How Auto Dealers Are Muscling State Legislatures Into Barring Tesla Motors

The electric car company Tesla Motors blasted New Jersey’s recent decision to bar them from being able to sell their cars directly to consumers without a middleman.  The rebuke was directed at New Jersey’s Motor Vehicle Commission, which is controlled by Governor Chris Christie’s political appointees.  New York may be the next state to bar Tesla’s method of selling cars, which strikes at the heart of how auto franchises make profits.

The banning comes despite the fact that this year, Consumer Reports rated Tesla’s luxury sedan as best overall vehicle.

The Christie administration said they made the move because Tesla shouldn’t have the right to unilaterally change the way cars are sold.  As TIME magazine notes, the CEO of the company, Elon Musk, blasted the move in a scathing blog post, saying the policy was made as a “backroom deal” to “circumvent the legislative process.”

Tesla sells its cars without using the franchise model.  But most other car companies make a profit by granting individually-owned dealerships the right to sell car brands. So Tesla is going up against automobile dealers who have a lot of power--which stems from their political contributions.  According to Open Secrets, the National Automobile Dealers Association, a lobbying group that represents car and truck dealers, spent $3 million in political contributions in 2012 and another $3 million on lobbying.

Tesla CEO Musk explained the rationale of their selling model in his blog post.

“When Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them,” Musk said. “The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none.”  

Musk added that electric cars require much less service than the gasoline cars most people buy, who then have to go to these franchises to get their cars fixed.  “There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car...Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.”

Musk encouraged consumers to visit New York or Philadelphia to buy their electric cars.  But New York may be closed off for the company soon.  As Forbes notes, “Auto dealers obtained a promise from aides to Governor Andrew Cuomo...that he’ll sign a Tesla ban working its way through the state legislature, assuming it passes.”  

In total, five states ban Tesla from selling cars.


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