This is man is so incredibly bright he frightens a lot of people across a wide span of different industries. We are so focused on what impact Elon Musk ultimately will have on the car business that we miss the fact he is a super-achiever and a visionary.
Don’t shoot the messenger. But I honestly believe he’s going to bust some of the dealer franchise laws in all 50 states. He ultimately will be responsible for manufacturer-direct sales in competition with franchised dealers.
Oh, we’ll be kicking screaming, gouging and biting right up until the end. But it’s coming, and after the dust settles, the industry will emerge better for it.
Who is this guy Musk anyway? He’s a South-African transplant who made his money as co-founder of PayPal in 2000. Revolutionary at the time, PayPal allowed people to pay online without using credit cards.
He has a contract with NASA to produce a commercial spacecraft to replace the Space Shuttle. This guy is the real deal, and his ultimate vision is space exploration with reusable spacecraft using something other than rocket propulsion.
Musk also is the chairman and driving force behind “Solar City,” the first viable production of cheap solar electricity for residential and commercial use.
And then there’s his Tesla Motors, the electric car company that is challenging the traditional dealership system in favor of factory stores.
Besides scaring the Bejesus out of the car dealers, he’s also got the electric companies nationwide on the edge of their seats. His achievements and out-of-the-box thinking are awesome.
Musk’s personal net worth since manufacturing the Tesla EVs has tripled to more than $10 billion.
And now, Tesla announced selection of Reno NV, as the site of a battery-pack factory. Projecting annual production of 500,000 units in the next five years, the Gigafactory is a $5 billion enterprise with $1.4 billion contributed by Panasonic and another $500 million plus concessions coming from the state of Nevada.
So, everything we know about Musk is that he’s ambitious, tenacious, unconventional and well financed. He’s never lost at anything he’s attempted so far.
Dealer competition busted the Ford and General Motors initiatives to own and operate dealerships in certain markets back in the early 2000s. The automakers found they weren’t good at retail and they retreated from the battle field bruised and wounded.
There will continue to be franchised dealers, even if they are coexisting with manufacturer-owned stores. Remember, the manufacturers are honor-bound to do the goofy-assed stuff that doesn’t work even though they keep trying to get us to do.
The only reason it will work for Musk is that Tesla does not already have an established franchised dealer body.
So, the company is not competing against existing dealers representing the brand. If any other manufacturer with established dealers tried it, we’d kick their butts back to where they came from, as we’ve done in the past.
Franchised dealers give consumers a competitive advantage with service and pricing. Factory-owned stores do not provide that.
Politically, consumers might think the protected dealer franchise system is not in their best interest. Dealers generally sell new cars at a loss or break even. The manufacturers make the lion share of the profit. With manufacturer control, margins and prices would increase.
All of that being said, I’ll go back to the original statement: Musk will prevail in disassembling franchise laws that protect the current auto-retailing system. I’m not particularly happy about it, but, I am a realist.
He’ll have a fight on his hands because the dealers and the dealer associations will go down swinging. It will cost him but, he’s got money to spend.
The wild card is the fact that he has a lot of sympathetic eyes watching and ears listening in the current administration in Washington. There are a lot of politicians and some government agencies on his side of this argument. It wouldn’t take much to swing it his way.
The Georgia Dealers Assn. has filed a complaint with the State Department of Revenue against Tesla Motors. The organization is seeking to revoke Tesla’s license to sell cars in Georgia. The basis for the complaint is that Tesla is operating on a limited license that only allows it to sell 150 cars annually and it sold 174 units in the state.
We can keep Tesla busy defending what are basically nuisance suits. But it will prevail in all states one at a time. Or there will be some sort of sweeping federal action in its favor.
I have a fairly strong track record when it comes to this type of prediction. Change is inevitable. As always, we’ll roll with the punches and keep on keeping on.
Jim Ziegler president of Ziegler Supersystems based in metro Atlanta, is a trainer, commentator and public speaker on dealership issues. He can be reached at [email protected]. WardsAuto readers also may comment on this article by logging in or registering below.