Report: Dealer Associations Challenge Legality of Factory-Owned Tesla Stores
State laws may put a kink in Tesla Motors’ retail plans, as the EV automaker’s factory stores are being questioned by dealer associations and state regulators, reports Automotive News. Tesla hoped to recreate the Apple buying experience with its factory stores, but dealer associations in a number of states claim those stores create unfair competition for conventional dealerships.
The main complaint is that Tesla’s stores are in violation of state franchise laws, which bar factory ownership of dealerships. Tesla currently operates 17 stores in the U.S., with most located in shopping malls. Recently, the Secretary of State’s office in Illinois told Tesla officials the company was breaking state law by listing CEO and founder Elon Musk as the owner of its Chicago store. Tesla said it would comply and asked for 30 days to respond.
Elsewhere, dealer associations are challenging the legality of Tesla stores. In defense of its Boston store, Tesla told city officials that the store wouldn’t conduct sales.
“We do what we’re capable of doing, and we do whatever they let us do,” Tesla’s vice president of sales George Blankenship told Automotive News. “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 website to make a reservation.”
But the Massachusetts State Automobile Dealers Associations has issues with Tesla’s plan, claiming product presentation and directing customers to Tesla’s website is part of the sale.
Tesla doesn’t face the same hurdles in all states, as the company operates within the limits of the law in California. In the Golden State, manufacturers can operate dealerships so long as they’re more than 10 miles away from a private-capital dealer selling the same brand. Since there are no private-capital Tesla dealers, the company is covered. That same law caused problems for Chrysler Group earlier this year, when the company’s new Motor Village in downtown Los Angeles was investigated for violations of state franchise law.
According to the National Auto Dealers Association (NADA), factory ownership of dealership is restricted or prohibited in 48 states. NADA said in a release:
“Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model.”
Six Tesla stores are scheduled to open this fall, and if the launch of the Model S is successful, don’t be surprised to see a few more popping up around the U.S. before long.
Source: Automotive News (Subscription required)