Can Car Manufacturers Sell Direct and Bypass Dealers?

Tesla Motors is a U.S.-based manufacturer of upscale high-performance electric cars. As it notes at its Web site: “The Tesla Roadster hit the streets in early 2008 as a car with no equal. Four years later, over 2,300 Roadsters drive emissions-free in more than 37 countries. Model S and Model X are the next step in the ‘Secret Plan’ to accelerate the world’s transition to electric mobility. Model S is now in production! It’s more than electric, it’s Tesla.” The Model S sells for $62,000 and up.
Now, despite the small amount of cars that Tesla sells, it is embroiled in a battle with car dealers about the right to sell Tesla cars.
Here is a synopsis of the battle, as described by Mike Ramsey and Valerie Bauerlein for the Wall Street Journal
“Elon Musk made a fortune disrupting the status quo in online shopping and renewable energy. Now he’s up against his toughest challenge yet: local car dealers. Mr. Musk, the billionaire behind PayPal and now Tesla Motors Inc., wants to sell his Tesla electric luxury vehicles directly to consumers, bypassing franchised auto dealers. Dealers are flexing their considerable muscle in states including Texas and Virginia to stop him. The latest battleground is North Carolina, where the state Senate last month unanimously approved a measure that would block Tesla from selling online, its only sales outlet here. Tesla has staged whiz-bang test drives for legislators in front of the State House and hired one of the state’s most influential lobbyists to stave off a similar vote in the House before the legislative session ends in early July.”
“Dealers say laws passed over the decades to prevent car makers from selling directly to consumers are justified because without them auto makers could use their economic clout to sell vehicles for less than their independent franchisees. Dealers say Tesla’s direct sales violate those laws. These franchise laws have insulated car dealers from much of the E-commerce revolution that has hammered other sectors from books to electronics. Franchise laws don’t apply to Tesla, Mr. Musk has said, because the company has never had franchised dealers. This argument has been a winner for Tesla in court skirmishes with dealers in New York and Massachusetts. It has fared less well in state houses where lawmakers are more attuned to the concerns of important local employers and political donors.”
Click the link above to read more and click the image to view a WSJ video clip.


Photo by Stephen Voss for the Wall Street Journal


This entry was posted in Online Retailing, Part 1: Overview/Planning, Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 4: Store Location Planning, Part 5: Managing a Retail Business, Part 6: Merchandise Management and Pricing, Part 7: Communicating with the Customer, Part 8: Putting It All Together and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

5 Responses to Can Car Manufacturers Sell Direct and Bypass Dealers?

  1. Jerry says:

    The states control dealers on a local basis. “Franchise laws don’t apply to Tesla, Mr. Musk has said, because the company has never had franchised dealers.” In Massachusetts there exists a dealer protection law for franchised dealers which also includes many restrictions as far as how dealers may conduct business within the state. Because Tesla does not have franchises these laws would not apply to them, then the field of play becomes uneven and unfair.

  2. Reblogged this on Retailing: From A to Z by Joel Evans and commented:

    This has been the most popular post on So, we are re-blogging it. 🙂

  3. Pingback: Retailing: From A to Z — The Most Popular Posts of 2013 | Retailing: From A to Z by Joel Evans

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