After New Jersey officials decided that they would impose a statewide ban on Tesla dealerships, Tesla CEO Elon Musk wrote a blog post claiming that the decision was influenced by the auto lobby and traditional auto dealers.
Tesla’s business model has always been that it should sell directly to consumers rather than through franchised dealers, which is different than automotive companies like Ford, who usually sell all of their vehicles through independent dealers.
Some states have already had laws preventing Tesla’s business model but a handful of them have already gotten rid of those requirements in order to allow Tesla to operate legally, this was not the case with New Jersey which reinforced the old laws.
Selling directly to consumers was banned in states decades before the franchise dealership model became popular and took over the industry. Now, manufacturers in states like New Jersey are forced to allow other companies to sell the vehicles.
Jim Appleton, the president of the New Jersey Coalition of Automobile Retails (NJ CAR), along with other members of the auto industry, are telling Elon Musk that he is wrong and should calm down.
He needs to stop and take a breath. If you’re an internet billionaire, maybe you think the world revolves around you, and the world springs from your laptop. Well, I got news for him. This is not a new law, Tesla is operating illegally, and as of April 1st, they will be out of business unless they decide to open a franchise. – Jim Appleton
New Jersey may not be breaking the law by keeping the law on the books but at the same time, the anger expressed by Musk is not surprising. Considering that Tesla is a massive company and relies on its ability to sell vehicles directly to consumers, states infringing on that ability are harmful to the company.
In his blog post, Musk provides a short history lesson in regards to the laws and why they were put in place. He says that the relationship between manufacturers and dealerships had been working for many years without an issue until some of the larger manufacturers attempted to buy all of the dealerships that were selling their cars. If they were able to do this, the individuals in charge of the dealerships would be out of work and would have been stuck in a bad situation, so they decided to seek protection from the state.
States then put in place laws to protect the franchisees from unfair tactics put in place by large automotive companies. Musk says that these laws have no place when talking about Tesla because it has never had franchises and therefore, the laws are not working to protect anyone in their situation.
However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them. – Elon Musk
Depending on the state, legislators are either playing nice with Elon Musk and Tesla or they are reinforcing the current laws in order to continue banning direct sales. Texas, for example, does not even allow Tesla to discuss potential pricing with customers who are in the state.
All of the direct sale bans have forced Musk to fight back and consider legal action but Tesla is not backing down with its stance that it does not want to work with franchised dealerships in order to sell its vehicles.
There are many things about Tesla that make it different from the average car company (Ford, Chrysler, etc) so treating it in the same way does not necessarily make sense, particularly in this situation.
Musk’s blog post in response to the New Jersey ruling was particularly harsh because NJ Governor Chris Christie had promised to put the law change up to vote but eventually allowed it to go behind closed doors. This is the reason why Musk is now claiming that a backroom deal must have occurred between auto dealers and the Governor, since a vote that represents public opinion would likely have swayed in favor of Tesla.
The conflict between Tesla and the massive auto dealership lobby is far from over but now that things are heating up, it seem as though people are resorting to personal attacks against Musk in order to boost their side.
Summary: Members of the automotive industry are attacking Elon Musk and Tesla because of its business model. Following a blog post by Musk, some individuals have said he needs to “stop and take a breath.”
image credit: newscientist