# Automotive Franchise Laws = Oudated? (Tesla) **URL:** \ **Category:** NYSpeed Automotive\ **Created:** [October 23, 2012, 8:55am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721 "2012-10-23T08:55:31Z")\ **Posts on this page:** 14\ **Page:** 3
**Author:** ![Blue\_Eyed\_Devil](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/blue_eyed_devil/32/7292_2.png) [@Blue\_Eyed\_Devil](https://forums.speedlife.net/u/Blue_Eyed_Devil)\ **Post date:** [May 20, 2015, 12:18pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/41 "2015-05-20T12:18:04Z")
Don’t expect Elon/Tesla to just pattern their business model the same as other auto makers have either. It will be interesting to see how their thinking outside of the box translates to “dealerships”. I heard the new model will have a 3D printer in the trunk and it will automatically make replacement parts that you need before you even know you need them!!! ---
**Author:** ![Beck](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/beck/32/28683_2.png) [@Beck](https://forums.speedlife.net/u/Beck)\ **Post date:** [May 20, 2015, 12:55pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/42 "2015-05-20T12:55:45Z")
> [@JayS](#): > > 👏 > > Early on I was one of the people who thought cars could be a direct sell item but everything you said makes sense. Add to that the fact that dealerships have really evolved from their days of making money on the sale of the car and short of a warranty repair didn’t see you again until you bought your next car. Now dealerships are all about the service side and you can correct me if I’m wrong but I’m pretty sure that’s the big money generator for them. Just looking at the massive service lounges with coffee bars, wifi, LCD TV’s and dedicated service teams it’s pretty easy to see dealerships make a huge push to keep you coming back for even basic services. Do you think Honda wants to get into that business? Hell no. That’s too localized and hands on to try and manage on a national scale. Those are all items that one XXX brand dealer, uses to set them apart from the other XXX brand dealers. Again, it’s as simple as this: Dealer Franchise Model: John Smith Honda pisses off Customer Y. Customer Y can go 5 miles down the road and buy from Gerry Johnston Honda and receive awesome service and maybe a better price. This is what makes customers happy. This is competition and this is good! Honda of America retains a customer and life is great. All issues and complaints get handled at a dealer level and it’s Gerry Johnston’s pocket book that takes a hit if he fucks up. Direct sales model: Customer Y wants an Accord. He goes to the Honda store and picks out his car. However, Honda says his trade is worth $3,000. Mr. Y wants $4,000. There isn’t another option for Mr. Y. Either take the offer and pay the sticker price (because Honda isn’t going to lose money to sell a car to a customer). Mr. Y get’s pissed off, and leaves. Now Mr. Y can’t buy a Honda because there isn’t anywhere else to go. Honda loses a customer. What if Mr. Y doesn’t like the service Honda has to offer? Where is he going to go? Sounds like a different brand. **Bottom line: Customers benefit from the fact that lost and pissed off customers mean a hell of a lot more to a single dealer, than a single manufacturer.** ---
**Author:** ![boardjnky4](https://avatars.discourse-cdn.com/v4/letter/b/96bed5/32.png) [@boardjnky4](https://forums.speedlife.net/u/boardjnky4)\ **Post date:** [May 21, 2015, 6:10am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/43 "2015-05-21T06:10:52Z")
But how do dealerships make money? It seems like Dealerships are increasingly selling cars at tiny profits. Like you said, they make $500 per car, that’s squat. That’s not tenable. My only guess is trade-ins, financing and service are where the real money is? ---
**Author:** ![Blue\_Eyed\_Devil](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/blue_eyed_devil/32/7292_2.png) [@Blue\_Eyed\_Devil](https://forums.speedlife.net/u/Blue_Eyed_Devil)\ **Post date:** [May 21, 2015, 6:35am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/44 "2015-05-21T06:35:52Z")
$500 per car my ass. I call 100% BS! ---
**Author:** ![Onyx\_Z32](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/onyx_z32/32/7581_2.png) [@Onyx\_Z32](https://forums.speedlife.net/u/Onyx_Z32)\ **Post date:** [May 21, 2015, 7:02am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/45 "2015-05-21T07:02:07Z")
Posts moved to relevant thread :tup: ---
**Author:** ![Beck](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/beck/32/28683_2.png) [@Beck](https://forums.speedlife.net/u/Beck)\ **Post date:** [May 21, 2015, 10:46am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/46 "2015-05-21T10:46:29Z")
> [@boardjnky4](#): > > But how do dealerships make money? It seems like Dealerships are increasingly selling cars at tiny profits. Like you said, they make $500 per car, that’s squat. That’s not tenable. My only guess is trade-ins, financing and service are where the real money is? Trade ins, pre-owned cars, financing , service, etc. There are 5+ different businesses in a dealership. ---
**Author:** ![Onyx\_Z32](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/onyx_z32/32/7581_2.png) [@Onyx\_Z32](https://forums.speedlife.net/u/Onyx_Z32)\ **Post date:** [February 1, 2016, 10:28am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/47 "2016-02-01T10:28:10Z")
> [@Beck](#): > > :tup: > > Can’t wait til they start franchising Tesla dealerships. Your wait could be over soon: [Tesla applies for Michigan dealership license](http://www.detroitnews.com/story/business/autos/2016/01/31/tesla-applies-dealership-license-michigan/79619370/) > Tesla applied for a “Class A” dealership license to sell new and used cars. Under the classification, it also must have a “repair facility as part of their business or have an established relationship with a licensed repair facility,” Woodham said in a Sunday email to The Detroit News. ---
**Author:** ![bing](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/bing/32/7211_2.png) [@bing](https://forums.speedlife.net/u/bing)\ **Post date:** [February 1, 2016, 11:11am UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/48 "2016-02-01T11:11:31Z")
just read Beck’s explanation… it’s a good one. i would have thought Tesla could have managed all of the sales but Beck’s right about service vs. scale. it’s 100% true in automotive… you have to have regional ownership. there is no one-style-fits-all for business of this type. from that article though Tesla is stating that they are specifically looking to confirm the state of michigan’s stance so that they can sue. seems to me that the Big Auto could just wait for Tesla to scale up and run into the issues it will inevitably run into as Beck suggests. If and when Tesla does look to a franchise or agent model i would think they would still have their own take on it where they still retain the majority influence. rather than a franchise model they may put operating partners in place with a % stake but in such a way where Tesla still has the majority stake and a parachute clause. I can also see them avoiding established dealers and going with people greener so that they can more easily exact their influence on to those who will not have inherited business patterns. ---
**Author:** ![Beck](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/beck/32/28683_2.png) [@Beck](https://forums.speedlife.net/u/Beck)\ **Post date:** [February 1, 2016, 2:13pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/49 "2016-02-01T14:13:08Z")
> [@bing](#): > > just read Beck’s explanation… it’s a good one. i would have thought Tesla could have managed all of the sales but Beck’s right about service vs. scale. it’s 100% true in automotive… you have to have regional ownership. there is no one-style-fits-all for business of this type. > > from that article though Tesla is stating that they are specifically looking to confirm the state of michigan’s stance so that they can sue. > > seems to me that the Big Auto could just wait for Tesla to scale up and run into the issues it will inevitably run into as Beck suggests. > > If and when Tesla does look to a franchise or agent model i would think they would still have their own take on it where they still retain the majority influence. rather than a franchise model they may put operating partners in place with a % stake but in such a way where Tesla still has the majority stake and a parachute clause. > > **I can also see them avoiding established dealers and going with people greener so that they can more easily exact their influence on to those who will not have inherited business patterns.** Why wouldn’t they want “inherited business patterns” from an established dealer? Starting a dealership, with a niche brand - is INCREDIBLY difficult and it’s very easy to lose money - not to mention the capital needed is going to be in the millions. If they want to be successful, they are going to have to franchise with people who have made a lot of money doing it with other brands. Giving a dealership to a green pea, who has no name recognition, no previous customers and a niche product is going to be disastrous. ---
**Author:** ![bing](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/bing/32/7211_2.png) [@bing](https://forums.speedlife.net/u/bing)\ **Post date:** [February 1, 2016, 4:22pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/50 "2016-02-01T16:22:12Z")
> [@Beck](#): > > Why wouldn’t they want “inherited business patterns” from an established dealer? Starting a dealership, with a niche brand - is INCREDIBLY difficult and it’s very easy to lose money - not to mention the capital needed is going to be in the millions. If they want to be successful, they are going to have to franchise with people who have made a lot of money doing it with other brands. Giving a dealership to a green pea, who has no name recognition, no previous customers and a niche product is going to be disastrous. We’re speculating either way but based on Elon’s general attitude toward the exisitng dealership model and his quoted experiences in the past that have led to their current sales model i would bet that they are going to continue with the existing model and then when they start to hit scale and experience the issues you’ve suggested they will go to an operating partner model which is also quite common in MSO dealerships. Except in this case the majority partner will be Tesla instead of Millionaire X. One reason I believe Elon will use is that he’ll want to avoid cross-selling where a BMW, Cadillac, Audi, Merc dealer who might also own a Tesla dealer under the typical model could cross shop the client between similar marques. Porsche Canada denied their recently opened Oakville dealership to the local BMW dealer despite the BMW family’s ownership gourp making the higher offer for the rights in the territory. Porsche gave the reasoning they did not want a BMW dealer owning the Porsche dealer next door and since they had other good options they went with a dealer from slightly out of town. There are a variety of other reasons too. In general Tesla appears to want to break more than just the notion that electric cars cant be viable; Elon want’s to share things up big time. I think they want to have such a degree of control over the whole experience and if they enter into long term franchise agreements it will be difficult and expensive to break them if an established dealer tries to have too much influence in their respective territory. ---
**Author:** ![Beck](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/beck/32/28683_2.png) [@Beck](https://forums.speedlife.net/u/Beck)\ **Post date:** [February 1, 2016, 4:49pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/51 "2016-02-01T16:49:41Z")
> [@bing](#): > > We’re speculating either way but based on Elon’s general attitude toward the exisitng dealership model and his quoted experiences in the past that have led to their current sales model i would bet that they are going to continue with the existing model and then when they start to hit scale and experience the issues you’ve suggested they will go to an operating partner model which is also quite common in MSO dealerships. Except in this case the majority partner will be Tesla instead of Millionaire X. > > One reason I believe Elon will use is that he’ll want to avoid cross-selling where a BMW, Cadillac, Audi, Merc dealer who might also own a Tesla dealer under the typical model could cross shop the client between similar marques. **Porsche Canada denied their recently opened Oakville dealership to the local BMW dealer despite the BMW family’s ownership gourp making the higher offer for the rights in the territory. Porsche gave the reasoning they did not want a BMW dealer owning the Porsche dealer next door and since they had other good options they went with a dealer from slightly out of town.** > > There are a variety of other reasons too. In general Tesla appears to want to break more than just the notion that electric cars cant be viable; Elon want’s to share things up big time. I think they want to have such a degree of control over the whole experience and if they enter into long term franchise agreements it will be difficult and expensive to break them if an established dealer tries to have too much influence in their respective territory. Eh, it’s very likely that there is more to it than that. I’m guessing the BMW guy is a little salty that someone had a better plan/pitch etc. Happened with me and another large dealer group. We won the bid for the franchise and the larger auto group sent out an email to their employees that they turned it down. (Not even remotely factual). ---
**Author:** ![bing](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/bing/32/7211_2.png) [@bing](https://forums.speedlife.net/u/bing)\ **Post date:** [February 1, 2016, 4:53pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/52 "2016-02-01T16:53:36Z")
yes quite possibly. you cant really believe much that dealerships say about one another 🙂 ---
**Author:** ![bing](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/bing/32/7211_2.png) [@bing](https://forums.speedlife.net/u/bing)\ **Post date:** [February 25, 2016, 1:00pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/53 "2016-02-25T13:00:26Z")
> **[Tesla Withstands GM-Backed Effort to Ban Direct Sales in Indiana](https://www.bloomberg.com/news/articles/2016-02-25/tesla-withstands-gm-s-direct-sales-challenge-in-indiana-senate)** > > Tesla Motors Inc. prevailed Thursday in Indiana, where lawmakers sidelined a bill that would have kicked the company out of the state unless it establishes dealerships. Tesla wins in Indiana ---
**Author:** ![travisn](https://yyz2.discourse-cdn.com/flex034/user_avatar/forums.speedlife.net/travisn/32/5046_2.png) [@travisn](https://forums.speedlife.net/u/travisn)\ **Post date:** [February 25, 2016, 2:02pm UTC](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721/54 "2016-02-25T14:02:45Z")
> Mahan said that he welcomes Tesla to Indiana, but thinks it should have two dealerships competing on price. This is bs. [Previous page](https://forums.speedlife.net/t/automotive-franchise-laws-oudated-tesla/226721.md?page=2)