Car Dealers Sue Tesla, Citing State Franchise Laws

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TL;DR: The Massachusetts State Automobile Dealers Association is suing Tesla Motors for selling cars directly, as opposed to through a dealer network.

NPR said:
Tesla Motors usually makes headlines for its technology. Its new Model S is the first entirely electric vehicle to be named car of the year by Automobile Magazine.

Friday's news is less flattering: A judge in New York will take up a lawsuit against the company about how Tesla sells its cars.

When Mark Seeger bought a Tesla in Seattle, he was actually just looking for a pair of shoes.

"I was looking for a Banana Republic 50 percent-off sale," he says. "I had no intention of going into Tesla or buying a car that day."

Then he walked past Tesla Motors' Bellevue, Wash., showroom. It's one of a handful of Tesla's company-owned stores. Within five minutes, he'd put down a deposit for an electric car that costs more than $50,000.

"This is the most expensive impulse buy I've ever done," he says.

This isn't a typical sale for Tesla Motors, but according to car dealers in Massachusetts, if it had happened there, it would have been illegal.

The issue is that Tesla sold the car through its own store, instead of through a local dealership.

Robert O'Koniewski, the executive vice president of the Massachusetts State Automobile Dealers Association, is suing Tesla for opening a store in a local mall.

In Massachusetts, franchise law 93B prohibits a manufacturer from owning a dealership, O'Koniewski says. An auto dealer association in New York is also suing Tesla.

Typically, car manufacturers build the cars, then ship them out to local car dealers, which have to meet the various manufacturers' standards.

Manny Quinones is a sales manager at one of those dealers, Manhattan Motorcars in New York.

"We're multibrand, so we have brand-specific showrooms," he says.

Each brand represents another manufacturer that can require expensive equipment and training. Not having to meet those various needs, O'Koniewski says, gives Tesla an unfair advantage.

"Those dealers are investing millions of dollars in their franchises to make sure they comply with their franchise agreements with the manufacturers," he says. "Tesla is choosing to ignore the law and then is choosing to play outside that system."

Tesla insists it isn't breaking the law, in Massachusetts, New York or anywhere else. But it is clearly trying to play outside the franchise system.

Jeremy Anwyl, vice chairman of Edmunds.com, thinks that's the real issue.

"Let's say consumers really liked buying from a factory store. That would put dealers in a tough spot because they've been saying for years that the franchise system is actually good for customers," he says.

And if customers like the Tesla model, then the franchise system ? and the laws that prop it up ? could be in trouble.

"If you step back, why do we have these laws? Well, the dealers would argue, 'Well, we made a big investment, so we deserve to be protected,' " Anwyl says. "But travel agents made a big investment, and they didn't get any protection."

Right now, there are only a few thousand Teslas on the road. But if they become more mainstream ? as Tesla plans ? they could be a model for other manufacturers. Much of that will depend on how Tesla is able to handle the things dealers do now, like service. New Tesla owner Seeger, for one, isn't worried ? because the Tesla is a simpler kind of car.

"An engine is very complex ? lots of hoses and belts and pulleys and God knows what, wires," he says. "The Tesla has a motor and a single-speed transmission and four wheels. That's kind of it."

Then again, he's still waiting in line to receive his first Tesla.

"I'm number 11,100 and I believe 97 for the Model S," Seeger says.

His second Tesla, the Model X, won't be out until 2014. Maybe by then the legal battles over Tesla's showrooms will be resolved.

http://www.npr.org/2012/11/09/164736569/car-dealers-sue-tesla-citing-state-franchise-laws?sc=tw
 
Heh, I can never take these things seriously. Seems people have entitlement issues when it comes to making money. Even when modern technology makes them obsolete, they insist that they're entitled to business and profits, and no one else.
 
Someone should just point out to the judge how this business model worked out for Daewoo. Chances are the case will get thrown out.

Alternatively Tesla sets up a separate company that is a dealership group that then sells Tesla cars as a franchise.

Either way it's spurious case.

Sometimes I just don't get the US (a country which I love to visit and whose people in my experience are mainly pretty cool) but while you might claim baseball, football and basketball as your national sports in reality they appear to be corporate greed, obesity and a willingness to go to court over the most trivial and pointless of issues.
 
Now if only somebody could figure out how to combine all of those, and televise it on network TV!

I'm sure it would star Donald Trump, as he has a handle on all three pretty solidly.
 
This sounds awfully like something from the book Atlas Shrugged. As TC said: people feeling entitled to profit on the basis of the past.

Get with the times people - it's the 21st century, dealerships are not really necessary at this point. (Every day I drive past a Nissan dealership - 100 new cars on the lot, no customers)
 
Atlas Shrugged also said things like NASA were inherently evil.

In this case the dealers are in the wrong. This validates Tesla's decision not to use them in the first place.
 
Franchising of any kind may have been a good idea way back when, but it has certainly ran its course. I've no sympathy for car dealers and it's their own damn fault.

My first ever (serious) car purchase was something of a page from Grisham's novel. True, I was very young, inexperienced in business/legal matters and what not but at the end of the day I felt that if I did not sign the paperwork they will just beat me up and make me. I'm not joking either, the amount of shouting, expletive throwing, fist banging on desk. I've already signed off my own car title over so just walking away didn't seem like a possibility. I was scared shitless.

Second was more civilized but simply infuriating. Oh how they squirm with pleasantries when they see dollar signs. Everything is fantastic. Everything, until 2 weeks later the car developed problems needed addressing. Oh they addressed them alright: Could not reproduce the problem, but hey BTW how about a maintenance work, it's only $750 and it is very important that you do it: no, fuck off jack ass. And when after 3 or 4 trips to the dealer shop my brand new, ~$45k truck appeared to gain a deep scratch from front fender all the way to the back door: we didn't do it, must have been already there, we can give you a discount on new paint job. Their arbitration process was a fucking joke and only finally after more than a year a county judge saw things for what they were: a fucking rip-off.

5-6 years ago I went to 3 Honda dealerships, a friend from abroad wanted to buy 2 CR-V's, for him and his wife. Simple cash deal, I know exactly what I want, I can wait for delivery or I can take things from the lot provided they have what I need: 1 of them wouldn't even talk to me, second started quoting some insane prices shaken from his ass. I'm ready to buy 2 fucking cars and can't do it. The third one was fumbling his way thru discussion and eventually let it slip, that they didn't like to sell cars per se, they made way more on loans to get them, he'd be happy to make me a deal on a payment. Now I understood why no one would talk to me in the previous two. Go fuck yourselves and die then.

About the only pleasant experience was buying my current Jeep, and it was so pleasant that almost surreal. Technically it was a dealership but I bought the truck over the internet. It may be nothing new now but in early 2000 this was not so common. I've never seen the actual car, never seen the guy. Talked on the phone, everything was laid out clear as day: this is what they do, this is what they charge (it wasn't an awesome deal but it was quite fair), they can facilitate me with few types of loans to pick what suits me best or pay however I want otherwise, I get exactly what I want. And the truck was "exactly" as I specified, in fact built-to-order. It did take nearly 3 months to get it but throughout the process the guy would call me from time to time to give me status updates. Last one: Hi Adam, your Jeep's going on the train and it will be at X ready for pickup in 3 days, please call me back afterwards to confirm everything was all right. Thank you very much for your business, I hope you enjoy your truck. I did and still am.

My commuter car is getting really old and I'll have to get something quite soon, but honestly, I think I'm just going to get something used from a private seller. I'm more and more willing to forgo the idea of a "new" car, that's how much I hate those fuckers.
 
This sounds awfully like something from the book Atlas Shrugged.
This is big business fighting bigger business, capitalist vs. capitalist. Does not really work along Randian front lines.
 
I read an article about this a few weeks ago (wish I could remember where, I'd link it). Basically, Tesla thinks it's working outside the franchise laws because the "showrooms" they're setting up in malls are just "information centers." You don't actually buy a car from these locations, they just educate you about the vehicles. If you want to buy, you have to go online and order it through Tesla's website.

The article also mentioned that one of the groups suing (or threatening to sue at the time) was a dealership that kept begging Telsa to sell their cars. They kept getting shot down and this is the result.
 
This is big business fighting bigger business, capitalist vs. capitalist. Does not really work along Randian front lines.

I hate Atlas Shrugged, but this is covered by the book. The lesser steel companies in the book used the government to gain access to Reardon steel.
 
I hate Atlas Shrugged, but this is covered by the book. The lesser steel companies in the book used the government to gain access to Reardon steel.
This only works as an analogy if you equal "the courts/justice system" with the government.
 
I hate Atlas Shrugged,

Off topic, but why did you hate it?

I never read the book, but I just watched the first film on Netflix and I didn't really object to anything in it. Sure seems like a lot of people hated the message/politics/whatever...
 
Off topic, but why did you hate it?

I never read the book, but I just watched the first film on Netflix and I didn't really object to anything in it. Sure seems like a lot of people hated the message/politics/whatever...

Read the book and you'll understand. The story could be contained in 200 pages if Rand didn't keep stating her thesis over and over and over again. Her ideas are flawed in a manner of ways, it doesn't account for monopolies and trusts, she assumes the disabled (mentally or physically) don't exist, and all government programs to advance science are evil (though she used science programs as an example she meant all government programs).

- - - Updated - - -

This only works as an analogy if you equal "the courts/justice system" with the government.

The law was created by legislator.
 
Read the book and you'll understand. The story could be contained in 200 pages if Rand didn't keep stating her thesis over and over and over again. Her ideas are flawed in a manner of ways, it doesn't account for monopolies and trusts, she assumes the disabled (mentally or physically) don't exist, and all government programs to advance science are evil (though she used science programs as an example she meant all government programs).

Ahh, I'll stick to the films then.
 
I...this... what... how?

facepalm.jpg


TESLA DOESN'T WANT US TO TAKE A CUT OF THEIR PRODUCT WAAHHHH
 
Ahh, I'll stick to the films then.

I would still recommend reading it to understand the philosophy. You can skip to the Golt speech at the end to save yourself the torture of reading the rest.
 
I would still recommend reading it to understand the philosophy. You can skip to the Golt speech at the end to save yourself the torture of reading the rest.

The Galt speech at the end is interminable and offensive to anyone who has any quantity of active brain cells. Just the words "This is John Galt" make me want to go to the kitchen and grab a sharp knife. Whether the knife is used to off myself or to go after anyone who believes in this crap is dependent on my frame of mind at that moment. I don't live too far from Paul Ryan, so the stakes are much higher than they used to be.

As for Tesla, I believe they want this suit. Elon being Elon, he's going to litigate this all the way to the point where someone's going to declare the laws requiring dealer franchises as against the Commerce Clause, or until the Supremes tell him that it stands. He's got the money to do it.
 
What have I done here...


I merely mentioned Atlas Shrugged in the sense that argatoga pointed out - the example of Rearden having a better product that everyone wants, so they use the government to issue regulations and make it accessible to anyone who wants to produce/sell it.

Leave philosophy aside.
 
So, this all boils down to some people are pissed that Tesla sold a car and they didn't have a chance to get a cut?

Cry me a freaking river....
 
They fear the changing of the tides. If Tesla is allowed to do it, I would imagine that Ford, Honda, VW, etc will at least consider their options. The first one that changes wil likely have the ability to sell their cars for less, thereby creating an "unfair" advantage. Before you know it, franchise dealers are left out in the cold as manufacturers will be selling direct more and more.

...worst-case scenario (for dealers), that is...
 
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