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NEWS
Tesla petitions US government for direct sales
Resistance to Tesla's direct sales network exposes state-protected franchised dealersAvon ladies and Amway and Tupperware parties have helped establish the direct sales model as a venerated part of American business and community alike, for over a century.
Tesla is now finding that spirit doesn’t extend to the car industry. In fact, in 48 of the US’s 50 states, auto makers are prevented by law from eliminating the middle man.
Some of those laws have been enacted specifically in response to Tesla’s incursion. The Chicago Tribune reports State lawmakers across the country are hastening to chase the Californian EV maker out of town before it manages to set up camp.
In Illinois, it’s allowed to run its own shopfronts, but after the company opened a store near Denver, Colorado jumped to stop it opening more. The North Carolina senate, meanwhile, has pushed through new laws ensuring sales are channelled through a franchised dealer network.
Texas, that bastion of competition and all things free enterprise, is also proving a problem; a bigger problem than most, in fact. CNBC and others have noted the tightness with which it protects the third-party system. New cars can only be channelled out through franchised dealers.
For Tesla buyers, that’s a pain. According to the Austin American-Statesman, “[you] can visit one of the two galleries Tesla Motors operates in the state – one in Austin, the other in Houston – but employees can't tell you how much the car costs. They can't offer you a test drive. They can't even give you their website address. And if you buy one, the car is delivered by a third party – in a truck that's not allowed to have Tesla markings.”
True to form, Tesla isn’t shying away from a fight. In the hope of turning all this around, an anonymous “Tesla fan” called KS, from Stow, Massachusetts, has kicked off a White House petition in a bid to stop “state legislators [from] trying to unfairly protect automobile dealers in their states from competition.” Reached by tech site CNet, “Ken” identified himself as a holder of “some stock” in Tesla but not an employee.
Ken’s argument in favour of allowing Tesla to sell direct is simply that the company is “providing competition, which is good for consumers”. Tesla argues that middle-man retailers fatten the system with an unnecessary cost centre.
The highly localised conventional dealership and service systems developed around the internal combustion drivetrain, a device far more mechanically complicated than the battery electric drivetrain on which Tesla is building its value equation.
In the era of high digitisation and telematics, the company argues in favour a clean-sheet overhaul working to the benefit of Tesla and its customers alike. Or, as one now oft-quoted Tesla spokesman put it: “How do you sell the future if your business depends on the present?”
Of course, much of the resistance to Tesla’s incursion comes from the dealer sector. They’re out in force arguing against “unfair competition” for their “family-owned” businesses, garnishing their argument with smalltown community appeal.
“It's a consumer protection,” Bob Glaser, head of the North Carolina Automobile Dealers Association, told The Associated Press. “And [it’s] why we say that is a dealer who has invested a significant amount of capital in a community is more committed to taking care of that area's customers… You tell me they're [Tesla] gonna support the little leagues and the YMCA?”
But nor has it been lost on US media, as CNBC reports, that car dealers as a sector sit among the top donors to political parties at state level. With reason. Some of those family-owned franchises are worth upward of a billion dollars. They’re also major contributors to state tax coffers.
Dealers also fear that Tesla might open the floodgates, giving other car makers the impetus they need to follow suit. If that happens, there’s no doubt about the economic and employment blood that would be shed.
As we pen this, the Tesla petition has 74K signatures, meaning it needs a further 26K by July 5 to make the 100K threshold necessary to earn it a place in the White House in-tray. That’s not shaping up as a problem, given about half those signatures have turned up in three days.
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Written byJeremy Bass
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