Tesla Wins Lawsuit to Protect its Apple-Like Distribution Model
Traditional Auto Dealers Not PleasedDespite its engineering prowesses and large media presence, Tesla Motors is still a relatively small company. What works for ancient behemoths might not work for a small startup, which is why Tesla's distribution model is closer to Apple's than Ford's or Toyota's (ie. a low-pressure "showcase" atmosphere where you can interact with the products). Basically, pretty much all of Tesla's customers are first time customers, and most are not very familiar with electric car technology. This is a very different situation from what a traditional car company is dealing with. Building up a traditional dealership network would be a herculean task for Tesla, and just building up enough inventory to stock up each location would probably drain the company's resources.
No, rather than build a big dealership on the edge of town, Tesla has decided to create smaller showrooms in high foot-traffic areas (malls, etc) where potential customers can drop by on impulse and learn about electric cars. When they decide to buy, Tesla can build the car and ship it to the customer (or to the closest service center), and thus avoid having tons of costly inventory on its hands. It also avoids trying to sell electric cars via traditional dealers who are also selling gas cars and clearly have a conflict of interest (hard to fully extol the virtues of EVs when your showroom is full of gas cars).
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But that direct-sale model didn't please everybody. The Massachusetts State Automobile Dealers Association brought Tesla to court, claiming that it violated the laws that protect auto dealership franchises by operating its own company-owned stores. Lloyd covered this back in October. For more details: Tesla Being Sued By Car Dealers Association For Selling Cars Without A Middleman.
On Friday a Superior Court judge dismissed the case based upon the auto dealers’ lack of standing and failure to state a claim.
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In a release, Tesla wrote:
“We are delighted by the outright dismissal of this case and the validation that we are operating our business in compliance with the laws and expectations of the Commonwealth of Massachusetts,” said Elon Musk, Tesla co-founder and CEO. “We are confident that other states will also come to this same conclusion and look forward to following through on our commitment to introduce consumers to electric vehicle technology in an open, friendly, no-pressure environment.” (source)