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California Car Dealers Slam Tesla For Website Pricing Tricks

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Tesla Store  -  Portland OR

Tesla Store - Portland OR

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State and national auto-dealer groups have been battling Tesla Motors for four years now.

The dealers want to stop Tesla from selling its electric cars directly to buyers, and are working to change state laws so Tesla will have to conduct all sales through independently-owned third parties--which is to say, car dealers.

In Tesla's home state of California, its Tesla Stores and its direct online sales to buyers are perfectly legal. So the California dealer association is taking a different approach.

ALSO SEE: Tesla Model X Electric Crossover Photos From the Detroit Auto Show

It recently blasted Tesla Motors [NSDQ:TSLA] by accusing it of deceptive marketing and pricing practices in the information it shows on its website.

2013 Tesla Model S electric sport sedan [photo by owner David Noland]

2013 Tesla Model S electric sport sedan [photo by owner David Noland]

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Deceptive cost calculations?

The association's letter to the California DMV (PDF) complains Tesla violates several sections of various Federal and California codes and regulations:

"Tesla fails to provide required information and shatters the notion of comparison finance shopping by including the potential availability of incentives, gas savings, and tax savings into final payment quotes for prospective customers. This scheme is most blatantly demonstrated by the general ―$580 per month after gas savings advertisement found on several of its internal web pages."

It also notes that Tesla's quoted new-car prices net out a $7,500 Federal income-tax credit for purchase of a plug-in electric car. According to the California dealers, just 20 percent of all car shoppers qualify for that credit--and the group attributes that statistic to the Congressional Budget Office.  

The complaint also attacked the way Tesla calculates resale value of its cars, the financial value of savings in commute time by using HOV lanes, and the methods used to calculate the savings of powering a car with electricity versus gasoline.

Frankly, the California dealers have a point--to some extent.

Paperwork

Paperwork

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Cost calculator slammed

When it was released in early April, Tesla's financing cost calculator was widely slammed for producing unrealistically low monthly costs that did not reflect the actual amount buyers would have to pay out of pocket.

For example, Motor Authority critiqued each line of Tesla's online tool, concluding that a 60-kWh Tesla Model S would likely cost an "effective" $764 each month per the calculator--but require an out-of-pocket monthly payment of $1,051.

Other critiques--here, for example, and here ("its own calculator demonstrates acrobatics rarely seen outside a Cirque de Soleil show to reach that number")--were equally harsh.

Tesla later changed its residual-value assumptions in the calculator, but widespread criticism of the calculator on the remaining grounds continues.

Today, the company's website appears to require users to spec out a Model S before giving a price; the "Options and Pricing" screen below is no longer live for U.S. buyers.

Net pricing: just wrong

As for Tesla's use of so-called "net pricing"--quoting electric-car prices with the $7,500 Federal income-tax incentive subtracted--this site has long argued that the practice is deceptive.

People who lease an electric car are able to benefit from that credit immediately, because the lessor nets it out of the amount financed.

2012 Tesla Model S - net pricing shown on Tesla website

2012 Tesla Model S - net pricing shown on Tesla website

Enlarge Photo

But buyers must pay the full amount, then wait up to 15 months to take advantage of the Federal credit--and some buyers do not qualify for any or all of the credit amount.

The dealers overstepped, however, in noting that only 20 percent of car buyers--that's all car buyers--qualify for the credit.

Tesla buyers are paying $70,000 and up for a car, which surely puts them in a higher income bracket than U.S. car buyers at large.

Unequal blame?

Regrettably, not only Tesla but also Chevrolet and Nissan use the deceptive pricing on their sites.

We note that the California New Car Dealers Association, however, does not attack Chevrolet, Mitsubishi, or Nissan for this practice--only Tesla.

So while the complaint has valid points, it seems not to spread the blame equally for one particularly deceptive practice.

Which rather brings to mind the words of Luke 4:23: "Physician, heal thyself."

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