Tesla Motors might franchise dealers, while monopolizing repair of salvage-title Tesla cars

Last April I suggested an agreement between Tesla Motors and New York State was in effect a capitulation by Tesla, and that the company had lost its argument over its preferred model of selling cars directly to customers.  The ebb-and-flow of events since have made it unclear whether that’s indeed the case, even though popular opinion says Tesla Motors should have the freedom to sell directly to customers.  A few days ago Michigan passed a law banning Tesla Motors from selling cars in that state, and it seems Tesla Motors CEO Elon Musk is on the brink of agreeing to set up franchised dealerships.  Finally, the company seems to be exercising its control over Model S repair services in a way that might lead Tesla to evil practices just as I theorized some time ago.

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Tesla Motors has a huge positive image right now.  The company is doing wonderful things, and are successfully navigating the extremely difficult terrain of launching an automobile manufacturing startup company.  This line is business is so difficult to enter there have been zero successful automaker startups in the last 60+ years (in the U.S.).  That Tesla Motors has gotten as far as it has is nothing short of amazing.


At the same time we should always be on the watch for whether Tesla Motors turns evil.  There was a time Google, for example, could Do No Evil and had a hugely positive image.  It’s fair to say that Google’s image is tarnished nowadays, and it’s possible that company is doing Evil.

The laws governing car sales were ostensibly meant to protect consumers.  While the laws vary from state-to-state they generally implement the system of car sales we see today in the U.S.  Every car dealership is independent from the car manufacturer, is required to carry used cars, is required to have a service department, etc.

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Keeping car dealers independent from car makers means we are insulated from the manufacturer acting like a monopoly.  We have the freedom to buy from a range of dealers, and can play dealers off one another to get a better deal.  We also have the freedom to service the car anywhere we like, or to do the service ourselves.  We can even rebuild cars, swapping the gas engine for another one, or even an electric drive train, and to rebuild cars with salvage titles.

It’s not that car dealerships are angels – far from it, that industry has a hugely negative image.  A recent study from the Institute for Transportation Studies at UC Davis goes into some of the huge negative baggage hanging around the necks of car dealerships.

It’s clear the NADA’s fight against Tesla Motors is more about protecting NADA’s power over the process of selling cars, than the protection of consumers.  With that power, they’ve perpetrated an extremely unpleasant system of buying and servicing cars.

On Oct 1, 2014, the Michigan Legislature passed a law that will prevent Tesla Motors from opening any kind of gallery or store in Michigan, and may even prevent the company from doing anything to inform Michigan residents about Tesla’s cars.  Tesla Motors says they got a “Raw Deal in Michigan“.  The blog post calls on people to directly lobby Gov. Snyder to not sign the bill, but he has since done so.

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There currently is no Tesla store or gallery operating in Michigan, but was hoping to open one next year (according to the Detroit Free Press).   According to that piece, Gov. Snyder claimed the law he signed did not change the conditions for Tesla Motors.  It reports Diarmuid O’Connell, Tesla’s Vice President of Business Development, saying that Gov. Snyder wants to see a robust debate in the Legislature next year.

Tesla Motors Gigafactory rendering

Tesla Motors Gigafactory rendering

Several voices in the piece suggest it’s silly to think this didn’t change conditions for Tesla Motors.  If it didn’t make any changes, then why was the Michigan Auto Dealers Association so keen on inserting language in the bill that harmed Tesla Motors?

But there’s a bigger question – will Tesla Motors have to adopt a franchised dealer model anyway?

Ponder what it will take for Tesla Motors to be selling a half million cars per year by 2020.  The company has repeatedly stated this goal, and it’s a whole lotta cars.  Can Tesla Motors sell that many cars through store fronts in upscale shopping malls?

According to Autoline Daily, Elon Musk is considering a “hybrid” approach of selling through franchised dealerships in some cases. Here’s Musk’s exact words: “We may need a hybrid system, with a combination of our own stores and some dealer franchises.”

Over on Cleantechnica, they combined that bit of news with comments supposedly made during a closed-door regulatory meeting a year ago, and come to the conclusion that it’s foregone that Tesla will have to adopt some form of franchised dealerships.  According to that piece, the Auto Dealers Associations are claiming it will be impossible for Tesla Motors to scale to the half million per year sales level on their own shoulders.

The final bit I want to cover today is an indication that Tesla Motors is conducting some minor evil in the service department.

I’m referring to the fate of people who attempt to self-service the Tesla Model S, or to buy wrecked Model S’s with salvage titles and attempt to resurrect their car.  What Tesla has done several times now is send letters to these people requiring Tesla’s sign-off before they can drive their cars.  In at least one case the charging system was remotely disabled.

Traditionally one can buy a salvage title vehicle, repair it, and get it back on the road.  Tesla Motors insists on inspecting such cars, to determine whether the car can be repaired.  If so, the work can be done at a Tesla repair center or at a certified repair shop.

I know of two instances where there are problems and salvage title Model S owners being left unable to drive or use their cars.

Peter Rutman bought a wrecked Model S for just $50,000 then spent another $8,000 repairing it, according to Auto Blog Green.  But Tesla Motors insisted on an inspection, and has remotely disabled the charging system, leaving Mr. Rutman steaming mad and refusing to undergo the inspection.  Rutman is afraid that Tesla will take the car away from him, but Tesla insists that’s not the case.  Instead, the company is concerned over improperly repaired cars being on the road (Rutman had the repairs done at a non-Tesla-Certified shop).

Tesla gave this statement to ABG:

Safety is Tesla’s top priority and it is a principle on which we refuse to compromise under any circumstance. Mr. Rutman purchased a vehicle on the salvage market that had been substantially damaged in a serious accident. We have strong concerns about this car being safe for the road, but we have been prevented from inspecting the vehicle because Mr. Rutman refused to sign an inspection authorization form. That form clearly states that in order for us to support the vehicle on an ongoing basis, we need to ensure the repairs meet minimum safety standards.

Regardless of whether or not the car passed inspection, Mr. Rutman would have been free to decide where to conduct any additional repairs and to leave with his vehicle. There was never any threat to take away his vehicle at the inspection or any time thereafter and there is nothing in the authorization form that states or implies that we would do so.

Additionally, Mr. Rutman opted to have his vehicle repaired by a non-Tesla affiliated facility. We work with a network of authorized independent repair facilities to ensure our safety standards are met. It is also worth noting that Mr. Rutman is not on any “blacklist” for purchasing Tesla parts. While we do sell certain parts over the counter, we do not sell any parts that require specific training to install. This is a policy that is common among automakers and it is in place to protect customers from the risk of repairs not meeting our safety standards.

The other case concerns Otmar Ebenhoech, a long-time pioneer in the DIY Electric Vehicle conversion industry.  He’s the designer of the Zilla controller widely used in electric vehicles.

Back in the late 90’s he built a Stretch Vanagon, by welding together the front half of one Vanagon to the back half of another Vanagon.  At the time he meant to make it a hybrid vehicle, running an electric drive train on one of the axles.  At least that’s what he explained to me the time I went to his place to look at a different car, and he’d just bought the two Vanagons and had yet to attach them together.   However, the hybrid stretch Vanagon concept did not come about.  A year or so ago he bought a wrecked Tesla Model S with the intent of transplanting its drive train into the stretched Vanagon.  The result is meant to be called the Stretchla.

Otmar spent quite a bit of time piecing together parts, some bought through the local Tesla repair center, to resurrect his car.  He calls it the Wreckla, and it can currently be driven and even charged at a Supercharger station.  But it has a cracked frame, and he had to disable the air bag system.

In a blog post dated in mid-July 2014, Otmar explained why he’d parked the Wreckla after receiving a letter from Tesla’s service department.

Due to the salvage status of your Model S, I have been instructed to cease providing you with parts. Tesla is very concerned about vehicles with salvaged titles being improperly repaired. Going forward, all salvaged vehicles must be inspected by us or our approved body shop, Precision Auto Body. If declared a candidate for proper repair, reconstruction must be completed by a Tesla-Certified Body Shop.

Otmar had previously been receiving much help from the local repair shop.  He’d been able to buy quite a few parts “over the counter” as Tesla said in their statement concerning Mr. Rutman.  In this case, as in Mr. Rutman’s case, the company is expressing a concern over proper repairs.

Otmar went into quite a long bit of writing about some concerns Tesla might have.

He asks us to consider what would happen if an improperly repaired Model S were to wreck, killing some people.  Would the typical news report tell us the subtleties between a regular Model S and a salvage title vehicle?  No, it will focus on whatever fire or blood was spilled.

That’s what we saw in the media frenzy following the Model S fires over the last year.

In other words, Tesla Motors has a motive of heading off potential negative press.

It’s not quite a sign of Tesla Motors being evil.  But, the company is exerting quite a bit of control over the right to repair a Tesla car.  Perhaps…in the due course of time….?

By the way, there is an organization named Right To Repair advocating for policies requiring car makers to support the repairability of the cars they sell.  We as consumers are, theoretically, better off in a system letting us repair the car ourselves or at any car repair shop.

Tesla Motors is quickly developing into a mature automaker.  As a result the company is facing two kinds of growing pains, as shown here, in sales and repair of Tesla’s cars.  We don’t know how it will turn out, but perhaps Tesla’s growth will eventually convert it into a regular car company with all the warts that implies.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

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