Tesla’s Referral Program Meets Dealer Resistance In California


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Tesla Motors sales efforts again does not fit into the legal framework in US, at least according to the California New Car Dealers Association, which just like Virginia’s Motor Vehicle Dealer Board, intends to block Tesla’s referral program – for the sake of consumer protection, of course.

Tesla referral is experimental, promotional program, which gives Model S owners $1,000 credit for every refer buyer (which also gets $1,000 in discount).

Here is the essence of the complaint:

“The California New Car Dealers Association, the dealers’ main lobbying group in Sacramento, sent an Aug. 26 letter to Jean Shiomoto, director of the California Department of Motor Vehicles, asking the agency to crack down on Tesla’s referral program. The letter argues that the program is illegal under the California Motor Vehicle Sales and Finance Act of 1968, which bans compensation of people who arrange sales without a license — a practice known in the industry as “bird dogging.”

“While many other licensed dealers would like to offer similar referral fees to existing customers, California law flatly prohibits the practice,” the group’s letter says, adding: “Tesla is required to abide by the same consumer protection rules that apply to all other vehicle dealers in California.”

In Virginia, Tesla quickly modified the program to give the whole $2,000 as a discount to new Model S buyer.

We expect similar actions in other states if legal hurdles can’t be cleared, at least until the program ends later this year.

Tesla Motors does not have independent dealer network, so we understand that the referral program doesn’t harm any actual consumers or dealers.

Source: Automotive News

Category: Tesla

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31 responses to "Tesla’s Referral Program Meets Dealer Resistance In California"
  1. Josh says:

    Didn’t Musk say Telsa was going to mount a “guerrilla warfare” on the dealers later this year?

    This must be it. Intentional conflict to spin up the media machine against the dealers, yet again.

    1. See Through says:

      “Tesla Motors does not have independent dealer network, so we understand that the referral program doesn’t harm any actual consumers or dealers.”

      LOL!. How did the author understand this? Current Tesla owners and shareholders could be lying through their teeth to earn free money, misrepresenting facts and turning wishes into facts. People buying $100K lemons on twisted realities are harmed beyond repair.

      Why is it that Tesla has to do everything illegally? Can they do anything without bending the laws? From accounting gimmicks to scamming the tax payers, to crying out loud at the door steps of white house(begging Obama to twist China government policies), this company has done it all. And all the while claiming that it is “production constrained”.

      1. Nix says:

        “lying through their teeth to earn free money”

        You mean like commission based sales people and bonus based sales managers at ICE car dealerships? Yes, THOSE FOLKS definitely lie through their teeth left and right.

        But there is no “free money” for people referring customers. Just free/discounted products. The person doing the referral isn’t getting cash, and can’t make a living off of referrals. Unlike sales people and sales managers who’s very livelyhood is based upon jamming you into a car no matter what they have to say.

        1. See Through says:

          “You mean like commission based sales people and bonus based sales managers at ICE car dealerships? Yes, THOSE FOLKS definitely lie through their teeth left and right.”

          When it comes from sales people, I adjust the statements as I understand their motive clearly. They are not CAMOUFLAGED as owner/friend/colleague. Moreover, dealerships back up their promises in writing and all sorts of legally binding documents. That’s very unlike Tesla model, where they verbally promise a lot but chicken out when asked to provide those promises in writing. See the ranger service as an example.

      2. JustMe says:

        I would not talk-up or lie about my car if I wasn’t as into it.

        Ultimately, my referral does not mean it’s absolutely a sale – it’s up to my friend/family/associate’s judgement to decided to go for it or not.

        $1K to an owner who had spent $100K is NOT an incentive to lie – after all, their/my reputation is at stake too if my friend/family/associate does not like their car!

        Ask all Tesla owners to see who do not like their car and would not boast about it?! It’s a beautiful piece of work – and that is why we refer!!!

  2. Koenigsegg says:

    F**k car dealers

    1. Scramjett says:


      And that’s not a rating I freely give out!

  3. ItsNotAboutTheMoney says:

    There’s some Tesla owners who were ready to give their $1k to the buyer anyway, and the switch to $2k off would just make things easier.

    1. scottf200 says:

      Yes, they were trying to “buy” referrals and instead of “earn” by genuinely influencing buyers with information, test drives, videos, etc. Genuine help not scammers.

  4. ffbj says:

    The most reviled industry in America doesn’t think something Tesla is doing is legal?
    Stop the presses.

    1. Grady says:

      The oil industry?

      1. Andrew says:

        But we actually need oil.

        We don’t need car dealers.

        1. See Through says:

          We don’t need a fire pit for tax payer subsidies either.

          1. Foo says:

            Exactly… which is why big oil should stop receiving government hand-outs.

            1. Phr3d says:

              well done..

    2. sven says:

      Congress? Crooked politicians and corrupt government are a cottage industry. Right? 🙁

      1. ffbj says:

        A bit of a stretch, but certainly Congress is in the running.

  5. Jeff Songster says:

    This is how the great dealers ‘help’ us poor lowly customers. They protect us from better cars and sales networks. What pure hooey! I can’t wait until the manufacturers all abandon the franchise dealer model cut out one more useless middle.

    If you do have to deal with those creeps… just go straight to fleet buyers once you know what model and features you want. Don’t sit down to buy anything until you have 3 or more email bids from them. Why waste your time being bored and worn down by evil, horrible, sales bully techniques.

    1. John says:

      I’ve done that in the past.

      I sent a fax to a half dozen dealerships sales managers outlining *exactly* what features I wanted, what color, etc.

      I made it clear I sent it to several competing dealerships, in different states.

      Lowest bid won.

  6. EV fanatic says:

    I hope they give the whole $2,000 as a discount to new Model S buyer nationwide.

  7. Mikael says:

    In the land of the scared and the home of the greedy.

  8. MTN Ranger says:

    HAHAHAHA! “consumer protection” The dealer associations have gone mad.

    1. Someone out there says:

      Yeah, more like crony protection.

  9. Interesting, but wondering if California New Auto Dealers Assoc. really have a case.

    The 1968 Act refers to “compensation”, but Tesla is only offering “discount credits” on purchases of future goods. No funds are payed out, and the discount credits are not transferable and expire after a few months.

    Think this is meant to be more a distraction (time and legal cost to defend) on Tesla by CNADA. It appears CNADA to gain some PR in the eyes of dealerships by enforcing a industry monopoly composed of only CNADA members.

    With Tesla having over 18 months of orders for the Model X on the books, it is not a major issue, but could lead to a drawn out legal battle. The definition of “compensation” is the key point, which could escalate this to being a federal case involving IRS interpretations of “compensation” and FTC interpretation of inappropriate restrictions to commerce at the state level.

    BTW: Could get interesting for dealerships if someone recorded getting a $50 referral from a car salesman for referring a friend with a business card that had their name on it. Or, to look closer at discounts offered to employees of notable corporate businesses because they have a VIP discount program. Would these employee discounts then be considered “compensation” that would be treated as taxable income?

    CNADA could be opening a can of ugly worms with this legal challenge if they’re willing to dump it all out on the table!

  10. Nix says:

    Tesla is not a franchise dealership. They don’t have franchisee’s.

    1. Anti Lord Kelvin says:

      I wonder if honest politicians some day will come to congress to help consumers banning auto dealers…Wait, what I’m saying, honest politicians? Helping consumers? Banning one of their biggest contributors of their “fair” campaigns? Sorry I’d be mad! I’m out.

  11. Richard Gozinya says:

    Or, California could just change the law.

  12. Someone out there says:

    You need to have a license for everything these days it seems. Where did “free enterprise” go?

  13. Whoever is in charge of this Tesla referral program is fumbling badly.

    Plenty of ways to incent current customers without running afoul of anti-bird dogging laws.

    I believe the anti-bird dogging laws are anticompetitive and should be changed. But until they are, Tesla needs to create a program that does not offer an incentive to perform which will have to be subsequently withdrawn. Not a good way to motivate your fifth column.

    It also diminishes the potential referrals that would have been offered without compensation, since many people will wonder if the referral and praise the car gets is motivated by something other than goodwill.

  14. (I drive electric) says:

    I tried to buy an electric car in California in 1999…

    The dealers would not sell me one… They confounded every attempt I made to get information on the electric cars I was looking at. And tried to talk me into a gas guzzler I didn’t want!

    They also tried to lease me the ev1 with no buyout(I saw this was a total ripoff from the first…)

    Land of the free?
    Yeah right, … “You want a car?, I could sell you this bridge you don’t want!”
    “Or perhaps some swamp land in Florida you also don’t want!
    Dealers know what they are… This referral program just brings it to light. Good for you Tesla!