Dealers claim factory-owned Tesla stores are illegal

Tue, 09 Oct 2012

Unlike typical dealers, Tesla has a network of "stores" and "retail stores." While reservations can be made for a new Model S or Roadster at the retail store, Tesla says other versions of the store merely direct potential customers to make their reservation online. Most of these boutique-style stores are in shopping malls, and Tesla asserts that they are not sales facilities. It's an assertion with which traditional auto dealers are taking issue.

Dealers associations and networks across the country are doubling down their efforts to make Tesla's OEM showroom network illegal. Tesla has opened 17 stores in 10 states, as well as the District of Columbia.

Dealership associations contend Tesla's notion that sales are not made at these stores, stating that the showroom experience is still part of the sales process. To that end, dealer groups across the country have embarked in legal battles with the electric carmaker. The Illinois Secretary of State has informed Tesla that it is illegal to list CEO Elon Musk as the owner of its Chicago store. The Greater New York Automobile Dealers Association is looking into legal options against Telsa's Westchester store, as well as two others in New York. In Massachusetts, the opening of a store in the suburban Natick Mall is having its legality challenged by the dealer association in that state. California has laws in place that allow for a manufacturer to run its own dealership, as long as it is not within 10 miles of an existing dealer. That practice caught the ire of Chrysler dealers when the American automaker opened its own multi-brand showroom near downtown Los Angeles.

Tesla says the way that its stores are run are unique to each location. According to George Blankenship, Tesla's VP of sales, "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 website to make a reservation." Blankenship is the former Apple retail guru and the mind behind the Apple Stores – an experience Tesla hopes to recreate in its own sales network. In the eyes of many dealers, that is a threat to their own dealership model. As Tesla seeks to open more stores in more states, this is unlikely to be the end of the pushback against the electric automaker.

By George Kennedy