In war against dealers, no reinforcements for Tesla as battleground shifts to Ohio
Since Tesla lost its battle with the New Jersey Coalition of Automotive Retailers last week, the makers of the other two most prominent electric vehicles on the market, the Chevrolet Volt and Nissan Leaf, haven’t exactly jumped to Tesla’s defense. This is largely because both companies have a long history of working with auto dealers; it is a business model that has succeeded for decades, albeit to the displeasure of many consumers that have purchased a car from one of these dealers.
In fact, established OEMs likely wouldn’t part with their best dealers even if they could. Selling directly would mean great changes for these companies, and would require a great deal of time, effort, and money to sever ties with legally entrenched dealers and establish their own nationwide network similar to what Tesla has been doing with their showrooms and sales force.
OEMs would rather focus on their core competencies like design, engineering, and manufacturing, and leave sales and service to a middleman. It is easier for Tesla to sell directly because it was their business model from the start and they planned accordingly. Though automakers like GM and Nissan may wish they didn’t have to go through the dealers whose associations have become more powerful than they ever should have, the transition to selling directly to consumers would be difficult.
It is no secret that car dealers would prefer to sell conventional cars over electric models. They produce higher profits and more turnover, both of which are great for the bottom line of the dealers. They also offer greater opportunity for service down the road, which dealers derive much of their profits from. Green Car Reports in an excellent piece reports that "hundreds of cases have been reported of customers walking into a Nissan or Chevy dealer to buy a Leaf or Volt, then being aggressively steered toward a Sentra or Cruze." This is one of the main reasons Tesla has chosen to sell directly; they need to be able to control the actions of their employees whose purpose is to educate consumers on the benefits of going electric.
For that reason, it also might seem like GM and Nissan would want to establish separate dealers for their electric models, or sell them directly the way Tesla is attempting to. On the contrary: as Transport Evolved reported, GM actually struck a blow against Tesla in their latest battle with Ohio dealers. In that state, legislation has been introduced to prevent granting any new dealer licenses to Tesla. GM has submitted official written testimony opposing the upstart automaker’s license to sell vehicles directly, saying: “Tesla is an automobile manufacturer, they compete with our vehicles in the market. They should compete under the same laws we do.”
Don’t get me wrong, I don’t think Tesla should be an exception to the law. But GM is encouraging this legislation because they fear Tesla’s superior model for sales and service will give them an advantage. They feel threatened by the upstart’s attempt to change the outdated status quo, and have chosen to use their influence to hinder the progress of this threat through legislation.
Rather than allow Tesla to be the sole exception, the law should state that every automaker is free to sell their vehicles the best way they see fit. If every OEM chooses to sell directly, as dealers fear but which is unlikely, then those that fail to provide adequate sales, warranties, and service will suffer. Consumers do not need dealers for their protection. Unfortunately some states may not see it that way, which could be a serious problem for the domestic growth of Tesla.
What do you think of GM intervening in the Ohio debate? Should electric vehicles be sold separately from conventional vehicles? Leave comments below.