Tesla Motors Inc. is an American company that has innovated in the electric car space. They design, build, and sell their own vehicles straight to the consumer. The company first came to the spotlight with the Tesla Roadster, which was the first 100% electric sports car. The CEO, Elon Musk has envisions of making Tesla an independent automaker that will eventually offer electric cars at an affordable price for the average consumer. Yet, there are currently restrictions in some states making it difficult for consumers to get their hands on Tesla’s products, which guarantees that cars will always be very marked up in price.
New Jersey is the most recent state to ban Tesla’s direct sales practice. Tesla operates either as stores or galleries, which are usually located in shopping malls across the country. For instance, customers in D.C. cannot purchase vehicles from the stores, and instead must order a vehicle from the Tesla website. Much like buying custom Camaro car covers or other custom parts, Tesla makes it simple and easy to buy and customize their vehicles.
At the moment, Tesla’s stores act as showrooms where potential customers can learn about Tesla and its cars. The galleries are located in states with more restrictive dealer protection laws, which prevent discussing prices, financing and test drives. New Jersey is a new member to the no selling allowed list, which also includes Arizona, Texas, Virginia and Maryland.
Limiting What Tesla Does
Tesla’s battles with restrictions do not end with just the states who will not allow them to sell directly to consumers. Currently, Georgia only allows Tesla to sell 150 cars a year. A pending bill would increase the amount to 1,500 a year, but this bill would eliminate Georgia’s $5,000 electric-vehicle debate. Colorado on the other hand only has one store outside of Denver and will not be allowed to open any more in the state.
And there’s more. Both Ohio and New York are currently working on bills to prevent the company from expanding. The Ohio bill would limit Tesla to its two stores and no stores in New York.
What is making it hard for Tesla to take part in its direct sales practice is an old school franchise model where powerful middlemen are able to exercise a great amount of control over automobile manufacturers and customers alike. States created franchise rules giving dealers an exclusive right to the sales made in local markets in order to stop automakers from overpowering these franchises or making threats too sic the competition against them. Basically, they want to restrict Tesla from directly selling to customers, preventing innovation and keeping big dealerships happy.
If Tesla stores are permitted to thrive in this cutthroat environment, customers might begin to realize that this new way to buy a car is much more innovative than the current model. Tesla stores are seen as quite innovative to many, and have many similar qualities to Apple stores. Ultimately, Tesla could represent the modern standard for selling cars, much like Apple’s new standards in electronics. Dealerships are scared of Tesla’s potential to change the future of car buying, which explains why these dealers will fight for franchise laws to the bitter end.