Tesla facing dealership challenge over its ownership of factory stores

Article by Anita Panait, on October 9, 2012

Elon Musk’s strategy to sell Tesla vehicles involves opening a number of factory stores and replicating the Apple experience in them. Tesla has successfully opened 17 factory stores 10 states and the District of Columbia, mostly in shopping malls. The electric carmaker is also set to open six more stores this fall.

However, the carmaker is facing challenges from a number of dealer associations and state regulators in at least one case. These detractors claim that Tesla's stores violate state franchise laws that prohibit factory ownership of dealerships.

Protesting dealer associations also claim that Tesla's factory stores pose unfair competition for competing dealerships.

They also claim that these stores are inconvenient for consumers who need to have their vehicles repaired. These dealers associations say that if left unchallenged, Tesla stores threaten the franchise system.

Bob O'Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, remarked that Tesla’s factory store format, if successful, could be replicated by another carmaker which also builds electric vehicles.

O'Koniewski, described Tesla’s format as a separate system that bypasses dealers that it is “extremely problematic."

The New York State Automobile Dealers Association, on the other hand, has commissioned dealer lawyer Leonard Bellavia to write a report for an upcoming newsletter on the threat of BMW using a direct-to-consumer model to sell its upcoming i-car line of electric vehicles.

BMW has remarked that it plans to sell its i-cars through U.S. franchised dealers. Tesla, meanwhile, quipped that it is doing everything to comply with state and local laws

George Blankenship, Tesla's vice president of sales, said that the carmaker does whatever state and local laws allow them to do. Blankenship remarked that Tesla’s sales method is unique for each location.

Topics: tesla, dealership

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