The Tesla Motors direct-sales model is working well, and the automobile dealer associations are running scared.
What makes Tesla Motors so different? First, the Tesla Model S is a ground-breaking and cutting-edge automobile, but that’s not the problem. Second, like Apple, Tesla Motors is sold only through Tesla Stores, which is where the situation gets sticky with the Automobile Dealer Associations [ADA] in each state.
For the most part, state laws prohibit automakers to sell directly to the public, as this would undercut the dealerships selling the same vehicles. This makes some sense, as the dealerships would be unable to compete on price, profits would be minimal, and many would be forced out of business. [Personally, as a former Master Automobile Technician for Toyota and Lexus, I think I would rather have worked directly for Toyota, but that’s another story…]
Because Tesla Motors is so different, that is, they sell only one model, and only a few hundred per month, it makes me wonder why the ADAs would throw millions of dollars away to keep Tesla Motors out of the Lone Star State, Texas.
After all, how much of an impact on Texas automobile dealers could a couple hundred Tesla Model S possibly make, even if Tesla Motors sold its entire 500-cars-per-week capacity in Texas? It would barely make a dent in the hundreds of thousands of vehicles sold every month. Perhaps this is why, in some states, legislatures have overturned ADA requests to block Tesla Motors from selling cars direct to consumers.
Interestingly, in the state of Texas, in spite of overwhelming consumer interest in Tesla Motors selling direct, the State Legislature turned a deaf ear. And what sound could be more overwhelming than consumer outcry than piles and piles of ADA money?
As it turns out, the motion to allow Tesla Motors direct sales in Texas sat on the floor, weighed down by piles of ADA-lobbyist money, and never even came to a vote. Who footed the money-pile but ADA lobbyist Gene Fondren, who was key in constructing some of the toughest dealer laws in the country.
All told, it was really a matter of who had more money to put on the table and into politician pockets. Tesla Motors CEO Elon Musk spent maybe $570,000 between lobbying and campaign donations, while the ADA lobby spent $3.25 million between lobbying and campaign donations. Again, I have to ask, “Why are the ADAs so scared?”