PALO ALTO (KPIX 5) – Dealerships across the country continue to take aim at Tesla Motors over their direct-to-consumer sales. Now Founder Elon Musk is firing back and getting some support from Bay Area, where poll results show support for the company’s model.
Ohio and New Jersey are the latest states to move toward a ban on car sales that cut out the dealerships. The industry is pushing hard to ban the direct sales across the country because it threatens the dealership sales model.
“Unfortunately the way the auto association is setup, is that they make most of their profit on service,” says Musk. “I think it’s terrible to make a profit on service.”
Owners of Tesla’s Model S can often just get a software update instead of a service check, taking away a revenue stream for traditional car vendors.
“They have a cash cow in the form of check engine lights. When that thing goes off, ‘ka-ching,'” says Brad Berman, editor of Plugincars.com. “Electric cars are, by design, simpler. There are fewer moving parts.”
The service department makes up about half of the business at San Jose’s Del Grande Dealership Group.
“The customers buy a car and we tend to take care of them,” said Shaun Del Grande, who downplayed the Tesla threat. “It really doesn’t feel like an issue today and I don’t see it as an issue tomorrow, but who knows?’
“I just don’t see that the era of the technician or the era of the service department is ever going to go away, in the near future.”
The backlash against the Palo Alto-based company’s direct-sale model has been much stronger in other states. New Jersey recently joined Arizona, Maryland, Texas and Virginia in limiting the sales. Elon Musk fired back at the move with a letter to the people of New Jersey on the company website.
“The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”…Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind,” wrote Musk, who said his showrooms will operate normally in New York and Pennsylvania.
KPIX 5 asked Bay Area drivers to weigh in via a Survey USA poll and found 81 percent of the people responding support Tesla bypassing dealerships. 78 percent of respondents said they would be very or somewhat likely to buy or lease directly from the manufacturer rather than going through a dealership. Get the full poll results and demographic breakdown here.