Can Tesla Sell Direct and Bypass Dealers?

As we approach the end of 2016, we are going to present some of the most popular of the more than 1,500 posts that have appeared on Retailing A to Z. Today, we cover Tesla’s unique and controversial dealership program — which remains hotly contested as we head into 2017!


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
[Note from Retailing: A to Z: In the second half of 2017, plans to sell hundreds of thousands of less-expensive models. With this in mind, please answer this poll question.]


This entry was posted in Part 1: Overview/Planning, Part 2: Ownership, Strategy Mix, Online, Nontraditional, 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.

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