Tesla (NASDAQ: TSLA) may be losing the battle, but could CEO Elon Musk ultimately win the war?
I'm talking about the war on Tesla's direct selling model. A petition to the White House has been circulating around the web regarding the support of Tesla’s sales model, where customers can purchase from Tesla instead of dealership middlemen.
States like Texas, Virginia, New York, Minnesota, and North Carolina have been aggressively restricting Tesla sales in the courts and state legislatures. And more states will inevitably become involved as Tesla vehicles heighten in popularity.
The petition asks that Tesla be allowed to sell its cars in all 50 states. So far, the petition has gained over 90,000 signatures. A total of 100,000 signatures are required by July 5, 2013.
The petition itself was started by a fan named “Ken” who owns Tesla stock. But the petition is not about Tesla customers or people who own stock in the company.
It has grown beyond Tesla and has branched into causes for consumer choice, the non-interference of the state into the private sector, and combating special interest groups. The National Automobile Association is a powerful national lobbying force, with various state branches pressing for state laws that would impose restrictions on Tesla.
The North Carolina Automobile Dealers Association has been the spearhead of the toughest anti-Tesla legislation in the country, which would have made it illegal for online users to purchase a Tesla vehicle from the Internet in North Carolina.
But the toughest piece of the legislation had been stripped away when the bill met the state House. Republican Senator Tom Apodaca was a key sponsor of the bill, and it should come as no surprise that the Senator has received campaign donations from the North Carolina Automobile Dealers Association in the past.
There are 80 Model S cars on the road in North Carolina, with 60 more orders on the way. A version of the bill is going through the House, but the most controversial parts of the bill seem to be gone – at least for now.
While Tesla gained a huge win in North Carolina, a piece of pro-Tesla legislation fell through in the Texas legislature. Current Texas law holds that salesmen in Tesla showrooms are not allowed to make a pitch to potential customers. Texans can still purchase a vehicle online, but they would have to make special arrangements for car delivery.
A different piece of legislation had been circulating in New York that would have banned registration on vehicles not purchased from a third-party dealership. The bill also went further than Texas, essentially banning any showrooms unaffiliated with a dealership – a move that would have outlawed Tesla stores in the state of New York. However, the bill was blocked by the state Senate. Other efforts by third-party dealerships in New York have tried to use the courts to shut down Tesla servicing stations and stores.
Supporters of Tesla bans have primarily argued that they want Musk’s company to play by the same state rules as everyone else, but Tesla is being unfairly ousted and targeted by state governments and special interest groups that wish to maintain the status quo.
But some may wonder why Tesla cannot simply set up a dealership at the state level.
In my previous article about Tesla and state dealerships, I touched upon the issue of Tesla having the right to compete with other dealerships under a free market system.
In a digital age where almost everything is purchased from the Internet, purchasing cars online seems like a logical extension and something that could catch on in the future.
There is no pernicious agenda on the part of Tesla to drive dealerships out of business.
But the issue has just as much to do with business as it does principle.
Tesla vehicle prices would inflate with a middle man involved. One of the primary attractions of the Tesla Model S is its reasonable price tag. A Model S typically runs for $62,400, a reasonable price when considering the high price tag of other luxury electric cars.
And Tesla has done more for its customers by working with various banks to allow car owners to get in one of their vehicles for no money down. The lease payment plans are reasonable – $580/mo for personal use and $310/mo for business purposes.
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Because electric cars are a new commodity on the EV market, it will take some extra assurance on the part of the company to convince more people that a Tesla car has staying power on the road. That's why the showrooms are so important to the company. And Tesla customers know they will be treated fairly because the company’s reputation is on the line. It is also a good PR move for Tesla, since customers gain a closer relationship with the company, which translates to word of mouth.
For the Model S, Tesla’s guaranteed battery program replaces batteries in the event of failure, and motorists can rent another Model S.
Tesla vehicles are fully electric cars that require special services and attention – something private dealerships would be hard-pressed to provide. Very few mainline mechanics know how to fix Tesla vehicles aside from specially trained personnel.
And it is worth noting that Tesla has not ruled out dealerships in the future. For now, at least, Tesla believes its own representatives would do a better job in selling its vehicles and assuring customers. But even if Tesla wanted to keep its in-house model indefinitely, that is the company’s prerogative to do so, and dealerships would not go out of business as a result.
Will the Petition Work?
The petition will surely gain more supporters as public interest grows.
But most likely, the federal government will leave automobile regulation at the state level. Unless executive action is taken, Congress could get involved, but given the current divisive nature of the legislative branch, the process would not move forward anytime soon. Tesla would have to bypass the Executive and Legislative branches by taking up the issue with the Supreme Court.
But it doesn’t mean the petition is useless. The issue is gaining traction around the country as more people begin to realize the anti-consumer provisions in these state restrictions. Many people who had no intention of purchasing a Tesla vehicle are siding with Tesla’s cause, and all one has to do is troll through message boards and comment sections to get a feel for where many people are coming down on this issue.
As of Tuesday morning, the petition had gained 90,628 signatures and 9,372 more were required for White House review.
To sign the petition, click here.
*Editor's Note: Since the writing of this article, the petition has surpassed 100,000 signatures.
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