Posted on 10/09/2012 2:10:21 PM PDT by Cincinatus' Wife
After opening several stores without much pushback, Elon Musk's ambition to replicate the Apple experience in Tesla factory stores is now facing potential roadblocks.
Dealer associations in a handful of states, and state regulators in at least one case, say Tesla's stores violate state franchise laws that prohibit factory ownership of dealerships. Electric-vehicle maker Tesla now operates 17 stores in 10 states and the District of Columbia, most in shopping malls. Another six are scheduled to open this fall.
The protesting dealer associations say Tesla's factory-owned stores present unfair competition for rival dealerships, are inconvenient for consumers needing repairs and, if left unchallenged, ultimately threaten the franchise system.
"If a manufacturer sees that Tesla is successful with this kind of business model, who's to say they don't break out their own EV product lines and create a separate system that bypasses dealers?" said Bob O'Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association. "It's extremely problematic."
The New York State Automobile Dealers Association, concerned about just such an occurrence, recently asked dealer lawyer Leonard Bellavia to write a report for an upcoming newsletter on the threat of BMW using a direct-to-consumer model to retail its upcoming i-car line of electric vehicles. BMW has said it intends to distribute its i-cars through U.S. franchised dealers.
Tesla says it is doing whatever it takes to comply with state and local laws.
"We do what we're capable of doing, and we do whatever they let us do," said George Blankenship, Tesla's vice president of sales. "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 Web site to make a reservation."
Blankenship, the former Apple executive who developed that company's much-coveted retail network, is trying to replicate Apple's soft-sell, product-focused atmosphere in Tesla stores. Company employees can present the Tesla story better than independent dealers, he has said. Tesla opened its first store in Los Angeles in 2008.
Concerns have cropped up in at least four states.
• In Illinois, the Secretary of State's office told Tesla officials in a meeting on Sept. 28 that the EV manufacturer is breaking Illinois law by listing company founder and CEO Musk as the owner of its suburban Chicago store. Tesla officials said they would correct the problem and asked for 30 days to respond, said Jay Mesi, deputy director of the Secretary of State's Department of Administrative Hearings.
"We're not looking to put someone out of business," Mesi said.
• In New York, the association representing New York City metro dealers is exploring options to challenge Tesla's store in Westchester, which opened in May. That store and two others in New York violate state law, said Stuart Rosenthal, general counsel for the Greater New York Automobile Dealers Association.
The association filed a lawsuit in 2010 against Tesla and the New York Department of Motor Vehicles that challenged the legality of Tesla's first New York store in Manhattan that opened in 2009, Rosenthal said, but it was thrown out because it was filed after a statute of limitations had expired.
• In Massachusetts, the state dealers association will continue to challenge the legality of a store that opened in the Boston suburb of Natick on Sept. 28, O'Koniewski said. The association filed a protest this year with the city of Natick for approving Tesla's store license.
Tesla told city officials that the store wouldn't conduct sales, but O'Koniewski said selling activity goes beyond executing a contract and includes product presentation and directing shoppers to Tesla's Web site.
"Anything that gets you to the executed contract is part of the sale," he said.
• In Oregon, the state dealers association informally asked the Oregon Department of Transportation's Driver and Motor Vehicles Services Division to review the validity of the dealer license granted for Tesla's Portland store. Division spokesman David House says Tesla submitted everything required for a license but noted that his division doesn't determine whether a license holder complies with state franchise law.
Greg Remensperger, executive vice president of the Oregon Automobile Dealers Association, says the association is exploring options to further challenge Tesla's store. "As we feel the law is written, it should not allow them to be able to have a retail facility," he said. 48 states
In some states, such as Texas, questions remain over how Tesla may operate. In other states, Tesla clearly complies with state law.
In California, where Tesla opened its first store in 2008, manufacturers can operate dealerships as long as they're not within 10 miles of a same-brand store owned by a private-capital dealer, said Peter Welch, president of the California New Car Dealers Association. Since Tesla has no private-cap dealers, its stores comply.
In Colorado, where Tesla also opened an early store in 2009, the store is legal under a grandfathering provision, said Tim Jackson, president of the Colorado Automobile Dealers Association. The state has since updated its franchise law to prohibit factory stores, so Tesla would not be able to open a second store in the state, Jackson said.
The National Automobile Dealers Association says 48 states prohibit or restrict factory ownership of dealerships. NADA issued a statement saying that the franchised new-car dealer system is the best way to distribute vehicles.
"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," Montana dealer and NADA Chairman Bill Underriner said in the statement. "Other companies such as Daewoo did. All companies should be complying with existing laws in the same way dealers are required to."
Tesla says it is focused on providing a great customer experience and is not trying to change the auto retailing industry.
"That's the last thing on our agenda," Blankenship said.
"We just want to locate in high-traffic locations and interact with people when they are specifically not thinking of buying a car,'' he said. "We have no motivation to change the laws or how the car industry does its business."
Other news today on Elon Musk and Solar City: SolarCity brings IPO plans to light [Homeland Security, E-bay, Google, Walmart, Armed Forces, etc]
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April 15, 2012 (National Legal and Policy Center) Taxpayers Subsidize Forbes 'Green' Billionaires' Schemes
"........Musk, best known as co-founder of the company that became PayPal, is Chairman of SolarCity and CEO of Tesla. According to the Center for Responsive Politics, SolarCity spent $535,000 in 2009 and 2010 to lobby Congress and the Department of Energy on climate legislation, the Recovery Act, “green workforce training and development,” and provisions in various legislation “relevant to solar development.” SolarCity has sought to extend a program, due to expire at the end of 2012, that delivers to manufacturers an upfront cash grant in lieu of a 30 percent Investment Tax Credit (called the Section 1603 grant program). So far, according to DOE reports, SolarCity has received more than $66 million from that program.
The company also won a partial guarantee from DOE of a $344 million loan that will place up to 160,000 rooftop solar installations on military housing across the country..........." Source
Tesla has even more questionable connections:
Tesla brings political pull, as well. A former Tesla board member, Steve Westly, is an Obama bundler who raised hundreds of thousands of dollars for the president in 2008 and for his 2012 re-election campaign. His Westly Group was also a financial supporter of Tesla Motors until Tesla went public in 2010, and Westly continues to back the company.
Tesla’s founder and CEO, Elon Musk, is a hearty political contributor who has primarily backed Democrats, including Obama. According to published reports, another Tesla investor is Nick Pritzker, a donor to Obama and a cousin of Penny Pritzker, the national finance chair of Obama’s 2008 campaign.
Not a fan of Tesla, but what public purpose is served by not letting car manufacturers cut out the middle man and sell direct to the public?
Sounds like some group bribed politicians and set up a system to block competition.
“Not a fan of Tesla, but what public purpose is served by not letting car manufacturers cut out the middle man and sell direct to the public?
Sounds like some group bribed politicians and set up a system to block competition.”
Now ask yourself why beer has to be sold through monopolistic distributorships.
The ONLY Tesla product that will make money, a Tesla tee-shirt.
Bwahahaha!
How do ya like all those “progressive” antitrust laws now Elon Musk?
I don’t see anything wrong with Tesla selling direct to consumers. But I would think twice about becoming a dealer for a company that has no qualms about competing with their own dealers.
If you want me to sell for you, don’t bypass me.
If you’re going to bypass me, then why do I want to be your dealer?
None at all.
"If a manufacturer sees that Tesla is successful with this kind of business model, who's to say they don't break out their own EV product lines and create a separate system that bypasses dealers?" said Bob O'Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association. "It's extremely problematic."
Yes. Problematic for the dealers. For the consumer? Not so much. Watch where the politicians land on it, though.
“Now ask yourself why beer has to be sold through monopolistic distributorships.”
I thought of that, too, but didn’t want to distract from the thread.
Cue the "In a Yugo" song!
I doubt you'll here a song about the VOLT or Fiskar or Telsa in car songs!!
His most effective business, IMO, is in being an up and coming, primary in-country provider of heavy launch services with cutting edge spacecraft (SpaceX). I’d cut him slack for that, particularly if they keep the technology out of foreign hands...
“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” Takeshi Uchiyamada, a vice chairman at Toyota, told Mother Nature News...."
Toyota's go-slow message on electric cars "No automaker looking at the electric car market right now is going to read “full speed ahead” from what’s happened so far. The Chevy Volt is outselling half the car models on the market, but many others, from the Nissan Leaf (poor hot weather performance, has resulted in buy-backs) to the Fisker Karma (bad reviews), are having trouble on the launch pad..........
“It appears that Tesla’s new $600-per-year service program for its Model S is not going over well with some of the owners and wait-listers. David Noland, a Model S reservation holder and freelance writer, has dug into it the details and clarified the one he’s finding most annoying. And as it turns out, he’s not the only one taking issue with the program.
According to Green Car Reports, Noland owns a 2011 Chevrolet Volt and likes the service coverage for the plug-in hybrid’s electric motor and battery thermal-management system. It only needs minimal maintenance – a $49 annual system check at a local dealer and a $35 oil change every two years. That’s $84 for two years of routine maintenance. For the Model S, it’s a lot higher: $600 per year, and that electric car doesn’t even need the oil change.
Tesla’s official website says that the annual fee includes an inspection, replacement parts such as brakes and windshield wipers, roadside assistance, system monitoring, remote diagnostics and software updates, so it is more comprehensive. Looking for more detailed information, Noland contacted Tesla’s public relations department but reportedly never heard back. Tesla CEO Elon Musk, though, did eventually respond to Noland’s questions. “We are matching service cost to be less than a Mercedes of comparable purchase price,” Musk wrote. “This basically amounts to $50/month and covers all software upgrades as well as concierge level service.”
When Noland responded with a question about whether Tesla owners who opt out of the service program won’t receive software upgrades, Musk apparently didn’t respond.
Further investigation showed that the matter is even more serious. In a recent blog post on Tesla Motor Club forum, Tesla’s vice president, George Blankenship, made the policy more clear in comments on a post about the new service plans: failure to pay $600 for an annual inspection voids the warranty. Plus, any visit to a non-Tesla shop for any type of service will void the warranty, a provision that could run afoul of the law.
This isn’t going over well with Model S owners. In a Tesla Motors Club forum survey, 12 percent agreed that Tesla had “screwed the pooch,” and would cancel their orders. About 48 percent think the price is too high but will reluctantly pay it since they don’t think they have another choice. Only nine percent think it’s a great deal worth every dollar.
Noland thinks it’s odd that Tesla is taking what looks like the opposite approach with the Supercharger, offering the fast charging for free. He’d like to see Tesla do something similar with its Model S maintenance plan, or at least follow the example of BMW, where every one of its luxury cars comes with four years/50,000 miles of included service.”
Buy Tesla As Model X Gets Government Support
http://seekingalpha.com/article/925551-buy-tesla-as-model-x-gets-government-support?source=msn
“Cash has been a serious problem for Tesla Motors (TSLA), the designer and manufacturer of the popular Model S electric car. The company recently raised about $200 million from its second offering, which will help increase production of its Model S cars, from which the company is expected to make 90% of its annual revenue. The company has also committed to the Department of Energy (DOE) to repay its loan, earlier than the scheduled time.
Last week, Tesla received a $10 million grant from the State of California to help it move forward with the development of its Model X crossover electric vehicle. The grant, plus its own $50 million, will enable Tesla to add 500 workers for the project. This will help Tesla keep up with its promise of starting deliveries of the car in 2014.
The grant from California was expected by the market after California Governor Jerry Brown showed up at Tesla’s 10th February show, during which CEO Elon Musk introduced the prototype of the Model X to the audience. The governor used the platform to show how regulators are working to make the U.S. greener than ever.
The market was a bit surprised to know that the company is concerned about the production of the Model X, rather than being solely focused on the production and delivery of the Model S, which is already expected to be late. One of our earlier articles on Tesla went into details of how the company is expected to backtrack from of its promise of delivering 5,000 Model S cars this year. The company admitted this recently when Musk announced that Tesla will only be able to produce 2,700-3,250 Model S cars this year.
The $10 million that Tesla got from the State of California was a reimbursement for the machinery purchased by the company to refurbish the plant at Fremont. This loan is expected to be under tight scrutiny by political forces, as Musk has already been called a “loser” by GOP candidate Mitt Romney. Romney thinks that Tesla is yet another “green” company like Solyndra and Fisker, which consumed billions of dollars of taxpayers’ money and turned out to be absolute failures. That is why we are stressing the election results as an important catalyst for the stock.
Being a car viewed by the market as a direct competitor to Porsche’s 911 AG Sports Car or Audi’s Q7 SUV, the Model X, with its falcon-wing doors, has gained the attention of many potential buyers. The car’s reservation started on Feb. 11 this year; pre-orders are currently above 2,000 and are expected to reach around 3,200 by the end of the year. These are phenomenal numbers, given that production of the car has not started yet — that the prototype alone has attracted so many pre-orders. One can only imagine how these numbers will change once the car hits the roads and receives favorable reviews from its users.
Bears say that the Model X and its derivatives will crush sales of the Model S. It is a fact that after the prototype of the Model X was revealed in California, some buyers of the Model S switched from the Model S to the Model X. However, Tesla authorities claim that the Model S saw a boost of 30% following the big event. Currently, the down payment is $5,000 for getting a standard Model X reserved and $40,000 for getting a Model X signature reserved.
Conclusion
Musk remains determined to change the landscape of the automotive industry in the U.S. Through Tesla’s Model S, he has almost single-handedly revamped the image of electric cars to make them a symbol of style. He has demonstrated that electric cars are much more than tiny cars with big price tags.
Tesla has been punished in the past for its lack of promise-keeping ability. It will be interesting to see how the company goes about meeting its target of starting production in 2014. The sell-side expects the company’s revenues to multiply 14 times in the next four years. Sometime next year, the company also expects to make its first dollar in profits. With the slow production of the Model S already priced in the stock and financing problems largely solved, the stock is expected to rise in future.”
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