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Tesla Gets Green Light To Open Store In Natick, Massachusetts

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Tesla Store  -  Portland OR

Tesla Store - Portland OR

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After more than an hour of discussion last night, the town selectmen of Natick, Massachusetts, voted 4-1 to grant a license to sell cars to Tesla Motors Massachusetts.

The local company, which the Selectmen concluded was legally separate from Tesla Motors [NSDQ:TSLA], will operate out of a property on West Central Street in the town.

Tesla has operated a showroom or "gallery" at the Natick Mall since September, but is not allowed to sell its electric cars there.

The Massachusetts Auto Dealers Association had sued the company over its store, saying that, among other things, Tesla's service center in Watertown is too far from the Natick facilities.

That suit remains pending, although a judge denied an injunction to prevent Tesla from opening its facilities, saying the dealers did not have standing to sue.

Tesla's plans have also been opposed by the owner of Bernardi Honda in Natick.

Car dealers in most states have successfully lobbied for laws preventing automakers from opening company-owned dealerships, which could compete unfairly with independently owned dealers.

Tesla Motors, however, has no franchised dealers--but in many states and nationally, auto-dealer groups are now organizing to prohibit Tesla from selling its cars in any fashion except through independently owned dealers.

Tesla CEO Elon Musk has said the company feels that established dealers who make the bulk of their money from selling gasoline cars would not be properly incentivized to sell its electric cars--which render those gasoline vehicles obsolete.

But auto dealers clearly feel viscerally threatened by the notion that Tesla buyers are not required to use conventional auto dealers. In October, the National Auto Dealers Association said it was seeking a meeting with Tesla to explore "serious concerns about Tesla's intentions."

2012 Tesla Model S

2012 Tesla Model S

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Its chairman William Underriner said NADA "has 'a whole mess of lawyers in Washington' who work on state franchise laws," which presumably the dealer group could deploy in every location Tesla seeks to open a store or service facility.

That's exactly what happened in Colorado in early 2010, when the state dealer group got the law changed. It used to protect franchised dealers from competition by their auto brands; now it flatly bans any automaker from opening any facility, period. Tesla has just a single store in the state, which opened before the law changed.

Meanwhile, though, those electric-car advocates and interested Tesla fans in and around Natick will now be able to go into a local store, learn about the Tesla Model S, and perhaps even order one.

The 2012 Tesla Model S was named the Green Car Reports 2013 Best Car To Buy yesterday.

[hat tip: Boston Tesla owner Robert Stoddard]

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Comments (10)
  1. I don't understand these laws... Do they apply to GEICO, Sony, Apple and Microsoft too? Seems ridiculous that a state can force a company to distribute a certain way. What's next, the state outlawing commission sales? Now if the company sold an exclusive franchise for a geography and then viloated it with a company store - that's different.
     
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  2. @M Gert: These laws were first enacted when dealerships were small and individually owned businesses (prior to megachains like AutoNation, for example).

    They were intended to protect those local businesses from having to compete with factory stores that could get better terms from the automaker, and there's history to back up that need.

    It's pretty clear, however, that the very powerful auto-dealer groups feel deeply threatened by any auto sales model that differs from independently owned third-party dealerships, and will use their considerable wealth, influence & political power to fight it.

    The independent dealer model, by the way, is not legally required anywhere else in the world.
     
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  3. John Voelcker said it: these laws are a bit of a idiosyncrasy for the US and it is weird they only seem to apply to cars. Also in the short term the traditional car dealers don't seem to stand to loose a lot by Tesla's approach. Tesla expects to sell less than 10,000 units per year in the US for the foreseeable future, hardly worth making such a fuss about in a 10 million+ market.

    The way I see it this is either car dealers thinking long term or hidden behind all this lurks an agenda of exploiting the privileged position of cardealers to slow down the advance of EVs by forcing them to use a distribution model that's unsuitable for a product that needs a fundamentally different approach to marketing/distribution than traditional cars.
     
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  4. @Chris O: Thanks for the good words. But: Car dealers will sell whatever makes them money. And I don't think NADA is sufficiently forward-thinking to want to "slow down the advance of EVs".

    I think it's simpler: They fear any alternative model that proves what delaers know in their hearts. Many Tesla buyers (who are smart, demanding & digital) find stores + online ordering far preferable to having to educate the average new-car salesperson, who tries to push that buyer into the vehicle that gives him the highest profit for the least time expended.

    See numerous stories of educated Volt buyers being pushed toward Cruzes by Chevy salespeople saying they "don't really want an electric car".
     
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  5. @John Voelcker: Good point that traditional sales people tend to be inclined to talk people in traditional cars. It's no doubt easier money than spending the extra time in selling a product that might need quite some explaining and which might not be as profitable, certainly not in terms of secondary (maintenance) revenues. Which leads back to my point: the traditional franchise dealership system is set up for traditional cars; forcing EV makers in a distribution system that doesn't suit the specific needs of this drastically different product will act as a break on their success which may be just a side effect of what NADA is trying to achieve but I doubt it's one they are too worried about.
     
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  6. There are at least two stores in Colorado, one in Boulder, which was probably opened before the law changed, and one in Denver metro which was opened in a mall a few years ago.
     
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  7. @Mittar: The Tesla Store locator shows exactly one Tesla store, in Lone Tree, and a separate service facility in Denver.

    http://www.teslamotors.com/findus
     
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  8. Every commercial success story isn't just about having a great product, it's also and mostly about having the right marketing approach. Tesla's product is great but also new and unknown. It needs to be presented in low threshold locations where it can be explained to the general public by a dedicated staff that has the specific expertise and enthusiasm needed to make a convincing case for this product.

    Also there is the problem that Tesla's product doesn't have the sort of maintenance requirements cardealers rely on for most of their income.

    There is no doubt that the "Applestore approach" is the right way to go for Tesla as there is no doubt that the traditional cardealers will fight being sidetracked like this every step of the way.
     
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  9. NADA just wants its cut of the Tesla business, it is as simple as that. Personally, I hope they do not get it, for now.

    Automobile dealers don't have a unique problem in competing with the factory. Many factories sell their products through retailers and also directly. If the factory values their retailers, they are very careful not to underprice them. Once you are underpricing your retailers, they will stop doing business with you, and that is probably bad for you as not everyone wants to buy from the factory.

    NADA needs to back down and stop whining.
     
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  10. Good point that undercutting retailers (which Tesla doesn't have...)is usually not in factories interests. The "they want a cut of Tesla's business" argument makes less sense to me since Tesla only adds ~7-10K units to a 10 million+ market for the foreseeable future.

    So I ask again: why is NADA so up in arms about this? Seems to me it has very little to gain and Tesla has a lot to loose, which brings me back to my suspicion that throwing spanners in Tesla's works may be a key motivation for NADA. Luckily so far with little success.
     
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