. Now the workers want $15 per hour and will only drive up cost for lousy food.

As for the other franchises none of them were forced into it and don't have nearly 100 years of legacy to deal with.

Please follow up on this as it represents the thinking and power the MFG are up against and with little support to fight it.

http://gmauthority.com/blog/2016/05/new-york-court-ruling-puts-general-motors-dealer-sales-performance-metric-under-review/

This is the kind of BS they are dealing with now and if the MFG fight it they end up in court or with some government agency making it difficult to fight what they have a right to fight.

If there was a simple affordable way out the MFG would have taken the path you wish for but that is just it there is no simple affordable path.

Also stop comparing other franchises here as very little if anything applies. The lobbying efforts and power of the dealers is much more than nearly any other group out there.

Ford GM and Chrysler has tried to bring in factory stores over the last several decades and each time they get shut down by the government or court ruling. On the other hand these dealers continue to get away with breaking franchise rules with no penalty.

To be honest the automakers have made more progress with the UAW than the Dealer Association.