Tesla Motors Inc Defends Its Business Model In Ohio

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) is battling a renewed effort in Ohio to ban its business model, which sells cars directly to customers through branded outlets instead of selling to independent dealers. It’s already against the law in Ohio and many other states for manufacturers to directly compete with independent dealers who sell the same models, but since no one else is selling their cars, Tesla Motors Inc (NASDAQ:TSLA) isn’t affected by this regulation, reports Dan Gearino for The Columbus Dispatch.

Auto manufacturers can’t compete with independent retailers

“The dealers are trying to take a regulatory framework which was set up to protect dealers from (predatory action) from their manufacturers, and are trying to create a de facto monopoly,” said Tesla VP of business development Diarmuid O’Connell.

It’s hard to see how competition among independent dealers amounts to a monopoly, but the bill does seem protectionist. The Ohio Automobile Dealers Association says they aren’t specifically concerned about Tesla, which had just over 100 sales in Ohio last year, but about the precedent that it sets. If existing legislation can be bypassed by simply not selling to any independent dealers, big car manufacturers like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) might decide that it makes more sense to do everything themselves.

There is similar legislation being considered in New Jersey, New York, Washington, and West Virginia, and a few legislative losses could encourage dealers’ associations in other states to follow suit so it’s important for Tesla to defend its business model everywhere.

Tesla’s closed system business model may not hold

Tesla Motors Inc (NASDAQ:TSLA)’s business plan shows its tech sector influences, trying to create a closed system that meets all of a user’s needs, from manufacturing to sales to recharging the battery at a Tesla brand charging station, and this resistance could foretell future problems down the road. If the network of charging stations that Tesla Motors Inc (NASDAQ:TSLA) is building creates an insurmountable obstacle for other firms to enter the electric car sector, Tesla could be forced to share its infrastructure just like major telecoms have to let competitors use their nation-spanning broadband infrastructure.

Tesla Motors Inc (NASDAQ:TSLA)’s argument that the charging stations aren’t compatible with other batteries sounds as plausible as Microsoft Corporation (NASDAQ:MSFT)’s old argument that Windows can’t function without Internet Explorer, and could eventually reach a similar end.

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About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.

2 Comments on "Tesla Motors Inc Defends Its Business Model In Ohio"

  1. Johnny Le

    “In our world, if you can’t evolve and adapt, you become extinct. That’s why 95% of the species on this planet went extinct. They don’t get to pass laws to prevent other species from taking over. In the internet age, the dealership is outdated and should be allowed to become extinct naturally.”

    “Give me one other field/sector/industry where a producer is not allowed to sell directly to its customers. Even with big items like houses, builders are allowed to sell to buyers, and individuals can go the “sell by owner” route if they wish. It violates our rights.”

    Reply

    Tesla Motors is like a giant fireball descending upon the standard auto dealership, and the old dinosaurs are running about, appropriately terrified of their impending demise!… or so I hope…. to be honest though, oil companies have been suppressing electric mobility, phone companies have fought internet communication, my local energy supplier suppresses solar installations, and on and on and on…I think Elon Musk should expand his service station and charger network by an order of magnitude beyond the current plans. He could create little Mom&Pop stations right out of a Norman Rockwell print, hire two or three “car salesmen”, and put them to work checking the tires, topping off the battery, maybe throwin’ a quick wax over the car…you know, actually providing a service! Maybe attach a little coffee shop, creating another job or two. This would be a win-win situation, the dinosaurs would get to pretend it’s still 1956, and the public would get a clean, modern, transportation system without falling prey to the scheisters we currently have to deal with!

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  2. In our world, if you can’t evolve and adapt, you become extinct. That’s why 95% of the species on this planet went extinct. They don’t get to pass laws to prevent other species from taking over. In the internet age, the dealership is outdated and should be allowed to become extinct naturally.

    Give me one other field/sector/industry where a producer is not allowed to sell directly to its customers. Even with big items like houses, builders are allowed to sell to buyers, and individuals can go the “sell by owner” route if they wish. It violates our rights.

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