Tesla Motors Inc (NASDAQ:TSLA) is looking forward to selling the $70,000 Tesla electric luxury vehicles straight to consumers without involving the franchised automobile dealers. Elon Musk wants to remove the dealers from between, which have disappointed the dealers and they are making an effort to stop the billionaire in states like Texas and Virginia.
In North Carolina, the Senate, which is being controlled by Republican, has given its approval to the measure, according to which Tesla Motors Inc (NASDAQ:TSLA) will not be able to sell online.
According to the dealers, the laws are the same from decades and are made to safeguard the car maker from selling cars directly to consumers, and are necessary because if dealers are absent then the auto makers can use their economic power to sell the vehicles to the customers at a less price than the independent franchisees. According to the dealers, if Tesla Motors Inc (NASDAQ:TSLA) starts selling the cars directly to consumers the laws will be violated. The Automobile dealers are in a safe position due to the franchise laws otherwise they would have been affected from the e-commerce revolution, which has already affected all the segments from book to electronics.
Tesla Is Not Bounded By The Franchisee Laws: Musk
According to Musk, Tesla Motors Inc (NASDAQ:TSLA) is not bounded by the Franchisee laws as the company never had the franchise dealers. The argument given by Tesla went in its favor in a court fight with the dealers of New York and Massachusetts. However, the argument of Tesla did not go well with the state houses where authorities want to give priority to the local employers and political donors.
Main Reason For Tussle Between Tesla And Auto dealers
The reason for the tussle between Elon Musk and auto dealers is the state franchise laws, which are as old as the auto industry’s earliest days when Henry Ford wanted the entrepreneurs help in selling his Model T.
The issue that the Dealers are concerned about is that the car companies in a quest to create a direct retail channel will come up with the new subsidiaries to sell vehicles. The strategy was adopted by General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) during the in the 90's, but they lost to the dealers.
There are different Franchise laws in different states. In most of the sates, the laws does not allow manufacturers to have both company as well as franchised stores. There are states like North Carolina and Texas where manufacturers should have independent dealer.