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The Fight Over Tesla

A Tesla car in Frankfurt, Germany. (AP)

A Tesla car in Frankfurt, Germany. (AP)

Electric cars are here. Ford, Nissan, and Honda are just some of the companies that are making All-electric cars. And as batteries improve and electric charging stations pop up across the country, electric car companies are hoping to revolutionize the auto industry.

Then there’s the Tesla Motor company of California, which wants not only to revolutionize WHAT we drive — but how we buy it. Tesla makes the Model S, a luxury all-electric car that sells for about 100-thousand dollars. And the company wants to bypass traditional dealerships and sell directly to you from its own show-rooms — in the same way that Apple sells its Macs and I-pads from its own Apple Stores.

Tesla has a store in the Natick Mall, but here’s the problem: it’s against the law to sell directly to the public. In all 50 states, car makers are prohibited from operating their own dealerships. But Tesla wants to change that — and here in Massachusetts, the auto-dealers are pushing back.

Guests

Galen Moore, Web Editor at the Boston Business Journal. You can read his articles on Tesla here.

Diarmuid O’Connell,vice president, Business Development at Tesla Motors.

Scott Dube, president of the Massachusetts State Automobile Dealership Association.

More

Bloomberg “If there’s a secret to Tesla’s success, it’s been to outsource as little as possible. The company has insisted on doing just about everything it can in-house, which has helped it develop intellectual property and control costs. Tesla built the battery pack replacement feature into the Model S, for example, and then designed the robots that will do the work.”


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  • http://neilblanchard.blogspot.com/ Neil Blanchard

    A couple of clarifications: the Tesla Model S costs between $70-100K, depending on the battery pack capacity and the performance level and other options.

    The reason that the “auto dealers” don’t want to compete against Tesla.  And an electric car requires virtually NO regular maintenance.

    Neil

  • Jeffreyhyman

    As the proud owner of a Tesla Model S I can say that Tesla is selling an experience, and because their business is just starting out they need a chance to work out the kinks and learn how to operate before considering a Dealership relationship and successfully duplicatingf the experience. The one questions I allways get, “what don’t you like about your Tesla Model S” , my answer is “having to drive any other car”.

  • http://www.kazzmedia.com kazzmedia

    Tesla is in the right. Other manufacturers and dealers need to toughen up. If you want to compete, try being innovative instead of being a cry baby and complaining to the court.

  • Edward Arthur

    30 years ago I bought my first car, a 58 MPG diesel Rabbit.  You cannot buy a gas/diesel car which gets 58 MPG today.  Why is that?  The traditional car manufacturers do not deserve to be rewarded.  Thankfully today I drive a Tesla Model S.  Which has won the Motor Trend car of the year award unanimously -and- been named “Best car ever tested” by Consumer Reports, keeping this zer0-roadside car out of the hands of consumers protects consumers how exactly?

    • Pwillwade

      Thank you for this. Big auto makers can make fuel-efficient, better cars, but won’t as long as alternatives don’t exist. Dealerships will also continue to provide terrible service as long as their monopoly exists.

  • Ken Martin

    The car dealerships are clinging to an antiquated business model just like the record companies did a decade ago.  The record companies adapted.  The car dealerships need to as well.  Their argument that they play a necessary role in the process of selling a car is ridiculous.  If I can buy a house directly from a home owner, there’s no reason I shouldn’t be able to buy a car directly from a manufacturer. 

    The car dealerships recognize their customers’ dissatisfaction with their service. Who likes car salespeople? No one.  They are a necessary evil and have attempted to cement their position in the process through law.   I am a consumer and want to buy directly from the manufacturer, be it an EV or a combustion engine vehicle.  Bye, bye, car dealer. Good riddance!

    • methos1999

      I’m not so sure the record companies adapted, I think it’s probably closer to being dragged, kicking & screaming, into the future by the likes of Napster & Apple.

  • Anonymous

    More like protecting dealer profits.  Don’t believe it?  Check out the U.S. Department of Justice – Antitrust Division 2009 study where they note an average $7K mark up on new cars with no value added!  http://www.justice.gov/atr/public/eag/246374.htm

    • Dmtrousdale

      Totally agree that the dealership franchise monopoly needs to be eliminated, but your quote of “$7000″ is seemingly out of thin air, and nut supported by your link. Average dealer markup is on the order of 6-8%, so for a $30,000 vehicle you’re looking at more like $1500-2000.

  • Michael C

    Bravo to Tesla!   
    I have no desire to give my business to internal combustion hustling car dealerships, who make their greatest margins on grossly oversized and dangerous SUV’s and pick-up trucks, whose manufacturers — with dealer support — have historically fought against fleet mileage improvements, opposed seat belts, air bags, pollution controls, removal of lead additives from gasoline, and funded propagandists and lobbiests to oppose climate change preventive efforts. If they truly believed in “free enterprise” they would be willing to face actual competition from all-electric cars and not use the courts or legislature to guarantee themselves exclusive and meritless excess profit.

  • Peter

    The car buying experience your guest mentioned “playing one dealer off another” to foster competition is one of the worst, most hated activities that we are forced to endure when purchasing a car.  Can you imagine haggling about the price for a loaf of bread in such a manner?
     ”I’ll give you $2.35″”I couldn’t go below $3.45″”Ok, how about $2.70?”"I could probably do $3.05″”$2.90 is my final offer.”"Ok, $2.90.  you got a deal… hang on,  I have to ask my manager. He’ll do day old for $2.90

    Dealing with car salesmen is, in my opinion and experience, like being forced to deal with liars and cheats.

  • methos1999

    The argument that dealers benefit the consumer by providing competition is ridiculous. The true competition is between the auto-makers, not the dealers. If I am looking to buy a Hyundai, the car is the same regardless of where I go, so the dealers competing does not make the cars any better, it only makes more work for the consumer. But if one auto-maker is stealing market share from another, that competition will drive improved products, the dealer has no impact on this fact.

  • Galen Moore

    Haggling might not be worth much to dealers in the end. More $$ made on service. http://investors.penskeautomotive.com/phoenix.zhtml?c=82644&p=irol-newsArticle&id=1782011 

    • http://neilblanchard.blogspot.com/ Neil Blanchard

       Haggling is the worst thing about buying a car! 

      The gentleman from the dealer’s association made it sound like it is better for the buyer to be able to haggle – but any savings comes out of the dealer’s profit – they all pay the same price from the manufacturer, so if you buy from the dealer, it is by definition more expensive than buying direct.

      Neil

  • Michael Bender

    Dealerships + middlemen + ICEs = FAIL.

  • Michaelastumpf

    The big guns have always tried to take down a newcomer. Go Tesla!

  • Albert

    A tesla model S starts in the mid 60K range, not 100K! Do you like going to a dealership? Wheeling and dealing? It’s the dreaded part of buying a car. You feel like taking a shower after you’re done. Tesla is a species of its own.  It only produces electric vehicles. Thus, dealerships would have a conflict of interest in selling Tesla and it’s infrastructure of superchargers when the majority of their backing and contracts comes from gas-engine producing manufacturers. Furthermore, Tesla’s product requires Tesla employee’s that are competent to sell their cars. It would be almost impossible for dealerships to train their employees on sufficiently to be competent to sell Tesla. Tesla vehicles depend on a completely different infrastructure, charging stations, than other domestic manufacturers. They own the infrastructure and are subject to separate regulatory guidelines. Thus, it’s fair for them to have a separate sales model.  The dealership system was created 90 years ago. Tesla is new. The other domestic automakers were just bailed out. Dealerships make 10-15% on top of what te manufacturer makes. That means that Tesla is passing a 10-15% savings to consumers. You wont find any customer, who is not insane, opposing that. Change is justified.

  • http://www.facebook.com/futo.buddy Futo Buddy

    oh the cars. meh

  • Tony

    Here a petition (http://chn.ge/12XDy9I ) that is aimed and sent directly to your State’s legislative representative saying that they should not support the auto dealers association for unfairly blocking Tesla’s right to sell theirs cars directly to the consumer.
    http://chn.ge/12XDy9I  

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