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Injunction To Shut Tesla Store Denied In MA, Dealers To Fight On

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Tesla's retail store concept

Tesla's retail store concept

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Score one for startup carmakers trying to do things differently.

Last Friday, a judge denied a request by the Massachusetts State Automobile Dealers Association for an injunction that would have shut down the Tesla Store in Natick, which opened on September 28.

If the dealers' request had been granted, Tesla Motors [NSDQ:TSLA] would have been allowed to use its premises only for "an unstaffed display of a locked automobile."

Like all Tesla Stores, the Natick outlet has staff who educate consumers about electric cars and its new Model S all-electric sport sedan.

The stores are modeled after the much-lauded and very successful Apple Stores. The staff are not salespeople, Tesla says, and are not paid on commission.

All sales are conducted online between the buyer and the company itself.

The Massachusetts dealers sued Tesla on October 16, after expressing their opposition to the Natick store in June, well before it opened.

Local selectmen had approved the store's license, but the dealers first claimed that Tesla had no plans for service facilities on site, which is required for dealerships.

The Massachusetts dealers are far from giving up, however.

Robert O'Koniewski, the state group's executive vice president, told Automotive News that "dropping the lawsuit is not an option at this point."

While the group hasn't yet decided how to proceed, he added, it still feels that Tesla is illegally operating a factory store outside the state's franchise and license laws.

Tesla CEO Elon Musk weighed in with a conciliatory statement last month.

Musk argued that company stores were necessary because existing dealers earn the bulk of their profits from gasoline cars--and hence would not be able to educate consumers on the benefits of electric cars.

In respect to a pair of lawsuits filed by dealers against Tesla Motors, he said the company feels they are "starkly contrary to the spirit and the letter of the law."

Musk pledged that the company follows existing state laws to the letter. "We do not seek to change those rules," he wrote, "and we have taken great care not to act in a manner contrary to those rules."

Tesla Store - Portland OR

Tesla Store - Portland OR

Enlarge Photo

Dealer groups have been able to enact laws in 48 states that prohibit carmakers from operating their own sales outlets that would compete with existing franchised dealers.

As a startup, Tesla has no franchised dealers, so it is not competing with anyone.

Threatened dealer groups, however, have fought the Tesla Store model on many fronts.

In Colorado, for example, the local dealer group changed the state law on dealerships in 2010.

The previous law had protected existing franchises from factory competition; the revised wording flatly banned any automaker from operating any dealership or sales outlet.

The National Automobile Dealers Association said last month in a statement that it "is confident [Tesla] will re-examine its business model" as its sales grow, to "recognize the value of the independent, franchised dealer system."

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Comments (12)
  1. Wait, tell me the part again where dealerships are "only looking out for the consumer's interest" that was so funny.
     
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  2. This is what happens when a bully gets outsmarted by the geek... good job Tesla, stick to the law and show the world that you are changing the way we look (no cheesy sales man), buy (from the comfort of ones home), and drive (past all those poor folks at the gas station).
     
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  3. Shame, we'll have to do without all those dealer jokes and stories.
     
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  4. Don't worry, we can them come up with Corporate jokes.

    Complaints are just as easily handled poorly by Corporate as well as by dealers. I have recently found Toyota Corporate Service to be just as irresponsive as GM was in the 70s.
     
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  5. I will be ecstatic if I never have to buy a car from a dealer again in my life. I want them excised from my car buying methodology.
     
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  6. If dealers treated their customers with respect, they wouldn't have to sue Tesla to protect their monopoly.
     
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  7. "Dealer groups have been able to enact laws in 48 states..."

    Wait, there are the 2 states that don't have these laws? What states are they?
     
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  8. WTG MA! having worked briefly in the auto business selling cars, the hands that need to be fed are astounding. Eliminating this part of the business will allow Tesla to cut thousands off the price of the vehicle and still be able to provide at home services to its owners and still make money. Hard to argue with a business model that copies Apple Stores; one of the most successful retail models in the world. or are they copying Amazon?
     
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  9. Part of it is the business model is evolving fast.

    An Electric car may well need radically different kinds of service then a more traditional car. The Body work can be repaired by any standard body shop, the Secondary systems can be worked on by any competent service shop and the battery and motors may well become Field replaceable units, where trained techs come out do a fast swap and move on A La Geek squad.

    If you have regional support depots Say Every 300 miles you may not need much else.
     
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  10. Actually, this is not completely true. Take the body work for example. It would seem anyone could do it, but there are a lot of things that are different about electric cars that body shops need to be certified on before they can do the work. For example, suppose you have an area that needs to be painted. Seems simple enough, unless you consider that paint shops bake the paint, which will also bake your battery pack. What do you think GM or Tesla is going to tell you when your baked battery stops holding a charge and they see overspray and they have no record of the work being done at an authorized repair facility? The battery pack has to be removed before that work can be done. And a paint shop dude isn't qualified to do that.
     
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  11. I agree. Although I don't own a Tesla, I have a Ford Escort I converted to electric. I drove it to the paint shop for a new coat of paint but ended up having it towed home because when they "baked" it in their oven some electronics were fried in the process. They also painted my charger for some reason and messed up other stuff. I think overspray got on some electronic parts and they tried to paint over it. Fortunately, all the damage was stuff I could repair but it took a couple weeks to get the car running again.
     
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  12. Car dealers are slime. My brother used to be the head salesman for a long-since-gone auto dealer. He was there a very long time and when they got sold, he decided to try a different shop. Well, the auto sales world had moved on while he was fat and comfy at the place he'd been for decades. He found that it was not a world he wanted to be involved in anymore and he got into a different industry. I think a showroom where you can look over the product and then place your order on the factory web site is a great idea. I don't know what the laws are restricting that, or what reasons there might have been to pass any such laws. Maybe anti-trust issues could arise. But I like it as long as it can be done with fair practices.
     
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