By Joseph B. White
Tesla Motors Inc. CEO Elon Musk has achieved fame and fortune by disrupting industries from electronic payments to space travel. Now, he’s tangling with folks who eat Silicon Valley entrepreneurs for breakfast: Car dealers.
Auto dealers in New York and Massachussetts last week sued Tesla for opening company-owned dealerships, which the dealers say violate state franchise laws designed to prevent automakers from setting up company stores in competition with independently-owned franchises.
Tesla doesn’t have any independent, franchised dealerships, but dealers say the laws nonetheless prohibit the company from operating its own sales outlets.
The head of the National Automobile Dealers Association, Montana dealer Bill Underriner, tells Corporate Intelligence that he and members of his organization are concerned that Tesla’s company stores don’t comply with the franchise laws in several states. In addition, Mr. Underriner says Tesla’s stores don’t provide proper infrastructure for service and repair.
“We don’t see where Tesla is going to be able to repair or do any recalls they have on those vehicles” in the showrooms they’ve established, Mr. Underriner says. Representatives of NADA plan to discuss the issue with Tesla, he adds. “The solution,” he says, “is for them to start a distribution network that includes dealers.”
This morning, Mr. Musk fired back in a blog post.
Mr. Musk’s post makes some narrow points disputing the grounds of the litigation:
“The U.S. automotive industry has been selling cars the same way for over 100 years and there are many laws in place to govern exactly how that is to be accomplished. We do not seek to change those rules and we have taken great care not to act in a manner contrary to those rules.
Automotive franchise laws were put in place decades ago to prevent a manufacturer from unfairly opening stores in direct competition with an existing franchise dealer that had already invested time, money and effort to open and promote their business. That would, of course, be wrong, but Tesla does not have this issue. We have granted no franchises anywhere in the world that will be harmed by us opening stores.”
Read more in Corporate Intelligence.