Tesla Model S
  • Tesla Model S
  • Tesla Model S

  • tesla model s
  • tesla model s

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
Elon Musk is taking his argument for a different kind of customer-dealer relationship directly to the people. In this case, the Tesla Motors CEO writes on his company's blog to list the reasons why the luxury electric-vehicle maker decided to own all of its dealerships instead of offering franchises.

Musk, who said the Tesla Model S sedan aspires to be "the best car of any kind" in his new post, says that using the traditional dealer franchise model would have created conflicts of interest withing the salespeople. The reason is that any energy used to educate the public about electric vehicles would detract from conventional-vehicle sales. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business," Musk writes.

Additionally, most buyers purchase the same make as their previous vehicle, which means there are few buyers who would walk into a multi-brand dealership and be willing to take the time to learn about Tesla. Musk added that Tesla would have 19 dealership stores in the US by the end of the year, up from 10 at the beginning of the year.

While the Model S has been universally praised, its pricey service program has not. Earlier this month, David Noland, a Model S reservation holder, wrote that Tesla's $600-a-year service program is more than 10 times the cost of the service program for the Chevrolet Volt extended-range plug-in hybrid. Tesla has argued that its service plan is more comprehensive than usual because it includes an inspection, replacement parts such as brakes and windshield wipers, roadside assistance, system monitoring, remote diagnostics and software updates.

Finally, Musk addresses the recent lawsuits over Tesla's stores. As you might expect, Musk doesn't back down:

Regrettably, two lawsuits have nonetheless been filed against Tesla that we believe are starkly contrary to the spirit and the letter of the law. This is supported by the nature of the plaintiffs, where one is a Fisker dealer and the other is an auto group that has repeatedly demanded that it be granted a Tesla franchise. They will have considerable difficulty explaining to the court why Tesla opening a store in Boston is somehow contrary to the best interests of fair commerce or the public.

We're sure the case will be made, though, and we'll see how well it's delivered.


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  • 54 Comments
      Letstakeawalk
      • 2 Years Ago
      "...that using the traditional dealer franchise model would have created conflicts of interest withing the salespeople. The reason is that any energy used to educate the public about electric vehicles would detract from conventional-vehicle sales. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business," Musk writes." No explanation why Tesla couldn't franchise a standalone dealership (not represent any ICE brands) and stay within the law. "... most buyers purchase the same make as their previous vehicle..." Demonstrably false. Toyota currently has the highest customer loyalty of all brands - and they only have a rate of 47.3% return buyers. "...which means there are few buyers who would walk into a multi-brand dealership and be willing to take the time to learn about Tesla." That's one heck of an assumption, with no basis in fact. Indeed, the experiences at Nissan, Chevy, and Fisker dealerships would indicate quite the opposite: Buyers of makes that previously had never considered a brand will eagerly visit a dealership to learn about a new model that has unique performance characteristics. Of course, it's all just a red herring from Musk - the basic issue is that MA law prohibits a manufacturer from selling their vehicles directly to the public. "This is supported by the nature of the plaintiffs, where one is a Fisker dealer and the other is an auto group that has repeatedly demanded that it be granted a Tesla franchise. They will have considerable difficulty explaining to the court why Tesla opening a store in Boston is somehow contrary to the best interests of fair commerce or the public." Two competitive outlets are always better than one monopoly, Mr. Musk. He seems to think that a standard dealer wouldn't be interested in selling his product, yet he points out that there is in fact a dealer who is very interested in selling Teslas. Perhaps that dealer could offer better prices, or service, than Tesla corporate is willing to offer... what could Tesla possibly loose by letting *more* outlets sell their products?
        MTN RANGER
        • 2 Years Ago
        @Letstakeawalk
        Tesla's explanation does strain credibility. But as an engineering-based company, they just don't want to pay sales people. I can understand that.
        • 2 Years Ago
        @Letstakeawalk
        "Perhaps that dealer could offer better prices, or service, than Tesla corporate is willing to offer." The truth of course is that Tesla wants to get rid of dealers altogether. People hate going to car dealerships. People hate haggling over price, to be told at the last minute they have to pay more. Going to a dealership is a game of who can scam who better, and dealers almost always win. Tesla doesn't want to be associated with that garbage. As for service, Tesla also feels the same way. It's a new technology, and they want the service done in house. Also, their service is absolutely revolutionizing, and really is part of owning the product. Dealers would just mess it up. Why wouldn't you want the people that made your car to fix it? With gas cars I can see why it doesn't matter much- cars are cars. However, Teslas require a capital investment just to diagnose the battery, and also require more knowledge to service. It would be like taking your BMW to a bicycle shop and expecting the same level of service.
          purrpullberra
          • 2 Years Ago
          LTAW +1 for and Jon too. It might better stated 'Elon wants to sell 'the best car' in a dealership-free manner, the way it's legal to do around the world and in 48 US states. The 48 states laws mention *an established dealership network* so Tesla is home free, thence never granted or sold a franchise and probably never will. Tesla will sooner let MA and NY folks buy teslas out-of-state than compromise this business model with good reason, when/if this gets above the also paid-for local 'hick' judges ( who are also in on the scheme) to an appellate court it will be laughed out of court with Tesla victorious over a then dinosaur (dealerships).
          purrpullberra
          • 2 Years Ago
          Damn it I did not type 'thence'!
          Letstakeawalk
          • 2 Years Ago
          "The truth of course is that Tesla wants to get rid of dealers altogether." So do many of the other automakers. How successful have they been in getting the law changed? "However, Teslas require a capital investment just to diagnose the battery, and also require more knowledge to service." Most automakers have unique technologies that require capital investments and educational investments in order to properly diagnose and repair their vehicles. New models often cannot be repaired by smaller independent shops, but over time those smaller shops catch up and can often offer superior service at lower prices. On the Tesla forums, Model S owners are already discussing aftermarket service possibilities.
      oktrader
      • 2 Years Ago
      Balduhr: You mention you are not American. I am assuming perhaps Norsk? If so, your communication in our form of English is quite good, and your expression quite rational. Unfortunately, you are unaware of the power (and cost) of litigation in America. The US has about 3.5-4x as many lawyers per population as does Norway. Another great visitor to our country described us well (and, it turns out, with great prescience): “The lawyers of the United States form a party… which adapts itself with greater flexibility to the exigencies of the time and accommodates itself without resistance to all the movements of the social body. But this party extends over the whole community and penetrates into all of the classes which compose it; it acts upon the country imperceptibly, but finally fashions it to suit its own purposes.” Alexis de Tocqueville, 1832 Tesla faces, if effect, as many as 50 suits in the 50 States, should they choose to engage in vehicle sales across the nation. It is probably not that many, but ultimately it will be far more than two. The time and money tied up will be considerable.
      Grendal
      • 2 Years Ago
      Too bad. Seems like the lawyers will be making a lot of money trying to overturn outdated laws. The danger to the car dealers is if the law is actually overturned at the state level. The law is there to protect their business from the major manufacturers cutting them out. Tesla is, at this point, a small player that doesn't threaten them. If Tesla fights them and they lose, then what will that do to them? More likely, Tesla will lose (based on the wording of the law that LTAW posted) or get an exemption for being an EV or small player. In the larger picture, this is a minor distraction from Tesla's more important battle; reaching and maintaining full production. They've still got 12,000 people waiting on their cars that they ordered. Unless that succeeds, this will be just a minor footnote. From what I'm reading Tesla is at about 120-150 cars a week. They still need to quadruple that amount and maintain it for the company to begin making profit and the possibility of long term success. It can happen at any time though.
        Marcopolo
        • 2 Years Ago
        @Grendal
        @ Grendal One thing we do know about Elon Musk, despite his seldom winning, he's a very enthusiastic litigant !
          Letstakeawalk
          • 2 Years Ago
          @Marcopolo
          I forgot about how Tesla's handling of customer deposits ran afoul of Washington state law.
          Letstakeawalk
          • 2 Years Ago
          @Marcopolo
          Has Tesla actually won any of their suits? One was tossed for being "brought in bad faith" ( v. Fisker), another was tossed for being "unreasonable" and "gravely deficient" ( v. Top Gear/BBC). The defamation suit brought against them by Vespremi was a mixed bag, mostly upheld - fair enough since it was Tesla employees suing Tesla. For the life of me, I can't find the results of the breach of contract suit brought by Magna, who developed a transmission for the Roadster but were never paid... Anyone got the result there? Currently, Tesla is in litigation brought by a former property partner for "...for fraud, breach of contract, negotiating in bad faith and negligent misrepresentation..." Methinks Tesla should hire new legal counsel.
          Marcopolo
          • 2 Years Ago
          @Marcopolo
          @ LTW, You are quite right it's a fairly dismal record showing the companies indifference to any opinion other than it's own. "Methinks Tesla should hire new legal counsel." Hmmmm....maybe a new client would be preferable. Counsel is only the instrument of his client's instructions ! It's often the case that geniuses like Elon Musk, see the world in a slightly different way than the rest of society. (that's what sets them apart). The downside can be a personality which lacks any empathy, patience, or a sense of humour when dealing with lesser mortals. This will always lead to Elon Musk having poor judgement in legal matters. But, who knows? Enough losses and he may learn to conciliate.
          Letstakeawalk
          • 2 Years Ago
          @Marcopolo
          "Methinks Tesla should hire new legal counsel." Hmmmm....maybe a new client would be preferable. Counsel is only the instrument of his client's instructions ! " So true - and fair enough, Tesla's counsel is earning their keep, so maybe they've found the golden goose! Beats the heck out of filing patents for rounded corners.
      MTN RANGER
      • 2 Years Ago
      LTAW, I thought even with the company stores, the prospective owner would just use the Internet to order the car.
      Marcopolo
      • 2 Years Ago
      There is no stereotype as unpopular as car salesman ! But in truth, most large franchised automobile dealers new car departments are not only conducted completely ethically, but with some of the lowest profit margins of any business or product. When buying or selling a motor vehicle, consumers arrive with a lot of preconceptions, unrealistic expectations, and a lot of ego involved. There is a tremendous fear that the salesperson will sell them something they will later regret, or will gain the better deal. With the arrival of the internet, the traditional model of car purchasing, changed dramatically. Consumers now treat Auto showrooms as a display centre for the manufacturer. The dealer is obliged to carry all the overhead of stock, employees, service departments, rental, etc, which the potential buyer uses as a sort of free motor show to gain all the information, then goes home and checks out the internet for the cheapest deal ! This is great for the manufacturer, but not so good for the dealer ! But people still buy cars from dealers. They like the personal contact, the service, that only dealers can provide. Given Elon Musk's IT background, it's natural that he would have confidence in a direct retail sales model. Tesla want to control the whole process, from manufacturer to customer. Such a sales model may prove either disastrous, or a new way to sell automobiles. Governments, and consumer groups, would argue that if Manufacturers could control the retail market, it would be bad for consumer competition. There would be little point in shopping for a better deal, as there would be no incentive for outlets to compete with one another.
        ElectricAvenue
        • 2 Years Ago
        @Marcopolo
        "Governments, and consumer groups, would argue that if Manufacturers could control the retail market, it would be bad for consumer competition." Why? There is competition among manufacturers. With a custom ordering model such as Tesla's, there is really nothing to differentiate dealers. The business model makes no sense.
          Letstakeawalk
          • 2 Years Ago
          @ElectricAvenue
          "there is really nothing to differentiate dealers" Sure there is. Some dealers will have better customer service than others. Some dealers will offer better trade-in prices. There's plenty of way for dealers to compete for business. Why do you go to one Starbucks instead of another? Same prices, same product. Atmosphere, location, staff... all are factors in choosing one retail outlet over another. Dealers competing for business is good for the consumer. One monolithic outlet, not so much.
          Marcopolo
          • 2 Years Ago
          @ElectricAvenue
          ElectricAvenue There maybe competition among manufacturers, but the laws were created at a time when the big three manufacturers controlled most of the market. Dealerships create competition, and help prevent collusion between manufacturers. They also help raise the standards of second hand units.
      mikeybyte1
      • 2 Years Ago
      So if you can't go in and do a test drive and buy the vehicle, is it really a dealership? It's a store in a mall where you can't but anything. (Well, maybe some Tesla hats. But no cars.) How is that different from when you walk into a mall and see a shiny new car sitting in the middle of the food court? You know a car company - or a dealer - dropped that shiny car down in the middle of the mall to get some attention. IMO, Tesla simply took that concept and moved it into a dedicated store space that they lease. The goal being to answer questions and inform potential customers. Seems like a slick way to get around the dealership franchise laws. I don't see the conflict of interest. Now if that mall store was like a Sears Automotive with service bays and car parts and accessories for sale, then yes. But I am on team Tesla in this battle.
        Letstakeawalk
        • 2 Years Ago
        @mikeybyte1
        "Seems like a slick way to get around the dealership franchise laws." Except that it doesn't. By operating such a store, Tesla is directly violating the laws as written. Please read the posts where I provided links to the relevant MA laws regarding the prohibition of auto manufacturers from operating a store designed to sell their vehicles.
      Vlad
      • 2 Years Ago
      All the best to Musk, and down with the sleazy dealers. They may have played some positive role when the current laws were established. Today it's a shining example of burdensome regulation, and absolutely unnecessary intrusion into a free market.
        jaydc1388
        • 1 Year Ago
        @Vlad
        Free market without any protections doesn't exactly have a good history, and the rush to do away with past institutions and laws "because we're better now" hasn't panned out so well judjing by the current state of the US Economy and income in general: Unions? "They had their place in the past but today's workers are treated much better so we don't need them any more" Yeah that worked out great, employee wages and healthcare turned out for great for everybody and the US economy is booming once we got rid of those union thugs......... Antiquated banking and investing laws that reduced undue risks and/or abuses, that turned out super....... We should probably do away with all the growth stifling EPA regulations too, starting with yopur neighborhood water supply and put that lead paint and asbestos insulation back into your kids school if it's cheaper; hey it's a free market!
        purrpullberra
        • 2 Years Ago
        @Vlad
        +10 If I was Elon I'd see if I could legally prevent these specific people (plaintiffs and family members) from ever buying a Tesla car. I'd be mad with power for sure, obviously. ;). "Have you ever gone mad without power? It's no fun" - Simpson's movie
      Letstakeawalk
      • 2 Years Ago
      " Being a new company, in the future, they might decide that franchising is the way to go. Or they might decide to put their cars into dealerships." To be clear, Tesla offering franchises is the same as Tesla having dealerships. The Dealer buys a Tesla franchise, which includes the right to use Tesla branding, trademarks, and to sell Tesla products. In return, the franchisee, the Tesla Dealer, must abide by rules set down by Tesla Motors in the franchise agreement. That's why I don't get Musk being so reticent about setting up a dealer. TMC would effectively still have as much control over their Dealer as they would over their own shop, but they wouldn't have the headache of overhead and HR costs.
      JakeY
      • 2 Years Ago
      @Letstakeawalk I would be very careful with the legal terminology. "Solicitation, looking to a sale" means the location has to be trying to get you to buy something. However, Tesla stores in question make it very clear you can't buy a car there. The staff won't offer to sell you a car and they won't pressure you to buy one. They tell you go on the website if you say your are interested in buying a car. All the terms of the sale are discussed online and the contract is also done online. The store is not involved at all. I find it unlikely a judge will consider the sale to have occurred at the store under those conditions (no offer of sale was made at the location, no contract written or spoken was made at the location, no related options were offered or finalized at the location, no change of money was made at the location). Simply showcasing the product (which might make you want to buy it in sometime in the future, it might not) is not sales. Otherwise the car display in the front of the mall or any car show, for example, would have to be considered sales and may be illegal under the same franchise law if the stand is run by the auto manufacturer, which they typically are in car shows. I'm looking at home solicitation sales as a guideline (because the legal location of sale is very important in determining if a home solicitation sale 3 day cancellation applies). http://doj.nh.gov/consumer/sourcebook/solicitation-sales.htm
      BrentNelson
      • 2 Years Ago
      it’s great improvement you are providing such a biggest platform to users,viewers.thanks for that. Tesla Motors designs and manufactures the most advanced electric vehicles and electric powertrains in the world. http://carkart.com
      Letstakeawalk
      • 2 Years Ago
      But the Tesla store employees are engaged in the act of selling a car, as defined by MA state law. It is irrelevant whether any money changes hands, or if a contract is signed. “Sale” or “sell”, the issuance, transfer, agreement for transfer, exchange, pledge, hypothecation, mortgage in any form, whether by transfer in trust or otherwise, or lease of any motor vehicle or interest therein or of any franchise related thereto; and any option, subscription or other contract, or solicitation, looking to a sale, offer or attempt to sell, or lease in any form, whether spoken or written." Tesla store employees are attempting to solicit prospective buyers through spoken discussion and by presentation of written descriptions to at some point in the future purchase a Tesla. "(c) It shall be deemed a violation of subsection (a) of section 3 for a manufacturer, distributor or franchisor representative: (10) to own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor." http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93B/Section4
      LEONARD
      • 2 Years Ago
      The guy was compaining about a $600 a year service plan?? hmm he must have never owned a Benz or Bmw lol
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