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'Big car' beating on little Tesla. Fair?

2014-03-20 09:34

DIRECT TO THE PUBLIC: Prospective customers Sara and Robert Reynolds (L) and Vince Giardina check out a Tesla at the company's own store in Cincinnati, Ohio. Image: Al Behrman / AP

COLUMBUS, Ohio - Vehicle dealers in Ohio are sparring with battery-car company Tesla because it is selling direct to the public.

Ohio is one of several US states that want to prevent Tesla from opening direct-sales outlets because they undercut traditional auto dealers. On Tuesday (March 18 2014) New Jersey officials approved a regulation prohibiting automakers from dealing directly to customers.

Tesla VP Diarmuid O’Connell, Associated Press reports, visited Ohio legislators the same day to try to discourage them from passing similar restrictions. O’Connell said: “The bill would shut down our ability to grow in the Ohio market and, frankly, it’s just a first step to them shutting down our existing businesses.

“This is the pattern we see in other states.”


The administration of Republican governor John Kasich, through the US Bureau of Motor Vehicles, issued a licence to Tesla authorising it to open its own retail outlets in Cincinnati and Columbus but Joe Cannon, a lobbyist for the Ohio Automobile Dealers' Association, told lawmakers earlier in March that the decision meant Ohio’s longstanding licensing rules “have been thrown upside-down".

The association filed unsuccessful legal action against Tesla’s two existing Ohio stores, so it now is fighting for passage of a bill that would prevent Tesla from expanding to other locations.

Ohio dealers —830 of them with 50 000 employees and the equivalent of R21-billion in annual payroll — say their businesses can only prosper when the law separates manufacturers and dealers. They view the licence Ohio granted to Tesla as opening a Pandora’s box.


Cannon told the Senate finance committee: “The DMV’s decision opens the door for all manufacturers — emerging and existing — to follow the same path. This decision has serious implications for dealers and consumers. Dealers have made substantial investments in their businesses, employees and communities across the state.”

O’Connell, AP reported, argued the several hundred vehicles Tesla had sold in Ohio represented a fraction of the market, which averages about 500 000 cars a year.

The decade-old Tesla company is based in Palo Alto, Califonia, and sells two models — the two-seat sports-style Roadster for the equivalent of about R1.1-million and the Model S sedan for the equivalent of R815 000. It would like, eventually, to offer a model for R380 500.

O’Connell said the cars could be difficult to sell, so direct-sales were needed to jump-start battery-car technology and drive down prices. Though many dealers refused to sell Teslas their associations still fought to limit the company’s ability to sell them itself.

At what it calls "galleries" in the states of Maryland, Arizona, Texas and Virginia, people can view vehicles but cannot discuss price, take a test drive or place an orders. An Arizona lawmakerintroduced legislation that would overturna sales restriction in place there.


O’Connell said no US automaker with an existing franchise dealer had ever sought to follow such a direct-sales model so threats from auto dealers were specious.

Cannon argue that dealers played an important watchdog role that is lost through direct sales.

Cannon said: “Dealers act as advocates for their customers as it relates to warranty, recall and other service-related issues with the manufacturer. The distinctly different roles of dealers and manufacturers act as checks and balances to ensure that warranty and other service issues are administered fairly.”

Do you think automakers should be able to sell their products direct to the public or is this American system just protection for big business? Email and we'll publish your thoughts - or use the Readers' Comments section below...
Read more on:    tesla  |  ohio  |  electric cars

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