Elon Musk – “To the People of New Jersey”, Tesla Is Still Here For You

MAR 14 2014 BY STAFF 44

The Site of Tesla's Fight in New Jersey - Image Copyright InsideEVs - Tom Moloughney

The Site of Tesla’s Fight in New Jersey – Image Copyright InsideEVs – Tom Moloughney

Today Tesla’s CEO Elon Musk has officially filed his rebuttal to New Jersey’s recent decision to not allow Tesla to continue selling cars direct in the state without a licensed franchise operating between the customer and Tesla.

Recent Meeting In New Jersey Didn't Go So Well

Recent Decision On Tesla’s Operations In New Jersey Didn’t Go So Well (Photo InsideEVs/Tom Moloughney)

The full transcript of that letter can be found below, but as part of his note to the public Mr. Musk has made it quite clear that Tesla is still going to be doing business with the residents of New Jersey:

“Most importantly, even after April 1, you will still be able to order vehicles from New Jersey for delivery in New Jersey on our TeslaMotors.com website.”

The ruling doesn’t effect any existing service centers for Tesla in the state, but corporate stores will now be “transitioning” to galleries where you can check out and ask questions about the Model S, but not buy it.

Elon Musk: To the People of New Jersey

Elon Musk Pens Letter to the People of New Jersey

Elon Musk Pens Letter to the People of New Jersey

On Tuesday, under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the Governor, ended your right to purchase vehicles at a manufacturer store within the state. Governor Christie had promised that this would be put to a vote of the elected state legislature, which is the appropriate way to change the law. When it became apparent to the auto dealer lobby that this approach would not succeed, they cut a backroom deal with the Governor to circumvent the legislative process and pass a regulation that is fundamentally contrary to the intent of the law.

It is worth examining the history of these laws to understand why they exist, as the auto dealer franchise laws were originally put in place for a just cause and are now being twisted to an unjust purpose. Many decades ago, the incumbent auto manufacturers sold franchises to generate capital and gain a salesforce. The franchisees then further invested a lot of their money and time in building up the dealerships. That’s a fair deal and it should not be broken. However, some of the big auto companies later engaged in pressure tactics to get the franchisees to sell their dealerships back at a low price. The franchisees rightly sought protection from their state legislatures, which resulted in the laws on the books today throughout the United States (these laws are not present anywhere else in the world).

The intent was simply to prevent a fair and longstanding deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear. In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, 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.

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. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what’s easy and it is game over for the new company.

Tesla Logo

Tesla Logo

The evidence is clear: when has an American startup auto company ever succeeded by selling through auto dealers? The last successful American car company was Chrysler, which was founded almost a century ago, and even they went bankrupt a few years ago, along with General Motors. Since the founding of Chrysler, there have been dozens of failures, Tucker and DeLorean being simply the most well-known. In recent years, electric car startups, such as Fisker, Coda, and many others, attempted to use auto dealers and all failed.

An even bigger conflict of interest with auto dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.

Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. 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. I resolved that we would endeavor never to do such a thing at Tesla, as described in the Tesla service blog post I wrote last year.

Why Did They Claim That This Change Was Necessary?

In New Jersey, You'll Still Be Able to Order a Model S and Eventually Even a Model X

In New Jersey, You’ll Still Be Able to Order a Model S and Eventually Even a Model X

The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.

There are other ways to assess the premise that auto dealers take better care of customers than Tesla does. Consumer Reports conducts an annual survey of 1.1 million subscribers, which factors in quality, reliability and consumer satisfaction. The Tesla Model S was the top overall pick of any vehicle in the world, scoring 99 out of 100. This is the highest score any car has ever received. By comparison, in the industry report card, Ford, which sells their cars through franchise dealers, received a score of 50. BMW, which makes competing premium sedans, received a score of 66.

Consumers across the country have also voiced their opinion on the sales model they prefer. In North Carolina, a Triangle Business Journal poll found that 97 percent of people polled said Tesla should be allowed to sell cars directly. A poll by the Austin Business Journal showed that 86 percent of respondents were in favor of direct sales, and in a Los Angeles Times poll 99 percent of respondents came to the same conclusion. These aren’t polls that we commissioned and there are many more like them. We have not seen a single poll that didn’t result in an overwhelming majority saying they preferred the direct model to the traditional dealer model. Democracy is supposed to reflect the will of the people. When a politician acts in a manner so radically opposed to the will of the people who elected him, the only explanation is that there are other factors at play.

Going Forward

Some reassurances are also in order. Until at least April 1, everything is business as usual for Tesla in New Jersey. It should also be noted that this regulation deals only with sales, so our service centers will not be affected. Our stores will transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our Manhattan store just over the river in Chelsea or our King of Prussia store near Philadelphia.

Most importantly, even after April 1, you will still be able to order vehicles from New Jersey for delivery in New Jersey on our TeslaMotors.com website.

We are evaluating judicial remedies to correct the situation. Also, if you believe that your right to buy direct at a Tesla store should be restored, please contact your state senator & assemblyman: www.njleg.state.nj.us/districts/districtnumbers.asp

Finally, we would like to thank the many people who showed up in Trenton on Tuesday to support Tesla and speak out against the MVC’s back-door tactics in passing this regulation change without public consultation or due process. It was an amazing response at very short notice and much appreciated.

Elon

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44 Comments on "Elon Musk – “To the People of New Jersey”, Tesla Is Still Here For You"

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I dig rich folks who believe in Democracy. And science…

+1

I won’t be voting for Christie should he become a presidential candidate. If I lived in NJ I’d vote against him there.

I’m no fan of Christie, but his scandals are nothing … he’s a freakin’ choir-boy compared to our Illinois politicians. But I would vote for anyone who doesn’t want to double the national debt like the last two presidents did/are.

Regardless … Elon wrote a very good letter. I hope it gets some media traction so that Christie is forced to respond. Otherwise he’ll probably ignore it. Not much coverage yet … just checked. A Musk vs Christie rivalry would be far more entertaining than bridge-gate, which resolved to a big-nothing even though the media loved it.

Cristie is correct. This is a legislative, not executive issue. If a law is flawed, change the Law.

Elon quote:
“The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”.

If you believe this, Gov. Christie has a bridge closure he wants to sell you! “

LOL good one Elon. Stick it to the pig!

“Unless they are referring to the mafia version of “protection”, this is obviously untrue.”
————

LOL

Elon just getting the seat nice and hot for his new VP of Communications/Marketing from Nissan-Renault Simon Sproule – who starts on April 1st.

Yeeeaah… We’ll see how long Simon lasts.

Yeah, the mafia reference will make the best sound-bite by far. Too bad it was sort of diluted by the unrelated “bridge-gate” dig just prior. IMHO, his letter would have been more effective without that. Like this:

“The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. Unless they are referring to the mafia version of “protection”, this is obviously untrue.”

Poetry! 🙂

Yeah, Joos can call it our consumer protection plan, Yeah. Think of it as insurance, against, god forbid, a piano might fall on your head.

All these politicians that back the car dealers over Tesla are going to lose. Just look at the comments sections after any story on the topic. Even the people that think electric cars are stupid back Tesla on this matter.

So, they keep the stores and service centers open. Sounds like good marketing, and little practical effect.

I think that this will just be an inconvenience for Tesla and their customers. No real impact. However, I do expect there to be some attempt at a “sting” to see if employees will break the rules so Tesla can be fined.

Christie needs all the friends he can find/climb into bed with right now, so to him, the sleaze merchant auto dealers actually look good.

Of course, this decision will be overturned eventually. EVs are on the right side of history, and those blocking them are in for a rude awakening.

I’m surprised that the auto clowns haven’t played the China card yet — “You open the doors to manufacturers selling directly to the public, and there will be showrooms all over the place selling Chinese cars!”

LOL

i love Elon

I guess it’s time for a series of Electric Car Guest Drive events in New Jersey.

This really shows how government trying to regulate private markets eventually goes wrong. Even the best intentioned interference in the market, even the ones that work for a while, eventually go wrong. Other examples include broadcast TV and cable TV, which are now the tails that wag the dog.

It seems like the best government regulations are the ones that sunset automatically if not renewed.

For the case of Tesla, I’d like to know how it really makes a difference. The state might be able to stop a Tesla employee from delivering the car, but an independent car service? Even if you are too busy (or lazy) to go get your Model S, there are plenty of ways to get it delivered.

No, the best government regulations are the ones that are based on logic and reason
They never go out of date.

I agree with most of your premise but our current media problems are the result of deregulation. The fairness doctrine was removed and corporate media saturation protection was abolished allowing one sided corporate controlled monopolies. Some regulation is always necessary to protect the consumer. Try doing away with regulation of medicines and see how well the guava extract cures cancer.

Musk says he doesn’t want to make Service a profit center like other car dealers

If that is true, then why does Tesla charge $600/year to service an EV ??? Doesn’t that seem very excessive?

How much does it cost to maintain a LEAF at a regular franchised car dealership? How much does a yearly oil charge cost on an ICE, $29.95?

Why did Tesla originally try to mandate the $600/year fee to maintain the warranty?

It seems that it is cheaper for service at regular franchised car dealers than it is at Tesla’s factory owners dealers.

Interesting.

Is the Leaf sold as a Premium Luxury Sedan? No? Then why the false comparison right off the bat?

Musk has already publicly addressed the high cost and assured owners that the ANNUAL FEE is NOT REQUIRED to maintain vehicle warranty. It even says on Tesla’s Service Page: “However, even if you never bring in the car, your warranty is still valid.”

Read it, beeotch: http://www.teslamotors.com/service#/service-plans

The service fee is therefore OPTIONAL, so I don’t see what you’re trolling on about, as per usual. 😛

You change your oil yearly? Your cars must not last long.

I NEVER change my oil and my car always works fine. I only change the filter and add oil when needed.

Oil changed are a service industry lie to get more customer money, which should be credible to you based on their great reputation.
The practice wastes millions of gallons of precious oil every year.

Wow, you actually posted that? LOL!

Sorry, the constant heat and friction break down the hydrocarbon molecules and allow them to start to cake up and coat the engine parts reducing efficiency. It also makes the oil break down in a way that reduces viscosity. The industry does suggested oil changes at about twice what is really necessary. Synthetic oils can easily go 10 to 15,000 miles without changes. If use a magnet on the bottom of the plate to catch engine filings that can also help.

Seriously, you are comparing the entire maintanance of one car, which is almost entirely that which agas car needs, with one of hundreds performed on a gas car.

Seriously?!?

A comparison to a BMW would be better. A single 3 month oil change on a similar class car from BMW costs $600 alone.

All BMWs use synthetic. It’s every 10-15,000 miles or once annual for less miles driven, recommended. I change mine every 7,500 miles. It’s about $100 at the dealer.

In today’s news from New Jersey I found the following nugget.

“From advisers and employees to lobbyists and friends, Gov. Chris Christie’s supporters raised $660,000 for the inaugural gala at Ellis Island that got snowed out. . . .”

“Contributors included: * Automotive dealerships and their association, the New Jersey Coalition of Automotive Retailers, which gave a total $5,500. . . .”

It looks like that contribution really paid off for them. 🙁

http://www.nj.com/politics/index.ssf/2014/03/christies_inaugural_bash_that_never_was_raised_660k.html#incart_river_default

The UPI story linked below states the real reason that dealer groups oppose Tesla’s direct sale approach is not because they fear Tesla, but because they “fear that Asian carmakers will follow Tesla’s lead and open factory-owned stores.” Apparently, they are referring to Chinese automakers, which have yet to enter the US market and thus like Tesla have no established dealership network.

The story also says New York might soon ban direct sales. It quotes the president of the Greater New York Automobile Dealers Association as saying: “My hope is that we are going to be the next state.” “I feel confident.”

🙁

http://www.upi.com/Business_News/2014/03/14/New-York-car-dealers-press-for-ban-on-Teslas-direct-sales/UPI-59731394823358/#ixzz2w3YDRY00

So let me get this straight. I will have to now go to a showroom where salespeople are illegal, but they are there simply to answer any of my questions, then I go home and order my vehicle from the comfort of my living room?

And that business model is bad because…

Can you imagine a world where all dealerships did that? Pinch me, I’d be in heaven.

land of the free.lol.i am glad to be european

geeezus!!! Too bad Elon is so busy making the best car in the world, flying off into space and expanding our frontiers, looking to build battery plants that will employ thousands and expand technology in general!! Think he could squeeze in President of the U.S.? We should all be so lucky!!

Fanboys for everything these days. It sickens me to listen to Elon Musk’s Lies. Tesla admits to trying to circumvent the state law regarding franchises verbal agreement with the press secretary, give me a break. He lied about meeting with the NJDMVC and the franchise commission all the while tweeting about how unfair the state is. Grow Up and act like an adult Follow the law like everyone else. Because you tweet doesn’t make you exempt because you are beginning to develop a fan base doesn’t give you special treatment. VW had to abide and partner with other manufacturers to create joint showrooms when they followed the law trying to break into the market as well as all other companies HELL even Yugo did it. Is Tesla too good for that? maybe he should call his Buddy obama and ask to have an executive order to nullify yet another state law. Pathetic Tesla you lost a fan here by acting childish and unethical. I see the lies and did my own research, I heard your rants and seen your BS tantrums that have no proof of truth in them. sad and disappointed I write this but more than that disgusted.

You’re a tool, Bill. Sorry.

Second that!
“You never change things by fighting the existing reality.
To change something, build a new model that makes the existing model obsolete.” – R. Buckminster Fuller

It’s a shame that laws are created to protect dying paradigms. Why shouldn’t TSLA try to change what is clearly broken.

Really? If the way things have always been done was always the best way to do things the United States would not exist and neither would any of the democracies on the planet. It is by innovation and changing our expectations that we progress. Electric cars are a dramatic and necessarily important part of our future.

Dang, posted in the wrong location, detracts from my professorial gravitas.

http://i.imgur.com/HL3NZ1i.jpg

(***image too large for display***)

Elon Musk is one heck of a promoter. He promotes in the name of the people, but in fact, he looks mainly for his pocketbook. He’ll BS anyone so he can have his way to get a huge advantage over his competitors. In short, I don’t think he’s a sincere person and I would not trust him.

I, on the other hand, always trust someone named Jon Doe.