Will Electric Cars Make Auto Dealership Obsolete?

Pike Research's David Hurst looks at the spate of lawsuits against Tesla for its dealership-less marketing and sales initiative.

Published: 14-Nov-2012

Automakers Tesla Motors and CODA Automotive both operate company-owned showrooms, which are not being called “dealerships,” and which offer the ability to see, touch and feel vehicles, as well as order the vehicles. Tesla vehicles are delivered to consumers’ homes. Telsa claims this means these are not technically dealers, while CODA does have dealers in the traditional sense. Similar to what we’ve seen before, traditional auto dealers are not buying Tesla’s distinction and legal battles are sure to follow.

This is a bit of déjà vu from the late 1990s, when car dealers felt threatened by companies trying to sell cars directly online. This episode resulted in a strong response from auto dealers and legislated monopolies for dealers, under which particular dealers have exclusive rights to sell particular manufacturers’ vehicles in certain regions or cities. This regulatory environment still exists today, including in Telsa’s home state of California.

Going back even further, to the early years of the automobile, vehicle manufacturers sold off their company owned dealers to avoid anti-trust suits from the government. This has been the basis for complaints from auto dealers regarding any new perceived threat, whether Internet-based or manufacturer-based. Let’s be clear on one thing: the current auto dealer business model is not going anywhere soon. Auto dealers provide significant employment and political support in the United States, so it’s a near impossibility that the model will be demolished by a government or court ruling. However, a consumer shift seems likely to have a bigger impact on the dealership model. Tesla claims that it is not challenging the current dealer franchise laws so much as capitalizing on a unique marketing opportunity. Whether that distinction matters seems likely to be answered by state courts, rather than public opinion.


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