Tesla Car Dealership (Follow Saturn example?)

Tesla Car Dealership (Follow Saturn example?)

I was just thinking. If Tesla wanted to or had to - couldn't they follow the Saturn Car dealership model from some years ago.
Full disclaimer - I hate going to a car dealer - I'd rather get a root canal.

No Hassle pricing - price on sticker is what you paid.
The employees all received a set salary

I couldn't find any research on the dealership model quickly but - thoughts? Anybody with any sources on this?

melinda.v | June 4, 2016

that is essentially what they are doing. the difference is Saturn's were franchised dealerships, not manufacturer owned stores like what Tesla has. that is the issue, not the pricing and employee compensation.

Orland | June 4, 2016

Exactly, they are following it, but not completely, otherwise it would be a non-issue for them to sell in any state. They would have dealerships just like Saturn did.

CraigW | June 5, 2016

The key is that Tesla cannot set up any franchise dealers. If they do the entire company would come under the dealership laws and that would handcuff Tesla throughout the U.S.

yongliangzhu68 | June 5, 2016

I predict Tesla NEVER has a dealership. Also not sure if the OP is confused, but Tesla has never had a dealership and only a store. So using any dealership comparisons is meaningless.

Red Sage ca us | June 5, 2016

Certain States, such as Texas and New Jersey, previously allowed Tesla Motors to apply for and be granted a dealership license. No one complained about their being a manufacturer that sold direct, because they were seen as a niche player during the time it took three years to sell around 2,500 of the Tesla Roadster. No major challenges appeared to their preferred means of doing business until several months after the Model S arrived on the scene. Because it very quickly became the best seller in class, and high end cars on the lots of 'independent franchised dealerships' were taking much longer than normal to move. When former customers were contacted to upgrade their most recent purchase, the 'independent franchised dealerships' were surprised to learn how many AUDI, Mercedes-Benz, BMW, and Porsche buyers were getting an electric car from a small startup in California instead of their top wares that burned gasoline or diesel. They hoped it was just a passing fad, but it became apparent that as Tesla Motors' sales were growing, theirs were all dropping. Worst of all, people were willing to wait three months to receive a custom ordered electric car instead of coming to their local dealership to buy a high end car that was sitting in the showroom. So the National Automobile Dealers Association (NADA) was called to task on the behalf of 'independent franchised dealerships' to stop the attrition.

Suddenly, places that had gleefully allowed Tesla Motors to operate were having injunctions put in place to halt their progress. Franchise laws for new car sales were in most places separate from franchise laws that governed other types of businesses. Those franchise laws were specifically in place to prevent manufacturers from competing with 'independent franchised dealerships' that they already had contracts with in a given territory. Those laws were in some cases changed to instead make it illegal for any manufacturer to sell direct at all, and made it necessary to sell solely through 'independent franchised dealerships'. Certain regulations were re-interpreted to be enforced in such a manner that all new cars must be sold through 'independent franchised dealerships' even if the actual laws on the books did not say so. NADA and others argued that the spirit of franchise laws was to prevent manufacturers of automobiles from selling direct at all, despite the fact that was not stated specifically at all.

Acura, Lexus, Infiniti, Saturn. Each was originally to be a new marque that would sell direct. Since Honda, Toyota, Nissan, and General Motors had other brands that were sold through 'independent franchised dealerships', their existing franchisees protested being 'left out' and demanded that they be included in the new ventures. The 'independent franchised dealerships' had leverage because of the other cars they already distributed for the manufacturers. They have no such leverage against Tesla Motors. That's why they resorted to back room deals, litigation, and lobbying of legislators to block their preferred business method, hoping they could frighten the new company into falling in line with all the rest. It didn't work.

Trust that as often as NADA and its members claim there are disadvantages to selling direct, they know better. Winchell's and Dunkin' Donuts didn't file injunctions against the rapid expansion of Krispy-Kreme. Grocery store chains didn't file suit when Starbucks began to sell their brand of coffee beans in their own stores. Walmart and Best Buy didn't go running to government officials when Apple Stores arrived. No one insists that the Microsoft Store must carry Apple or Linux products. Dell Computer sold direct through mail order and their website for years. There is no army of lawyers claiming they cannot also sell through retailers.

Did I mention Dell is based in Texas?

moorelin | June 6, 2016

Tesla never had a dealership license in Texas. "Galleries" from the beginning.

mrbarnes | June 6, 2016

Would anyone think it's possible to partner with Daimler to be a dealership within a dealership? Have a gallery within a dealer showroom where specific Tesla 'support specialists' or something sell the cars? The partnership could be at the manufacturer level, but the manufacturer could give incentives to a dealership to host a certain amount of square footage for such transactions? Just a thought.

DTsea | June 6, 2016

With Daimler? Why?

yongliangzhu68 | June 6, 2016

Irony is that the original local dealer who is a member of the community is mostly gone, especially in larger/metro areas. They are mostly owned by large mega corporations that run 100's of different dealerships, often in 'completion' with theirselves with different brands/dealerships in the same market.

Red Sage ca us | June 8, 2016

moorelin: I believe Tesla Motors had their own dealership license in Texas at one point. It was never renewed beyond 2013. I think the same happened in New Jersey. So, while they were expected to fail, go bankrupt, blow away in the wind, as a low volume producer of electric cars that were 'Toys for the RICH!' -- Tesla Motors was allowed to sell direct in those States. Once they became world renowned for building the best car of any type -- they were not allowed to sell the cars they made any longer.

Red Sage ca us | June 8, 2016

mrbarnes: No. It would not work that way. Daimler/Mercedes-Benz also are not allowed to sell direct in the US due to Franchise Laws that ban the practice. When the Model S was released, both Toyota and Daimler owned TSLA stock. Those companies were close enough to Tesla Motors that they could have shared space at Lexus or Mercedes locations had that been needed. It wasn't. | June 8, 2016

And to dispel the poor dealers, the top 30 dealership groups have revenues over $1 billion each. AutoNation alone raked in $19 billion in 2014.

CraigW | June 8, 2016

I look at dealers in much the same way as I did banks, for processing student loans backed by the federal government - middlemen who provided a decreasing service value, but demanded an expanding profit margin. They will fight tooth and nail, but will have a hard time getting buying through the Internet banned. IMO, when the general public finds out they are having a hard time test-driving a Model 3 like the one they have reserved, there will be an upsurge in pressure on politicians to do something, quickly.

Orland | June 9, 2016

It would be nice if we could revamp these dealership laws across the nation, they no longer serve the original purpose they were created for. But that's either a local fight in each state or something Federal to reduce the time factor.

It's amazing (well, not really) how many laws are abused beyond original intent to preserve a monopoly or "bad actors", by cloaking it with the "better for the consumer" label, even when the consumers are saying it isn't better.

dsvick | June 9, 2016

I find it funny that a group of people (politicians) that is looked upon so poorly by the public is standing up for a process (car dealerships) that the public would rather visit the dentist than take part in.

yongliangzhu68 | June 9, 2016

dsvick: Not trying to get political but the system has drifted to the point that corporations are considered constituents/people and since they give the most money they are afford the most privilege.

[crazy dream] I wish we could implement Musk's Mars colony idea for a direct democracy form of government here. [/crazy dream]

We now actually have the technology to do it but it would require a dangerous and unprecedented constitutional convention that will never happen. Also the constitution in Article V of makes allowances for this so it is not unconstitutional. Of course this still excludes states rights/laws which is were the 'dealership' laws are.

alseTrick | June 9, 2016

In states that won't allow Tesla to sell direct to the customer, why doesn't Musk just become a dealer and have Tesla create a franchisee agreement with Musk?

Orland | June 9, 2016

@Red Sage ca us - wow that was one video/article. I'm still amazed they had the hem.... stones ... to even lie to our faces like that. :)

@wj - I think even Elon would say a direct democracy in a country the size, and varied population of the US would not be prudent. But also *sometimes* the majority can be wrong........ but then we'd have to debate all types of governmental bodies/forms. Direct democracy works easiest/best I think when the population is a lot smaller.

yongliangzhu68 | June 9, 2016

squared: Because the laws prelude the corporate supplier from owning or controlling the dealership in anyway. It can't be a dealership unless it is 100% independent dealer owned.

yongliangzhu68 | June 9, 2016

squared = tsquared prelude=preclude

Red Sage ca us | June 10, 2016

That's why I always use the term 'independent franchised dealerships' in quotes. Their use of language is... Disingenuous at best. They have actually accused Tesla Motors of being a 'monopoly'. They have insisted that Tesla Motors competes 'unfairly' by selling direct, instead of using the 'franchise system'. They have said they could 'help' Tesla Motors, if only they were willing to use franchises 'like everyone else'.

General Motors has said that by selling direct, Tesla Motors has an 'unfair advantage' over other automobile manufacturers. I don't believe they realize that is actually an argument in favor of Tesla Motors' preferred means of doing business. Because it effectively means they have admitted that having to sell through 'independent franchised dealerships' is a DISADVANTAGE.

For a very long time, Dell Computer sold their computer systems through mail order. Then they sold direct through a website as well. As they grew in popularity, they also sold computers to retailers. But they didn't stop their core business of selling direct via mail and a website. And none of the retailers insisted that they must sell exclusively through a third party distribution system. Did I mention Dell is based in Texas?

Tesla Motors has no 'independent franchised dealerships' to compete against, fairly or unfairly. There simply are NONE. My position is that FRANCHISE LAWS are meant to govern companies that use FRANCHISE CONTRACTS. Franchise laws are NOT meant to GUARANTEE BUSINESS to those who want to run franchises. Franchise laws were created to protect Franchisees from poor business practices by Franchisors. Franchise laws act as belt & suspenders protection, because to become a Franchisee, you must have a signed contract with terms that were agreed to by both parties. So, once again... Tesla Motors has not contract terms with any Franchisees, anywhere. So, Tesla Motors should NOT be forced to enter such contracts to sell the products they make.

I feel the same way about unions. The United Auto Workers unions believe that simply because someone is manufacturing vehicles in the United States of America, their labor force should be unionized. The original purpose of unions was to protect employees from bad employers. Most successful employers have figured out it is a better idea to simply treat your employees well, and they will do better work for you. As a result, those companies are not unionized. Tesla Motors strives to create precisely that type of work environment. So their employees have chosen not to join a union. And the UAW doesn't have a leg to stand on in their desperate attempts to unionize the Fremont facility.

https://www.justice gov/atr/economic-effects-state-bans-direct-manufacturer-sales-car-buyers

Drdpharris | June 10, 2016

@Red Sage ca us. Thanks for that link to justice. They make the argument (beyond an extra layer of profit) that direct to customer is more efficient in that it matches production to consumption better.

Red Sage ca us | June 10, 2016

Drdpharris: Oh, I'm happy to share the link in any and all discussions such as this... (Though Mollom didn't want me to do so, for some reason.) I am really surprised that for an article that was written in 2009, that was based upon data from years earlier, and is still valid today, journalists so rarely refer to it when covering Tesla Motors' issues with States that ban direct sales by automobile manufacturers. Now to see if these links work...

Orland | June 10, 2016

@Red Sage ca us. Excellent articles, glad to see that Tesla may have a decent path to address the current patchwork of obstructive laws. Not really surprised about the lack of media research, it seems speed is trumping quality more and more these days.