Tesla's Fremont Factory Store

Tesla's Fremont Factory Store

Currently, it is illegal to buy a Tesla vehicle in Utah, along with many other states. This is due to the 100-year-old dealership franchise system. Lawyers at the company are working hard to change this, and now the Tesla direct sales battle in Utah has reached the state's supreme court.

Inside A Tesla Store

Inside A Tesla Store

Craig Bickmore, executive director of the New Car Dealers of Utah Association, supports the franchise system. He explains:

“If you’re a dealer who has put tens of millions of dollars of capital into your dealership, equipment and inventory, you would have no input with respect to the manufacturer and how they deal with you without the franchise system. That is why it is so very important to have . It’s no different than the FCC (Federal Communications Commission) with communications or a JOA (joint operating agreement) with newspapers. Those are similar types of circumstances where legislatively they’ve made the playing field somewhat equal and level in different industries. It keeps that manufacturer/dealer relationship workable.”

He provides an example of the benefit of the model:

Tesla Store, Melbourne-Richmond, Australia

Tesla Store, Melbourne-Richmond, Australia

"When there’s a recall, those consumers come into these dealerships. They don’t go to Detroit, Japan or Germany, where the car manufacturers are. They go to the local hometown dealer to get their vehicles serviced and fixed. The dealers become the advocates to get those problems solved and taken care of. They’re the frontline folks.”

While Bickmore agrees with the dealership model, he admits that he would like to see Tesla be able to come up with a plan or a deal to sell its vehicles in Utah. However, he explains that this already happened, and Tesla had an opportunity, but the company turned it down. Tesla found the state's compromise to be too restrictive.

Utah state representative Kim Coleman advocated for Tesla and tried to work out a plan that would allow Tesla to open a showroom and place car orders in the state. But, the deal held that Tesla would not be able to keep inventory on hand or let consumers drive the new cars off the lot. Tesla, believing this to be unfair, has taken it to Utah's supreme court. Kim Coleman is hopeful that the ruling works out in Tesla's favor. She plans to fight again if the ruling is against Tesla. She said:

“I believe this is an unconstitutional restraint on trade. A regulation that says a company can’t sell its own product in its own way is unconstitutionally prohibitive. If I made a product that I believed in and loved and wanted to sell, I don’t know that I would want to give that control over to someone else. Dealerships have a lot of control in selling these cars. It makes sense that a manufacturer would choose to sell that product themselves versus giving it to someone else, who will mark up price. They’ll lose control over the product, how it’s marketed and how it’s sold.”

Tesla has also made it public that selling an electric car through the traditional system is more difficult. Convincing consumers to make the switch is the first task, but then competing against the dealers' standard motivation to sell ICE vehicles complicates the issue further. The company considers its vehicles to be specialized products, somewhat removed from the "typical" automakers' offerings.

Source: Utah Business