Why is Tesla moving towards the dealership model and folding to franchise law?

yobigd20 · Mar 31, 2014

http://franchiselaw.foxrothschild.c...esla-and-new-york-auto-dealers-reach-a-truce/

"In what appears in the first instance to be a major concession by Tesla....Tesla reportedly agreed that future stores in New York will be dealerships...This seems to be a significant and substantial change in Tesla’s marketing and sales distribution strategy...it would seem to mark a major success for the various state automobile dealers associations who have fought Tesla with vigor....it could also show that Tesla can see the advantage of sharing the costs and risks of nationwide expansion with franchised dealer networks"

sooo that's a major loss for Tesla. Is Tesla going to fold to the dealership model now? That's a stupid, stupid move for Tesla. I am very, very, very disappointed by this news.

Zythryn · Mar 31, 2014

yobigd20 said:
http://franchiselaw.foxrothschild.c...esla-and-new-york-auto-dealers-reach-a-truce/

"In what appears in the first instance to be a major concession by Tesla....Tesla reportedly agreed that future stores in New York will be dealerships...This seems to be a significant and substantial change in Tesla’s marketing and sales distribution strategy...it would seem to mark a major success for the various state automobile dealers associations who have fought Tesla with vigor....it could also show that Tesla can see the advantage of sharing the costs and risks of nationwide expansion with franchised dealer networks"

sooo that's a major loss for Tesla. Is Tesla going to fold to the dealership model now? That's a stupid, stupid move for Tesla. I am very, very, very disappointed by this news.

Where is the original statement?
Tesla previously has stated in Texas that they very well may find that the dealer model may work for them at some point in the future.
I don't take this as abandoning anything. They are simply stating it is a possibility when they are selling 500,000 cars a year.

I suspect it would also depend strongly upon dealers learning enough about EVs to sell them effectively and for Tesla to be able to retain enough control over the dealers to insure customers are well treated.

Basically, it is as possible as hell freezing over:tongue:

SwedishAdvocate · Mar 31, 2014

Zythryn said:
.../ Basically, it is as possible as hell freezing over:tongue:

Especially since there’s no evidence of any hell in the first place. :wink:

yobigd20 · Mar 31, 2014

but the dealership model is pure evil...

ItsNotAboutTheMoney · Mar 31, 2014

yobigd20 said:
but the dealership model is pure evil...

The current dealership model is pure evil. Specialized 3rd-party dealerships should in fact be better than direct sales, but are worse because current laws limit the manufacturer's ability to control the process.

What Tesla has agreed is really that they won't open any new stores under the current laws.

TomT · Mar 31, 2014

Decades ago Porsche decided to move to a model similar to Tesla's. They estimated that they could provide a much better customer experience, service, and cut the cost of the vehicle by 10 to 15 percent...Of course, just as with Tesla, they experienced fierce opposition to this from the dealership fraternity. After many years of battles, proposed legislation, and court fights, Porsche gave up. So, unfortunate though it may be, history is not on Tesla's side...

HHHH · Mar 31, 2014

I don't buy that. You can see Tesla fights tooth and nail to keep the current model because it benefits them so much. Perhaps they will only have those 5 stores in NY, or if they open more, they can own those dealerships.

Ugliest1 · Mar 31, 2014

TomT said:
Decades ago Porsche decided to move to a model similar to Tesla's. They estimated that they could provide a much better customer experience, service, and cut the cost of the vehicle by 10 to 15 percent...Of course, just as with Tesla, they experienced fierce opposition to this from the dealership fraternity. After many years of battles, proposed legislation, and court fights, Porsche gave up. So, unfortunate though it may be, history is not on Tesla's side...

History may not be on Tesla's side, but I don't think that's where Tesla is looking anyway. The future IMO is on Tesla's side.

ckessel · Mar 31, 2014

I'd guess Tesla doesn't think they need any new stores in New York for a very, very long time and was content to just keep their current stores alive. No need to fight that battle in New York for a few years, but which time it might be a moot point.

Electroman · Mar 31, 2014

If you want to believe that history has to be on your side, Tesla would not even have started car manufacturing. You see everyone in the last 100 years have failed starting a new auto company.

Ohio, NY and WA are victories to the dealers.

yobigd20 · Mar 31, 2014

mkjayakumar said:
Ohio, NY and WA are victories to the dealers.

potentially NJ again too because they have delayed the April 1st date by 2 weeks to work on a "compromise".

clintons · Mar 31, 2014

There was a great opinion in the WSJ titled Tesla Seeks Loophole, Not a Revolution A franchise arrangement is inevitable as Tesla and EVs become mainstream.

ElSupreme · Mar 31, 2014

All this means is Tesla won't open more stores in NY untill they start up teh fight against the dealership association. If they were installing a dealer that would be different.

My guess is they will find some pseudo loophole open up a 'dealership' that will be indistinguishable from their existing stores, and will be under 100% corporate control. Then the fight will resume.

stopcrazypp · Mar 31, 2014

ElSupreme said:
All this means is Tesla won't open more stores in NY untill they start up teh fight against the dealership association. If they were installing a dealer that would be different.

I'm guessing that too. Tesla probably feels five stores is enough right now in NY, so why bother putting up a tough fight when you can compromise and keep running the stores.

RobStark · Mar 31, 2014

mkjayakumar said:
Ohio, NY and WA are victories to the dealers.

WA was an absolute and total Victory for Tesla. Not a total victory for automotive factory stores.

Tesla can open as many stores as they want in WA but all other manufacturers are prohibited.

That means every other automotive company will be at a permanent disadvantage.

OH is a neutural truce. It allows Tesla to keep the stores they had plus the new one they planned on building.

We need to see the final language on the NY legislation before making judgement.

ItsNotAboutTheMoney · Mar 31, 2014

clintons said:
There was a great opinion in the WSJ titled Tesla Seeks Loophole, Not a Revolution A franchise arrangement is inevitable as Tesla and EVs become mainstream.

A franchise arrangement is not inevitable, far from it.

Inquire: Internet, stores, galleries <-- not really restricted
Test Drive: Stores <-- RESTRICTED, workaround through special demo events
Order: Internet <-- not restricted
Receive: service centers <-- not restricted
Service: service centers <-- not restricted

They just need to concentrate on hitting Gen 3 target, start selling to the good, open markets, stick special stores and events in tourist destinations and watch the media squeeze and angry middle class do the rest.

omarsultan · Mar 31, 2014

I think this is a hard battle for Tesla to win as long as its perceived as millionaire Tesla owners vs millionaire dealership owners--the general public does not care, so the political calculus goes in favor of the local dealers. I think the dynamic changes once it becomes the NADA getting in the way of someone buying their Model E--then the political calculus starts to shift in Tesla's favor.

If the option in NY is no stores vs keep your stores and kick the can down the road for future stores, it was a good move.

lolachampcar · Mar 31, 2014

I think the message from NJ hit home. Tesla heard it loud and clear.

No need to fight this battle now. We can sell plenty of MS by compromising today. Fox can think all they want that Tesla will use dealers in the future. Tesla will not correct them.

By the time G3 comes out, Tesla will have flushed out it's national legal strategy using interstate commerce as the underpinnings and it will simply trump all the state by state battles. Christy and everyone else that relied on what they thought Tesla promised will all cry foul but, as Omar pointed out above, no one will be listening as they will want their G3s.

SwedishAdvocate · Mar 31, 2014

omarsultan said:
I think this is a hard battle for Tesla to win as long as its perceived as millionaire Tesla owners vs millionaire dealership owners--the general public does not care, so the political calculus goes in favor of the local dealers. /...

I think the public does care. And they will start to care increasingly more, since more and more of the general public will understand just how severe the impact from Man Made Climate Change already is, and will only continue to become. And that we will have to cut CO2 emissions globally with 85% in order to start to reverse this monumental problem.

And here is a company called Tesla fighting the good fight, and trying to offer a solution. And what does the gasoline establishment try and do about it? And for what? Just so that they can squeeze even more millions out of the general public!

Bring it up to the ideological level. Why can’t you buy a car directly from the manufacturer? The dealers will never be able to win that argument.

Neech · Apr 2, 2014

SwedishAdvocate said:
I think the public does care. And they will start to care increasingly more, since more and more of the general public will understand just how severe the impact from Man Made Climate Change already is, and will only continue to become. And that we will have to cut CO2 emissions globally with 85% in order to start to reverse this monumental problem.

And here is a company called Tesla fighting the good fight, and trying to offer a solution. And what does the gasoline establishment try and do about it? And for what? Just so that they can squeeze even more millions out of the general public!

Bring it up to the ideological level. Why can’t you buy a car directly from the manufacturer? The dealers will never be able to win that argument.

+101.
The public does care about the car buying process because car dealers have created such a screw-the-customer process that everyone hates. As more people learn about Tesla's customer-friendly style there will be more demand for it.

Why is Tesla moving towards the dealership model and folding to franchise law?

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