Tesla vs. the auto dealers

By Laurie Bennett

April 14, 2014 at 7:49am

Count American auto dealers among those who have a problem with serial entrepreneur Elon Musk.

As James Surowiecki notes in the New Yorker, the New Jersey state government has declared that showrooms for Tesla, Musk’s electric car company, be shuttered.

Tesla has been banned in several states because it sells cars directly, rather than through independent dealers.

Elon Musk
Elon Musk

Although companies in other sectors, such as electronics (think Apple and Dell) can sell directly, 48 states mandate that auto sales must be handled by dealers.

The dealers maintain a significant political profile. State dealers associations spend millions on lobbyists and gubernatorial campaigns and legislative races.

At the federal level, the National Automobile Dealers Association spent $3 million last year on lobbyists, and doled out another $3 million to candidates in the 2012 elections.

Tesla hasn’t reported any D.C. lobbying activity since 2011. Its trade group, the Electric Drive Transportation Association, spent just $260,000 on lobbying last year.

Musk and other Tesla execs have indicated a preference for fighting one big battle nationally, rather than dozens of battles in the states.

“The challenge we face is that the auto dealers are very strong and very influential at the state level among the legislatures,” he said at the company’s annual meeting.

Musk, with a fortune estimated at $8.3 billion, certainly has the resources and the high media profile to wage a full-out war.

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  • #1.   Diego 03.23.2015

    The most important aecspt of this announcement to me is that we’ll have one more major OEM producing EVs soon. The number of people signing up for the Nissan Leaf has exceeded 17,000, and I expect that to hit over 50,000 by the December release date. Similarly, when the Volt’s price is announced in October or so, and they start taking reservations, the line will form quickly. So far, all this interest is sans any advertising for the cars. Once that happens, things will pick up fast. But the real action happens as these thousands of American begin to bring their new cars home, experience them like those of us lucky enough to drive the RAV4 EV and EV1s of the past decade, then they’ll be telling all their friends and relatives about the experience and word of mouth will touch off a frenzy. Now, should Israel attack Iran, or peak oil begin to make itself known in the world’s oil markets, all bets are off. There won’t be tens of thousands in line for these cars, there’ll be millions. This is why the Toyota/Tesla announcement is important. We’re going to need all the EVs we can get.

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