Tesla Must Alter Electric-Car Buyer Bounties, State Law Says


Tesla Store opening in Westfield Mall, London, Oct 2013

Tesla Store opening in Westfield Mall, London, Oct 2013

Enlarge Photo

Tesla has come under fire from franchised car dealers in several states for its direct-sales model.

That's led those dealers to lobby for changes to existing franchise laws, specifically to prevent Tesla from selling cars directly to customers in some states.

Now, Tesla finds itself in another legal bind over a different sales-related issue.

DON'T MISS: Tesla Doubles Down On Fight For Direct Sales In Michigan, Detroit Three's Home Turf

Tesla has been forced to make changes to its Model S referral program in Virginia after state regulators took issue with it, according to Bloomberg.

The promotion--which runs through October 31--gives buyers a $1,000 discount on a Model S if they're referred by a current owner.

In addition, the owner who refers to the buyer gets a $1,000 credit that can be applied to a new car, service, or accessories.

Tesla Store opening in Westfield Mall, London, Oct 2013

Tesla Store opening in Westfield Mall, London, Oct 2013

Enlarge Photo

However, Virginia regulators have decided that this runs afoul of a state law prohibiting compensation to people not licensed to sell cars--a practice known in the industry as "bird dogging."

Instead, Tesla will now give the entire $2,000 of incentives to the buyer, leaving out the referring owner altogether.

Tesla currently has two showrooms in Virginia, in McLean and Vienna.

ALSO SEE: Second Tesla Gallery, Service Center Opening This Weekend In Houston

It also operates a service center out of the Vienna location, and has three Supercharger DC fast-charging sites in the state.

Virginia's Motor Vehicle Dealer Board--which regulates car sales in the state--believes paying owners for referring others takes things too far.

"What's the difference between selling a vehicle and convincing someone to buy a vehicle? There has to be a line," Bruce Gould--the agency's executive director--told Bloomberg.

Tesla Store Los Angeles [photo: Misha Bruk / MBH Architects]

Tesla Store Los Angeles [photo: Misha Bruk / MBH Architects]

Enlarge Photo

He said the agency would have taken the same action if an established carmaker had tried to run a similar promotion.

In an open letter to owners in Virginia, Tesla disputed regulators' concerns.

"Our Referral Program was never designed to make you a salesperson," the letter said, while explaining the change in the program.

MORE: Tesla Releases Video Of Snake-Like Charger Plugging Into Electric Car Automatically

Meanwhile, owners in other states--as well as Europe and Asia--are competing for a much larger prize than $1,000.

The first owner to refer 10 new customers will win a Tesla Model X electric crossover.

The first examples of the much-delayed Model X will be delivered before the end of the year, Tesla has said.

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