Money & Business

State Dealers Groups, Tesla Motors Find Room for Compromise

By / Apr 1, 2014 A Florida Tesla store, shown prior to its opening in 2009. (Joe Raedle/Getty Images News/Thinkstock)

Despite a tone that has been anything but pleasant in recent months, the icy relationship between auto dealers associations and Tesla Motors began to thaw last week, with compromise deals in two states and the potential that the most talked-about battleground, New Jersey, might reverse course.

What a difference a couple of weeks make.

Last month, Tesla Motors found its direct-selling model flagging at the state level, with multiple states siding with dealer associations in saying that the company’s efforts to get around the dealership model broke state laws.

But with a bit of press and a little compromise, the tenor of the conversation is starting to change—even in states where the discussion seemed at a dead end for Tesla. A few examples:

There needs to be a pathway for them to come into compliance with franchise laws.

New Jersey: The Garden State became the epicenter of the tussle—and the target of a tough blog post from Tesla CEO Elon Musk—when its Motor Vehicle Commission issued a ruling last month that would have forced the stores to convert to showrooms April 1. But now New Jersey has given the automaker a short reprieve, allowing it to continue selling at its stores until April 15. The move makes room for a longer-term solution. The state’s legislature is considering a series of compromise laws, including one that would allow Tesla to continue to operate its dealerships until electric cars make up 4 percent of the total market. New Jersey Coalition of Automotive Retailers President Jim Appleton, who had some harsh words for Musk just a couple of weeks ago, seemed more willing to compromise—to a point. “There needs to be a pathway for them to come into compliance with franchise laws,” Appleton told CNN Money.

New York: Likewise, New York legislators and dealers struck a compromise of their own with the company last week: The state will allow Tesla to continue to operate its five current locations, with the possibility of opening more if it commits to a dealer franchise model. “This agreement will serve as a model for other states as they consider how to accommodate Tesla and a distribution system that has served the public well,” Lou Roberti, the chairman of the New York State Automobile Dealers Association, said in a statement. “Franchised dealers provide price competition, a ready source of trained technicians and parts for repairs and recalls, and create a market for trade-ins.”

Ohio: In a compromise announced last week that an Ohio Automobile Dealers Association official called “helpful to both sides,” Tesla will be allowed to keep its two current stores, in Columbus and Cincinnati, open. It will also get to open up another store elsewhere in the state. “While on the margin it’s disappointing that we don’t have the ability to grow freely in Ohio, the compromise we achieved in the past 24 hours is sufficient for now,” Tesla Vice President of Business Development Diarmuid O’Connell told The Wall Street Journal.

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »

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