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Tesla Motors Sued By Car Dealers 510

Posted by Soulskill
from the not-playing-by-industry-rules dept.
An anonymous reader writes "Car dealers in New York and Massachusetts have filed a lawsuit that seeks to block Tesla from selling its pricey electric vehicles in those states. The dealers say they are defending state franchise laws, which require manufacturers to sell cars through dealers they do not own. Robert O'Koniewski of the Massachusetts State Automobile Dealers Association says, 'Those dealers are investing millions of dollars in their franchises to make sure they comply with their franchise agreements with the manufacturers. Tesla is choosing to ignore the law and then is choosing to play outside that system.'"
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Tesla Motors Sued By Car Dealers

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  • by ezakimak (160186) on Saturday November 10, 2012 @11:44AM (#41942965)

    The car dealer franchise laws began in California w/Reagan helping a buddy's business. Soon Bush did similar in TX, then lobbyists picked up the ball and rolled it to the other states.
    I can think of no other industry where it's in fact *illegal* for a manufacturer to sell their own product directly to consumers.
    It makes it so that it is no longer a free market. Who knows what options and colors people actually want--dealers order speculatively what they think they can sell, then sell them--people wind up choosing between the existing inventory, usually none having exactly what they want. You'd think on big ticket purchases people would be more picky about getting exactly what they want--but we wind up with millions of same-colored cars on the road anyways.

    Strike down these laws and it should be possible to actually order a vehicle that you customized on a manufacturer's "build-your-own" website--rather than it directing you to a bunch of local dealers that have their heads up their asses and don't actually have one in stock like you just spent 20 minutes configuring.

    Furthermore, right now, if you want to place a custom order, you *have* to do it through a dealer--who is now an unwelcome middleman that *hasn't* made a sale yet thinks they still deserve MSRP markup for merely printing out the paperwork even though you beat a path to their door with no other option.

    I truly hope Tesla wins.

  • by Anonymous Coward on Saturday November 10, 2012 @11:51AM (#41943037)

    http://www.teslamotors.com/blog/tesla-approach-distributing-and-servicing-cars

    Elon Musk made a blog post about all this legal turmoil last month. Worth a read.

  • Simple Work Around (Score:5, Informative)

    by Anonymous Coward on Saturday November 10, 2012 @11:53AM (#41943057)

    The Tesla "Dealers" are show rooms and advertisements only, you cant test drive, you cant get the keys, They may not even be owned by Tesla at all in some states to get around Franchise laws. BMW does the same thing, as do a lot of non-US car builders. They advertise a trip to some place where the car is built and you then buy the car in Europe.

    In this case they advertise the car in a mall or other location, and then provide you internet access to the Tesla plant to place an order. The show room makes no money and sells no car.

    Ford cant do this because its contracts with dealers would require Ford to pay the dealer if it somehow sold a car in that state. Tesla has no such contract with its advertisers.

    In the end, all sales are done out of California, cars are built there, and shipped to the person, the show room has no additional involvement in the process.

  • by Lunix Nutcase (1092239) on Saturday November 10, 2012 @11:57AM (#41943087)

    Probably to prevent the auto manufacturers from driving the independent dealers out of business and being the only source of buying vehicles.

  • Historical problem (Score:5, Informative)

    by Animats (122034) on Saturday November 10, 2012 @12:50PM (#41943539) Homepage

    Auto dealer franchise laws reflect a long history of auto manufacturers screwing dealers. Auto dealers were traditionally small businesses with one supplier, which put them firmly under the thumb of the manufacturer. Many dealers still are, although some are big mufti-manufacturer chains.

    After looking at the New York [onecle.com] and Massachusetts laws, it's not clear that they prohibit a manufacturer from selling entirely through their own stores. What the laws clearly prohibit is a manufacturer competing with its own dealers. If a manufacturer doesn't have any independent dealers, the law probably doesn't apply. The dealers are trying to stretch the law by arguing that the manufacturer is unfairly competing with their dealership, but that may not work.

    California prohibits a manufacturer from opening a company store within 10 miles of a dealer, so Tesla has no problem there.

  • by LordKronos (470910) on Saturday November 10, 2012 @01:22PM (#41943827) Homepage

    Actually, many states have a reciprocal tax agreement that coordinates how taxes are handled when a new car is sold across state lines. I live in Michigan and bought my car in Illinois. Those 2 states have a reciprocal tax agreement. I was originally going to buy from Ohio, and those states also have the same reciprocal agreement.

    A reciprocal tax agreement basically says when you live in state X and buy in state Y, you pay state Y the lesser of both state's sales tax. Then when you register it in state X, you pay state X's tax rate but get a credit for whatever you paid to state Y. So, here's 2 examples:

    1) State X = 5%, State Y = 6%
    You buy in Y, and you pay Y 5% tax. When you register in state X, you've already paid 5% tax (to state Y) so you owe nothing to state X.

    2) State X = 6%, State Y = 5%
    You buy in Y, and you pay Y 5% tax. When you register in state X, you owe 6% but get credit for the 5% already paid, so you only owe state X an additional 1%.

  • Re:Translation: (Score:4, Informative)

    by phoomp (1098855) on Saturday November 10, 2012 @01:53PM (#41944083)
    All that the dealers offer a discount on is the middle man markup. Remove the requirement to have independent dealers, and you remove their markup.
  • by Anonymous Coward on Saturday November 10, 2012 @01:55PM (#41944111)

    I really wouldn't have a problem with that. The byzantine system of distributors, dealers, invoice pricing, dealer kickbacks, rebates, dishonest service requirements and everything else that makes car sales so opaque is not something worth defending. Does it really make a dimes worth of difference to me if the local dealership is owned by a guy on the city council (aka, local small businessman) or the corporation?

    I live in a small town and see nothing but the bad side of local ownership. One of the local dealer is so bad that they have refused to do warranted service on cars not purchased locally and had a horrible reputation. Eventually they were threatened by corporate with losing the franchise and improved a little. Eventually the old coot that owned the place retired and passed it on to someone slightly less insane.

    IMO the local ownership creates far more negative local influence than corporate ownership would have.

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