In the industry's early days, manufacturers experimented with direct sales. But developing their own networks of company-run stores across the country would have been wildly expensive. Working with franchisees solved that problem. As the industry evolved, dealers pressed their state legislatures for laws that would cement the relationship.
No problem here
California law, for example, prevents automakers from opening their stores within 10 miles of one of their franchisees, said Brian Maas, president of the California New Car Dealers Association. For a startup like Tesla, that isn't a problem, because the company doesn't have any franchisees.
Texas law, in contrast, prevents car manufacturers from owning dealerships. Tesla lobbied to have the law amended this spring, but couldn't drum up enough support in the capital of Austin.
"Elon Musk kind of made Texas a battleground to change our law," Wolters said. "We didn't pick a fight with him."
In other states, including New York and North Carolina, politicians friendly to auto dealers have introduced bills to block direct sales. Most of those bills have stalled. But Colorado passed such a law in 2010, shortly after Tesla opened a store there.
Prodigious generators of jobs and sales tax receipts, auto dealers wield considerable clout. Tesla has tried to fight back by mobilizing public support. More than 114,000 people have signed a petition on the White House website -- a petition written by a Tesla fan, rather than the company itself -- saying states should not be allowed to stop Tesla's direct sales.
The White House has not yet responded. But Tesla executives have publicly discussed seeking some kind of federal help if the state-by-state fight goes badly.
Some dealership associations say Tesla's attitude toward franchisees may change if the company continues to grow.
The company has just 33 stores or galleries scattered across the country. But if Tesla someday becomes a true mass-market brand, selling hundreds of thousands of cars per year, its direct sales model may no longer work, Maas said. Owning and operating a big, nationwide network of dealerships is still too expensive, he said.
"It just doesn't pencil out to have company-owned stores, company-owned service facilities at that size," Maas said. "They're going to have to choose. And we think the franchise system works."
Looking down the road
O'Connell agreed that as the company becomes larger and more established, Tesla may decide to work with franchise dealerships.
"When we get to our Gen 3 vehicle and we're doing 100,000 cars per year, it's going to make sense in some situations to sell through dealers," he said. "So if this is just about Tesla, all they have to do is wait a few years."
Until then, some analysts doubt the fight will seriously curb Tesla's sales.
The most important potential markets for Tesla -- such as California, Europe and China -- remain wide open, said Andrea James, research analyst with the Dougherty & Co. investment bank. And the conflict with auto dealers may generate goodwill among car buyers.
"In the court of public opinion, this is helping them, because Tesla looks like the underdog," James said. "People do not like being told by their government what they can and can not buy, especially when the source of that rule is an entrenched interest."
David R. Baker is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org Twitter: @DavidBakerSF
(c)2013 the Houston Chronicle
Visit the Houston Chronicle at www.chron.com
Distributed by MCT Information Services
Most Popular Stories
- SpaceX's Satellite Launch Is 'Game-Changer'
- Reid Confident Congress to Pass Immigration Bill
- Maui Visitor Killed in Shark Attack
- Donors Abandon GOP Over Gun Stance
- Mexico: 'Extremely Dangerous' Radioactive Material Stolen
- CEOs More Optimistic About Economy, Hiring
- Climate Change Early Warning System Urged
- Private Sector Employment Surges by 215,000 Jobs
- Calif. Likes Christie, Says Tea Party's a Drag
- Newtown 911 Tapes Being Released Today