Tesla Motors Inc (TSLA) Faces United Opposition Of U.S. Dealers Favoring Franchise System

The direct sales approach of Tesla Motors Inc (NASDAQ:TSLA) is gaining a lot of resistance from franchise owners stating that franchise based auto dealers favor the customers. The electric car maker is working on a new concept to showcase its vehicles in company-owned showrooms and take the orders online, hence threatening the franchise model.

Tesla Motors Inc (NASDAQ:TSLA) has made deals with local dealer groups as well as state legislatures allowing the company to sell limited number of cars directly to the customers. However, the local franchise dealers do not appreciate this move and the chairman of National Automobiles Dealers Association even said that franchised auto dealers are beneficial for the customers.

Tesla Motor (TSLA)

Another Alabama Honda Dealer, Forrest McConnell III, said that franchise dealerships compete with company’s direct sales while providing repair and warranty services to the customers. Further, they boost the local economy with tax revenues and generate jobs for the local economy. He further added, “The franchise system is the best way to go,” and that he likes the Model S from Tesla. The NADA represents nearly 16,000 car dealers and the institution is opposing electric car-maker’s decision to forgo the franchise model.

On the contrary, Elon Musk, CEO of Tesla, said that the employees of the company best serve the specific technology and services needed for their cars through company’s stores. However, the opposing dealers claim that this approach might even set a precedent and question the ways car dealers have sold vehicles for the past several decades.

Earlier, Tesla Motors Inc (NASDAQ:TSLA) won a similar legal battle against the Massachusetts State Automobile Dealers Association, which was opposing its decision to sell cars directly in the state. However, these claims were overruled by the state court stating that the company was not infringing with the franchise model by showcasing cars at its showrooms and collecting orders online.

This article has been written by Prakash Pandey.

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