Tesla Store in Denver, Colorado – photo: Nicholas Fleury / flickr

 

Ever wonder why electric sports car maker Tesla has carefully avoided the word “dealership” in describing its stores? Turns out 48 of the 50 US states have laws in place restricting or prohibiting automakers from selling cars directly to consumers. This is why almost every car dealership in America is independently owned and operated. Tesla’s, however, are owned and run by Tesla itself.

Now the company is being challenged in four states– Illinois, Massachusetts, New York, and Oregon — by dealer groups (and in Illinois, by the Secretary of State).

Tesla claims it hasn’t run afoul of the dealer franchise laws because most of its stores don’t actually sell cars to consumers– they just provide information and direct interested customers to Tesla’s website, where they can customize and order their car. Dealer interest groups argue that because Tesla’s showroom employees facilitate sales, there’s really no difference. Bill Underriner, chairman of the National Automobile Dealers Association (NADA), said:

“Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model…Other companies such as Daewoo did. All companies should be complying with existing laws in the same way dealers are required to.”

The EV startup currently operates in 10 states and the District of Columbia, with 17 showrooms, and another 6 opening this fall.

Tesla’s showroom experience was developed by its vice president of sales, George Blankenship– a former Apple executive who built Apple’s amazingly successful, product-focused, soft-sell retail experience and aims to recreate it at Tesla’s new stores.

The factory stores are mostly located in malls, showing off Tesla’s technology to consumers where and when they wouldn’t normally be thinking about cars. Blankenship said:

“We do what we’re capable of doing, and we do whatever they let us do. It’s unique for each location. If we can’t be a dealer in a mall, we won’t do reservations on-site. We tell people where to go on our Web site to make a reservation.”

Will Tesla succumb to the pressure and sign on traditional car dealerships, or will it continue to forge its own path?

Sources: The Car Connection, The Truth About Cars, Automotive News

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