Tesla Inc. CEO Elon Musk said “Good luck with that” when asked whether he feared further legal challenges for selling vehicles directly to U.S. consumers.  
 -  Photo courtesy  Tesla Owners Club Belgium  via Flickr

Tesla Inc. CEO Elon Musk said “Good luck with that” when asked whether he feared further legal challenges for selling vehicles directly to U.S. consumers.

Photo courtesy Tesla Owners Club Belgium via Flickr

From approximately the moment the first Roadster prototype was unveiled in July 2006, Tesla Inc. has represented a dual threat to the status quo of automotive retail: Its vehicles would be fully electric, and they would be sold directly to customers, flouting the patchwork of state laws protecting the franchised dealership model. Last year, a third threat emerged: sales.

Founded in 2003 by Martin Eberhard and Marc Tarpenning, Tesla picked up where General Motors’ EV program left off. Inspired by GM’s fleetwide recall and scrapping of the EV1, the engineers set out to bring electric vehicles to the masses. An early investor, PayPal founder Elon Musk, became chairman in 2004. (He has since demoted himself to CEO by agreement with the U.S. Securities and Exchange Commission.) Leading with the $112,000 Roadster, which went into production in the summer of 2009, executives planned to build progressively more affordable cars, slowly and deliberately gaining market share.

Despite a series of missteps that includes production delays, missed deadlines, heart-stopping funding woes, fire emergencies, Autopilot crashes, SEC investigation-triggering tweets, and a ceaseless parade of departing executives — including both founders — that plan is still in place, and it’s finally bearing fruit. In 2015, Tesla’s first true mass-market vehicle, the Model X crossover, rolled into “galleries” across the nation. The Model 3 sedan followed in 2017, and the Model Y, a newer, better, cheaper CUV, was unveiled in February as a 2020-MY.

According to Experian Automotive data, more than half (53.9%) of all Teslas on U.S. roads were sold in 2018. Tesla accounted for 1.2% of all new-vehicle registrations last year, more than Acura (1.1%), Infiniti, Chrysler, Cadillac (all 0.8%) and Mitsubishi (0.7%). Tesla owned an astonishing 79.5% of all U.S. EV sales, up from 45.7% in 2017. No EV slouch itself, GM finished a distant second, accounting for 8.2% of all EV sales in 2018 after claiming 21.9% the year before.

For the past decade, when asked to gauge the scale of Tesla’s threat, big dealers, manufacturers, and industry experts would typically say something along the lines of, “Well, it’s very interesting, but it’s such a small piece of the market, we’re not losing any sleep over it.” And they were right. But that’s a tough case to make when one in every 100 new cars sold in America is a Tesla.

Just ask Jeff Dyke, president of Sonic Automotive, who told investors the former upstart is hurting his group’s BMW sales in a Feb. 20 conference call with investors.

“There’s no question. I mean … they’re calling out to sell well over 300,000 cars this year, they sold a lot of cars last year,” Dyke said, later adding that the factory executives he works with share his concerns. “I can tell you that I’ve spent a lot of time in manufacturer meetings, and five years ago, Tesla was just not even a real big topic, and today it’s the top of everybody’s board, and it needs to be.”

Further growth will cement Tesla’s position, and with it the company’s promise that you will never have to visit a dealership, not even for service, if all goes well. And we all know how much car buyers hate the dealership — at least until they need a competitive price or help selecting or financing a vehicle.

As for those pesky franchise laws, the fight continues. Musk’s latest tack is dismissiveness, declaring resistance to direct sales “unconstitutional,” citing interstate commerce rules, in a media call. Asked by a reporter whether he feared further opposition from dealer associations, the CEO was succinct.

“Good luck with that,” he said.

About the author
Tariq Kamal

Tariq Kamal

Associate Publisher

Tariq Kamal is the associate publisher of Bobit Business Media's Dealer Group.

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