U.S. Dealers Concerned As Chinese Follow Tesla Model

Chinese automakers are attempting to follow in Tesla Motors Inc (NASDAQ:TSLA) footsteps by selling their cars directly to customers, which in turn will be a grave threat to the U.S. auto industry’s dealer franchise system, according to the chairman of the National Automobile Dealers Association (NADA).

U.S. Dealers Concerned As Chinese Follow Tesla Model

U.S. automakers monitoring Chinese counterparts

David Wescott, a North Carolina auto dealer, stated in an Automotive Press Association event yesterday, “It’s in the back of everybody’s minds at this point, just to make sure that we should talk to the Chinese as their cars evolve.”

Some of the biggest automakers in the United States are taking a deep interest in the Chinese car makers, who may be looking to penetrate the United States market someday, according to a report from Bloomberg. Great Wall Motor Co, which is the top selling sport utility vehicle in China, is the first amongst the Chinese looking to gain traction on American soil, according to David Schoch, president of Ford Motor Co. (F)’s Asia Pacific operations.

Tesla may adopt franchisee system some day

The dealer said that they will have to raise their voices to support the franchise system. Elon Musk’s brain child Tesla Motors Inc (NASDAQ:TSLA) sells its electronic vehicles only through company owned showrooms.

A body of 16,000 new car dealers, NADA is, however, raising its ante to oppose Tesla’s decision of opting for direct sales instead of giving cars to franchised dealerships, thus dragging the Palo Alto-based company into legal battles.

According to Westcott, meetings between Musk and NADA leaders have been held several times. The dealer said that he would be excited to own a Tesla Motors Inc (NASDAQ:TSLA) franchise if the company decides to change its distribution strategy. According to Westcott, Musk is of the opinion that he will not shy away from adopting the franchisee model once the company achieves a certain volume.

Tesla assigned a Sell rating

Tesla Motors Inc (NASDAQ:TSLA) reported its first ever profitable quarter this year with share prices surging five times. The company also paid its U.S. loans nine years before the due date. Tesla launched its Model S sedan in Europe and Asia.

Despite the sparkling run, rating agency Standard & Poor started coverage of Tesla and assigned it a Sell rating, citing concerns over stock price of the company. “We are positive on Tesla’s fundamental growth story, but are concerned by its valuation,” S&P analyst Efraim Levy said in a research note.