Auto Dealers Don't Like Tesla's Success

Tesla has been thriving on much success lately – its stock price is up to $91 since exceeding analyst expectations in its first quarter of profit.

It’s getting kudos all over the place for gaining traction on its electric car, including getting 99 out of 100 possible points from Consumer Reports for its Model S Sedan. 

But there’s one group who isn’t very happy about Tesla’s success – automobile dealers.

They don’t like the fact that Tesla’s unique sales model of showcasing cars in shopping malls is working – over a million people visit those stores every quarter, says the company.

It challenges the status quo.

In January, Tesla won a lawsuit brought by auto dealerships that challenged the business model, but they haven’t given up. Now, they are turning to state legislatures for support and they have gotten it in North Carolina.

The state Senate unanimously passed a bill barring car manufacturers from selling their cars to individuals without going through a licensed dealer.  Tesla doesn’t even have a store in the state. A similar battle is underway in Texas.

North Carolina dealers say they simply want Tesla to honor the same laws as other car manufacturers, but Tesla counters that dealers aren’t motivated to sell electric cars. 

"Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars," says CEO Elon Musk. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. This would leave the electric car without a fair opportunity to make its case to an unfamiliar public."

Tesla’s sales approach is similar to Apple’s retail store model – it introduces its electric cars to potential customers where they typically shop – at high-end malls and shopping districts, rather than car dealerships. They don’t sell the cars through malls, they simply showcase them. Customers order the cars online.

At last count, Tesla had 24 showrooms in North America and 34 worldwide.

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