Teslaês ongoing quest to sell its cars without dealers
Longtime automotive writer Joann Muller had an interesting column on Forbes.com recently about the difficulty Tesla is likely to encounter meeting its ambitious sales goals without using franchised dealers.
Tesla CEO Elon Musk recently told investors during a conference call that the company plans to produce 500,000 vehicles a year by 2018 to satisfy consumer demand for its EVs, Muller writes. The only barrier to Teslaês goals, Musk said, is production.
But another barrier, says Muller, is the franchise laws and legal rulings that prohibit Tesla from using its direct sales model in many states. Tesla admitted as much in its securities filings with the federal government. So far, Tesla has battled in court and won permission in a few states to operate a few retail locations; that is to say, New Jersey, New York, Ohio and Pennsylvania.
Muller highlights the ongoing battle in Virginia. Tesla now operates a store in Vienna, VA, under a 30-month trial negotiated with the Department of Motor Vehicles. Midway through the trial period, Tesla acted to change its agreement with DMV and open another store in Richmond. Accordingly, they have asked the DMV for an exemption to the state law that prohibits a manufacturer from running a dealership. The DMV commissioner can grant an exemption if there is no dealer independent of [Tesla] available in the community or trade area which can own and operate the franchise in a manner consistent with the public interest.
An administrative law judge heard testimony from witnesses hired by Tesla and VADA on behalf of the Virginia DMV. Teslaês witnesses (including a Yale economics professor) argued that Tesla was so new and novel, being a company in need of representatives with different sales skills than those used for other manufacturers.
Mary Ann Keller, a well-known industry consultant who spoke for VADA, countered, Plain and sample, Tesla sells and services passenger vehicles to consumers and whether its vehicles are powered by electricity or holy water, it is in the business of retailing automobiles.
The administrative law judge will make a recommendation to the DMV, which will decide the case. From a practical standpoint, writes Muller, it seems like Tesla is going to have to budge eventually.Download Bulletin PDF