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.
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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.