News Column

Tesla Service Center in Raleigh Portends NC Showroom

May 23, 2013

Take a peek inside the Tesla service center in Raleigh, not far down the road from the Angus Barn steakhouse, and you will get a glimpse at what some believe is the future of the American automobile.

The single bay garage is just big enough to squeeze in a pair of lifts, shelves of wipers and battery packs stacked in wooden crates.

But notice what's not there: no motor oil, no belts, no spark plugs, no transmission fluid.

The garage is one of two dozen nationwide Tesla has opened, focusing on regions that have strong sales potential for the California company's line of Model S electric cars, which start at $69,900.

If sales trajectories here continue, Tesla officials say, North Carolina could get a Tesla showroom as early as next year.

Customers can't buy a car or test drive a Tesla at a showroom, which is typically in shopping malls. The sites are simply to entice people to order a Tesla online.

But sales here will depend not only on the whims of customers but also on the state legislature.

The N.C. Senate voted unanimously two weeks ago to prohibit online auto sales by manufacturers -- a bill that today only affects Tesla.

The House will now take up the bill, and Tesla is trying to line up support to counter the politically formidable N.C. Automobile Dealers Association.

On Wednesday, officials from the company were in town to meet with lawmakers. They parked a Model S in front of the legislature, and capped their efforts by letting House Speaker Thom Tillis take the car on a test drive.

Tillis' verdict: "When you accelerate it, it was the same sort of feeling I got when I test-drove a Mustang Boss back when I was probably 23 years old. Just an amazing feeling."

'Free-market' approach

Rep. Mike Hager, a Rutherfordton Republican, said the House debate will be more of a "free-market conversation."

"Any time there's an innovative way to bring a product to market, it's going to initially get pushback from the fellows that have been doing business the same way since 1902, or whenever," said Hager, who met with Tesla officials Wednesday.

Tesla CEO and co-founder Elon Musk, who previously founded PayPal, intends to travel to Raleigh to testify before the House Transportation Committee and make the case that lawmakers should not get in the way of his company's plans to expand here.

Professional race car driver Leilani Munter, a Cornelius resident named by Sports Illustrated as one of the world's top 10 female racers, also plans to appear before the House committee when the bill is scheduled for debate.

"I find it horrifying that North Carolina would make it illegal for me to buy a car from Tesla," said Munter, who met with legislators Wednesday.

Tesla's Model S luxury sports sedan is Motor Trend car of the year for 2013 and recently scored 99 out of 100 points in Consumer Reports. The basic model boasts a driving range of more than 200 miles between charges.

The experimental startup sells a few dozen, perhaps a few hundred, cars in most states.

Car dealers don't care a jot about Tesla's microscopic market share. But they are wary of the precedent that could encourage others to bypass the dealer network, eliminate the middleman, and shave a few thousand dollars from the price of a vehicle.

Consumers protected

The dealers point to consumer protections inherent in a state licensing system where a dealer's license can be suspended or revoked for misconduct. The N.C. Division of Motor Vehicles, for example, has nine hearing officers who handled 42 car dealer hearings last year in the state.

North Carolina's law requires auto dealers to obtain a state license, a $70 outlay that requires 12 hours of study and covers requirements in a 156-page auto dealer manual.

Minimum requirements include having a sales room, surety bonding and liability insurance. The state audits every dealership every two years and will not issue a dealer's license to anyone convicted of vehicle tampering or dealing in stolen cars in the past five years.

None of this would apply to dealers who are not licensed.

"Under what regulation would we make sure they're doing the things they're supposed to do?" asked John Brown, executive director of the Carolinas Independent Automobile Dealers Association. "Are they going to be exempt from the law -- like damage disclosures, mileage statements?"

Sen. Harry Brown, owner of two car dealerships in Jacksonville, excused himself from the Senate vote earlier this month. But he said this week there are solid reasons to keep the licensing system in place.

"If you're a consumer, would you rather go to a car dealer with a problem or call an 800 number?"

Many are unmoved by those arguments.

Jerry Maccioli, a Raleigh anesthesiologist, derides the legislation as the "Save the Car Dealers Association Bill."

He paid more than $100,000 for a Tesla in January without even a taking a test drive.

"I'm an informed consumer, I did my research, I made my choice," Maccioli said. "Why should I have to go through a dealer?"

Triangle a prime market

More than 80 Tesla cars have been sold to North Carolina residents, and about 60 more orders are being processed, said James Chen, Tesla's director of public policy and associate general counsel.

The Triangle is ripe for Tesla sales because it is considered one of the nation's prime markets for electric vehicles. The state already has more than 200 public recharging stations.

Last week, four Model S cars awaited in the back of the Raleigh service center to be delivered to their new owners, their bodies draped in all-weather body socks.

An all-black model crouched in the bay, as service manager Trevor Smith ran a diagnosis on his laptop. The car was in for a new windshield, third-row child restraint seats and an upgrade to 21-inch high-performance tires.

The center's three employees deliver cars, perform maintenance, and make house calls.

The company insists on selling and servicing its own cars, similar to Apple's legendary "walled garden" strategy of maximum product control, rather than shipping the Model S to unaffiliated dealers who sell multiple makes of cars. "This is new technology -- it's a computer on wheels," Chen said. "When we get to 200,000, or 300,000, or 400,000 vehicles a year, then maybe like Apple we will have a walled garden, and also work through independent dealerships." Staff writer John Frank contributed.

For more coverage on the automotive industry, please see HispanicBusiness' Auto Channel

Source: Copyright News & Observer (Raleigh, NC) 2013. Distributed by MCT Information Services

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