Pub. 56 2015-2016 Issue 3

35 SPRING 2016 vehicle sales model in Segment 3: 1. Tesla stores are small and often in high foot traffic areas such as shopping malls; 2. Tesla stores don’t carry inventory–“our cars are custom-built for each individual customer”; 3. TheTesla customer hasmany questions andneeds hours of patient education, a process that only they can afford; 4. The only profit at Tesla is from new car sales; 5. Tesla doesn’t advertise and cannot subsidize a dealer’s advertising; 6. Tesla will still be selling online, i.e., competing with a fran- chisee, and no customer would ever buy from a franchised dealer if there is a mark up; and, 7. Electric vehicles should entirely replace gasoline-powered vehicles and only Tesla can communicate this message. 66 With respect to Tesla’s first stated reason for a manufacturer- direct sales model, the location of a dealership is for the most part, under the direction of any manufacturer. Locating a dealership in a shopping mall or other high foot traffic area is no impediment to a dealer distribution system. Contrary to Tesla’s second reason, a custom-built vehicle is not unique in the industry for a McLaren, Lamborghini, Rolls Royce, Aston Martin, Ferrari, Bugatti or even a Chevrolet, Ford, or Porsche dealer. Limited inventory is also common for the high-line, expensive, or “hot” model vehicles. A no-inventory custom-built sales model means less carrying costs but also means the customer is unable to view available options and is no justification for a direct sale model as custombuilt vehicles occur in every line. The third justification, that every Tesla customer has many ques- tions and needs is risible. Every customer has many questions and needs. An electric vehicle is not unique in this regard and Tesla is also not unique. There are over 23 plug-in electric and 36 hybrid models available with more being built every year. 67 The BMW i3 electric is a stand-out and Porsche and GM are not far behind with an electric vehicle. In addition, the Nissan Leaf in 2014 became the first electric vehicle with over 100,000 sales. 68 To argue that a customer’s questions and needs require a direct distribution system is a non sequitur. Sales personnel are able to respond to questions and needs for the electric vehicle customer and the hybrid vehicle customer every day in a BMW, Chevrolet, Nissan, Honda, Toyota, etc., dealership. Tesla’s next rationale is that they “only profit in one way–from new car sales and new car sales alone” because Tesla does not offer service and parts, trade and used car programs, financing products, insurance products and other add-ons. Whether Tesla profits solely from new vehicle sales may be questionable. 69 Its inability or self-imposed decision not to offer additional prod- ucts may be unsatisfactory for future Tesla buyers and certainly does not give consumer choice. Again, this is no reason to demand a state to change their competitive distribution model. The fifth justification offered by Tesla, also self-imposed, is that it does not advertise and thus cannot subsidize adver- tising. Dealerships regularly advertise without manufacturer assistance. In addition, not all motor vehicle lines commonly advertise–Bugatti and Lamborghini, to name but a few, do  DEALER FRANCHISE — CONTINUED ON PAGE 36  DEALER FRANCHISE — CONTINUED FROM PAGE 33