Tesla and Auto Dealers Go Head-to-Head

Wall Street Journal

Tes­la Motors is allow­ing local auto deal­ers to show, but not sell, their cars – which is buck­ing up against deal­ers and fran­chise laws in some states.

Get the details on the pow­er strug­gle in bat­tle­ground states.

Elon Musk made a for­tune dis­rupt­ing the sta­tus quo in online shop­ping and renew­able ener­gy. Now he’s up against his tough­est chal­lenge yet: local car deal­ers.

Mr. Musk, the bil­lion­aire behind Pay­Pal and now Tes­la Motors, Inc. wants to sell his $70,000 Tes­la elec­tric lux­u­ry vehi­cles direct­ly to con­sumers, bypass­ing fran­chised auto­mo­bile deal­ers. Deal­ers are flex­ing their con­sid­er­able mus­cle in states includ­ing Texas and Vir­ginia to stop him.

The lat­est bat­tle­ground is North Car­oli­na, where the Repub­li­can-con­trolled state Sen­ate last month unan­i­mous­ly approved a mea­sure that would block Tes­la from sell­ing online, its only sales out­let here. Tes­la has staged whiz-bang test dri­ves for leg­is­la­tors in front of the State House and hired one of the state’s most influ­en­tial lob­by­ists to stave off a sim­i­lar vote in the House before the leg­isla­tive ses­sion ends in ear­ly July.

The focus of the pow­er strug­gle between Mr. Musk and auto deal­ers is a thick­et of state fran­chise laws, many of which go back to the auto industry’s ear­li­est days when indus­try pio­neer Hen­ry Ford began turn­ing to eager entre­pre­neurs to help sell his Mod­el T.

Deal­ers say laws passed over the decades to pre­vent car mak­ers from sell­ing direct­ly to con­sumers are jus­ti­fied because with­out them auto mak­ers could use their eco­nom­ic clout to sell vehi­cles for less than their inde­pen­dent fran­chisees. Deal­ers say Tesla’s direct sales vio­late those laws. These fran­chise laws have insu­lat­ed car deal­ers from much of the e-com­merce rev­o­lu­tion that has ham­mered oth­er sec­tors from books to elec­tron­ics.

Fran­chise laws don’t apply to Tes­la, Mr. Musk has said, because the com­pa­ny has nev­er had fran­chised deal­ers. This argu­ment has been a win­ner for Tes­la in court skir­mish­es with deal­ers in New York and Mass­a­chu­setts. It has fared less well in state hous­es where law­mak­ers are more attuned to the con­cerns of impor­tant local employ­ers and polit­i­cal donors.






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