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Tesla, Dealers Clash Over Direct Sales

You don’t buy a car from your local shopping mall—until Tesla decided to change how auto retailing should be.

The electric car builder started opening their own showrooms, featuring the Model S, in different states in 2012.

George Blankenship, Tesla’s sales strategist, told the CNN that they “want to engage with people when they’re not thinking about buying a car.” It is a strategy that would work when shoppers’ defenses are down and when they can enjoy shopping for cars—even with their kids.

Tesla’s idea may be innovative, unique and, perhaps, effective. But since then, its legality has been questioned by various auto dealership associations.

Some states, like New York, forbid automakers to directly sell their cars. Their products have to go through a middleman that is, a dealership. Although Tesla insisted ever since that their stores comply with state laws, franchised-dealer organizations always see the carmaker’s radical sales tactic as sidestepping the conventional and legal franchised dealership system.

Meanwhile, some consumers commended Tesla founder Elon Musk for the strategy, noting that it is how cars should be sold. According to them, dealerships, who act like middlemen, are unnecessary.

The battle between the electric vehicle maker and dealer associations carried onto state legislatures, and the fight is not over yet to this day.

National Automobile Dealers Association Chairman David Westcott explained that the franchise distribution model creates an ambience for competition among car dealers, which brings better prices to consumers. He recalled Ford also tried selling their cars themselves and failed.

Westcott said that Musk told NADA that he will adopt the dealer-franchise model when his car sales hit critical mass.

Throughout 2013, franchised auto dealers experienced high sales levels and robust profits. Lower interest rates on auto loans and loose credit standards for people with imperfect credit largely contributed to the growths.

Westcott shared that the comeback of the subprime credit is boosting U.S. car sales. “Subprime is back to where it should be. It had to be, to sell cars. We need that part of the segment,” he told WardsAuto.

WardsAuto also reports that the average sales per dealer would exceed 840 units for the coming year.

Last year, the average was 812 vehicles per dealer. It was 719 in 2011. And the all-time high was eight years ago at just 784.

But while the conflict between the California-based automaker and dealer organizations continues, buyers are enjoying the much easier car-buying process Tesla offers.




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