Tesla Strikes Deal To Keep Dealerships In New York

http://techcrunch.com/2014/03/28/tesla-strikes-deal-to-keep-dealerships-in-new-york/

by houseofshards • 12 years ago

135 53 12 years ago

Oculus• 12 years ago

Can someone with more knowledge of the (outdated) franchise law explain why Tesla can't/hasn't created their own dealerships (that officially aren't Tesla owned), but sell only Teslas?

sliverstorm5• 12 years ago

I believe the answer is, because they don't want to do that.

dangrossman2• 12 years ago

Because, under the same state laws, that's illegal as well.

"It shall be unlawful for any franchisor to ... acquire any interest in any motor vehicle dealer in this state ... or to use any subsidiary corporation, affiliated corporation, captive finance source or any other controlled corporation, partnership, association or person to accomplish what would otherwise be unlawful conduct under this article"

-- NY Vehicle and Traffic Laws, Article 17A, Franchised Motor Vehicle Dealer Act, S 463 Unfair Business Practices by Franchisors

There'd be little point to having the rest of the law on the books if it were so easy to work around.

Note that "franchisor" as defined in that law includes all manufacturers, whether they sell franchises or not. IANAL.

woodchuck64• 12 years ago

Maybe they would prefer to kill dealerships (saving customers $2,225 average per new car according to a 2000 report). Lord knows, I've never had a good experience with a dealership, let 'em die!

http://www.washingtonpost.com/opinions/charles-lane-tesla-ta...

sp332• 12 years ago

But if manufacturers have no competition for dealerships (because they own them all), what would keep them from jacking up the prices?

mattnibs• 12 years ago

How is requiring a car dealer to sell through a dealership beneficial to anyone besides the dealership lobby which spent millions of dollars in getting that law in place? This is why I freely support any company attempting to disrupt any industry that uses the US gov't to create laws limiting direct competition (Healthcare for example).

Politicians who stand up for this kind of nonsense should be ashamed.

flyinglizard2• 12 years ago

I imagine it's not just dealerships that oppose Tesla. It's nearly everyone involved in the automotive industry, from independent service shops to part suppliers to oil companies to the other American manufacturers.

Crito2• 12 years ago

Why would an independent service shop care if it is [local moderately wealthy businessman with contracts with wealthy corporation] or [wealthy corporation] who owns the dealership? Either way they have the Magnuson–Moss Warranty Act so either way car owners can choose to either take their car to an independent shop or to a dealer shop.

Lingering concerns could be cleared up by lobbying for some Right to Repair laws: http://en.wikipedia.org/wiki/Right-to-repair_act

alistairSH• 12 years ago

These days, it's not.

Originally, it was beneficial to the manufacturers to let franchisees take the risk of opening new storefronts. The franchise laws were put in place to stop manufacturers from undercutting their own franchises once the market was established.

MichaelGG2• 12 years ago

That sounds so odd. If franchisees were worried about that, then the manufacturer could sign a contract agreeing not to operate. Why does it need to be coded into law?

dangero• 12 years ago

Wow so this seems actually worse than outlawing Tesla because what they are doing is giving Tesla major privileges over any future competition. Seems very monopolistic.

sliverstorm5• 12 years ago

Well, as is often the case, they got theirs. They cleared the hurdle, now barriers to entry help instead of hurt them.

sentientmachine• 12 years ago

With Communism, a person's job is determined by an external power. How is the dealer network telling Tesla that they can't sell their car in NY not an example of communism?

Put down that microscope citizen. I've already told you, you are a cashier, cashiers don't use microscopes. Microscopes are for scientists. You can't be a scientist. Get back to your station. Don't make me taze you.

cwp• 12 years ago

Being allowed to keep their existing stores is "major privileges?" How so?

wlesieutre• 12 years ago

They get to have 5 stores and no other manufacturer is allowed to have any?

coreymgilmore• 12 years ago

These laws are crazy. They work for Tesla currently, but what about the future and future direct-to-customer sales models by other companies?

When Tesla grows, they will need more than 5 dealerships in order to reach more of the population.

When a new competitor tries to sell direct, these rules will make it impossible for them to compete on an even playing field with Tesla and therefore have to revert to the old dealership model. Win for Tesla, loss for free markets and competition.

rtfeldman• 12 years ago

Certainly no one should expect this status quo to last for long. The dealers will keep lobbying to kick Tesla out, and Tesla will keep lobbying to lift this restriction.

In that light, this is an interesting long-term strategic move on Musk's part. It arms him with a "we've been selling in this state for X years with Y thousand satisfied customers, so how can this be so problematic that it needs restriction?" argument for his lobbying efforts a few years down the line.

diakritikal• 12 years ago

As a bemused European looking at this situation. Did a new U.S. manufacturer, just agree to sell cars in mob town?

sandstrom• 12 years ago

It is interesting that the US -- a champion of Laissez-faire in many other areas -- is the only country in the world with such laws.

[regardless of whether one likes the idea of Laissez-faire or not, the contrast is interesting]

Aqueous2• 12 years ago

Just goes to show you - it's sometimes better to ask for forgiveness than permission.

Imagine if Tesla hadn't opened stores in these locations - they would be indefinitely, unconditionally barred from doing so unless they had flouted the auto dealer rules and went forward with the stores regardless. Now they have a foothold. When you realize that the stakeholders (in this case, New York State Politicians) have a political interest in you flouting their rules then the rules just don't seem that rul-y anymore.

It's also what's going to get their foot in Texas, as well.

Elon Musk is one smart dude.

andrewtbham2• 12 years ago

I agree. It's like this fred wilson blog post. The genie is out of the bottle.

http://avc.com/2013/10/the-genie-and-the-bottle/

andrewtbham2• 12 years ago

This is a great compromise for Tesla. The dealerships don't fear Tesla, they fear their manufacturers will start selling directly over the internet and cut them out of the loop. This should pacify their fears but still allow Tesla to operate. Long term, I suspect, this will be overturned, but for now it's a great compromise.

Tesla Strikes Deal To Keep Dealerships In New York

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