Auto dealers call Tesla Stores model illegal

Tesla Store may be coming to a mall near you. But don’t think for a second that it is there to sell cars! Image: Phil Denton/Flickr/CC BY

Tesla Stores are opening in shopping malls across the nation. In the process, they are changing the way that cars are sold. That has some traditional auto dealers accusing the company of violating state laws.

Tesla Stores challenged by dealers

Automotive dealership associations have lobbied for laws that disallow automakers from selling their product directly to the public. They say it stifles competition.

Now the Massachusetts State Automobile Dealers Association, among others, is
accusing Tesla of doing just that with its Tesla Stores.

Tesla told Wired that, “in every location, we work to comply with all state and local laws and regulations.”  It says is breaking no laws because its stores are not about sales — they are about educating potential buyers.

‘Educators,’ not sales staff

Potential buyers who visit Tesla Stores are “educated” about the Tesla Model S. However, the line is fuzzy between what constitutes a “lesson” and what might be likened to a sales pitch. If a consumer decides to take the plunge on a Model S and go luxuriously green, the “teacher” is happy to direct him or her to a computer terminal, where the order can be made and a deposit put down.

But the buyer does not drive off the “lot” in a car, as they would from a traditional dealership, such as Michael’s Toyota of Bellevue, Wa., The deposit secures a pre-order on a car that has not yet come off the assembly line. When the car is built, it can be delivered to the new owner, or it can be picked up from the factory in Fremont, Calif.

Shouldn’t they be ‘Tesla Schools?’

However, if education is its aim, why are they called Tesla “Stores” and not “Schools?” The difference between this sort of education and selling may seem like splitting hairs to some. And that is the position taken by automobile dealer association in four states, according to Automotive News.

Bob O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, summed up their position:

“Anything that gets you to the executed contract is part of the sale.”

Apple strategy

The new Tesla sales model may not seem surprising when you consider it was the brainchild of the company’s new vice president, George Blankenship. He used to work for Apple, where he masterminded its Apple Stores model.

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What about service?

At this time, there are 17 Tesla Stores in 10 states and the District of Columbia. However, with the absence of actual dealerships to sell its cars, the question arises, how does Tesla plan to service what it sells?

To that end, Tesla says it has plans to build service centers in the localities where it “educates” consumers.

Shanna Hendriks, a spokeswoman for Tesla, told Wired:

“By March 1 of next year, more than 90 percent of all current Model S reservation holders in North America will be within 100 miles of a Tesla Service Center. And more than 80 percent will be within 50 miles.”