Tesla Motors Inc Sales Model Supported By FTC

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) has been under fire by auto dealers in multiple states, but not so fast, says the Federal Trade Commission. In fact, regulators at the agency say it’s actually a bad policy to keep Tesla from selling its cars directly to consumers.

FTC points to shopping methods

Regulators note that over time, consumers received more and more choices when it comes to where to shop for things. They started shopping locally in stores, but then mail order catalogs came along, followed by the Internet. People also used to hail cabs from the street, but now they can use their smartphones to get a cab or locate transportation.

Writing on the FTC blog, Andy Gavil, Debbie Feinstein and Marty Gaynor note that state and local regulators have been protecting auto dealerships from Tesla Motors Inc (NASDAQ:TSLA)’s direct to consumer sales policy. They believe, however, that this is “bad policy,” and they list a few reasons.

Tesla as a disruptor

The regulators note that both consumers and businesses have benefited from an economy where both technologies and business models are able to disrupt industries. They, like others, see Tesla Motors Inc (NASDAQ:TSLA) as a potential disruptor. When this happens, anyone who feels threatened, like auto dealers, reacts by pushing lawmakers for protection.

They note that Tesla Motors Inc (NASDAQ:TSLA) sold just 22,000 of the 15 million cars sold in the U.S. last year, which they say is hardly a serious threat to already established dealers. The FTC regulators also note that back when the auto industry was just getting started, laws were passed to protect dealers from manufacturers as a way to even out the balance of power. They say that by trying to keep Tesla from selling its vehicles directly to consumers, the laws made to protect dealers are becoming protectionist rather than protecting.

Auto dealers’ complaint not relevant to Tesla

They also note that auto dealers have said that they need protection to keep from being abused. However, they don’t think this applies to Tesla Motors Inc (NASDAQ:TSLA) because it never had any independent dealers and apparently doesn’t even want any.

They also said that the way manufacturers choose to sell their products and services is “just as much a function of competition as what they sell” and that competition “ultimately provides the best protections for consumers and the best chances for new businesses to develop and succeed.”

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.

6 Comments on "Tesla Motors Inc Sales Model Supported By FTC"

  1. I don’t see why. I have never in my life taken my car to a dealer for service. And I almost certainly never will. I always take it to a non-dealer shop. When you need a home repair done, do you call a contractor or do you call your real estate agent? Sales and service are two entirely separate parts of the durable goods equation and there’s no reason whatsoever they need to be linked. Soon enough there will be non-Tesla shops out there in most markets that can service a Tesla vehicle. They don’t have enough market share to make than happen yet, but that infrastructure comes along with the growth of any brand in the market.

  2. geoffrey bailey | Apr 25, 2014, 8:20 am at 8:20 am |

    Windshield wiper fluid, windshield wiper blades, and tires can be found almost everywhere. Software updates just happen over the wireless Internet. What more is there to do for an electric car? I’m sure the dealerships would invent something.

  3. Electric cars like Tesla’s don’t need as much servicing, not as much moving parts as an ice car.
    For now Tesla’s model is luxury cars with luxury service (pick up with a loaner during service), this can be sustained for the time being with average prices of +$100k and the number of cars limited, when more affordable cars are sold in greater numbers I’m sure they will set up local servicing stations (that as said won’t need as much time/resources per car)

  4. um … they already have many and are building many more in every market. They even have them – along with superchargers – in states that have blocked direct sales.

  5. You’re about 5 years late to the party on this one. While Teslas are highly reliable and need very little servicing, when they do, there are currently 48 Tesla service centers:

  6. Direct sales to consumers is a good thing. But, when the car needs servicing where are the buyers going to go? At some point there will need to be a service station(s) run by Tesla.

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