New Jersey recently told Tesla Motors to take the nearest exit out of town, as legislators strengthened existing dealership franchise laws, thereby creating a road block for the automaker’s nonconventional, factory-direct sales strategy.
Starting April 1, car shoppers in the Garden State may be able to view the Model S electric car in one of the two showrooms, but purchases will have to be made online (as we did with our test car) or in a neighboring state. New Jersey is the latest state to present a legal challenge to Tesla Motors, with Ohio expected to be an imminent battlefront.
So, what is causing this rage? Simply put: Tesla presents a challenge to the status quo. The current dealership laws were largely enacted to protect dealers from the automakers, creating a restrictive deal lest a manufacturer open its own competing store with unfair advantages.
Tesla insists it needs a unique approach to selling its $70,000-plus electric car and that a decades-old sales tradition that requires a dealership middleman is unnecessary. Because it has no existing franchises, there is no specific dealer group to protect. Further, the California-based company has expressed concern that if its high-end models were sold by multibrand dealerships, sales staff may focus on pushing traditional cars that they and the customers are more familiar with, and that carry more future revenue potential for the dealership through servicing.
In fact, Tesla’s approach thus far has been to create small showrooms, often in malls, far removed from their service centers. From Tesla’s perspective, a showroom and service center do not need to be adjoining, especially given the concierge services it provides. Today’s Tesla customers may never need to even bring a car in themselves for work thanks to pick up/drop off and mobile service options. The New Jersey law refects a different perspective.
Dealers have stated that factory-direct sales limit competition, where the current system pits stores against one another to offer the best prices. From their perspective, the consumer benefits from this local competition.
It is a fair point that Tesla’s strategy limits choice, being a one-size-fits-all approach. This is also true regarding service. For example, Tesla owners don’t have the typical choices in choosing an independent mechanic due to the unique nature of the vehicle and the relatively small market for such services. Therefore, Tesla customers are more beholden than most to official channels, in this case literally the automaker, for service.
But satisfaction may favor Tesla’s approach. Sales are strong and the company touts a high-level of satisfaction. In fact, the Model S tops Consumer Reports’ ratings with the highest owner satisfaction score we’ve seen in years. Those survey results mirror the Model S’s rarified overall road test score; it earned 99 out of 100 points in satisfaction.
In collecting that data, we ask owners, “Considering all factors (price, performance, reliability, comfort, enjoyment, etc.), would you get this car if you had it to do all over again?” A model’s score is based on the percentage of respondents who answered “definitely yes.” If owners were not happy with their overall experience in some way, such a high score would not be feasible.
That the Tesla Model S scored 99 points in our road test demonstrates how this technological tour de force is much more than a novelty, but truly a remarkable car. Clearly, the company looks to innovate the retail experience as much as it has the automobile. We’ll be watching.
Do you think people should be able to buy cars directly from automakers? Or do you think the car dealerships need protection from competition? Share your thoughts at facebook.com/ConsumerReports.
—Jeff Bartlett
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