Tesla strikes deal to keep Ohio stores open
Facing state-by-state opposition from traditional car dealers, the company notches a small victory that could have broader implications.
By Jim Probasco
Two weeks after New Jersey banned Tesla Motors (TSLA) from selling its vehicles there, Ohio said the company could keep its two existing company-owned stores open and move forward with plans to open a third in that state.
The agreement, which banned Tesla from opening additional stores beyond the three, also prohibited other automakers from selling their automobiles in company-owned stores as Tesla has.
An Ohio Senate panel passed Wednesday's deal, according to The Associated Press. Based on the arrangement, Tesla showroom-stores in Columbus and Cincinnati would remain open and plans for a storefront in Cleveland would be allowed to proceed.
Ohio's dealer association had tried to block Tesla from selling directly to consumers. The company said it felt it had to do this in order to educate the public about its unique all-electric vehicles.
Local dealers said Tesla's business model threatened consumer protection laws and cut independent franchised dealers out of the retail pipeline. As of next week, New Jersey, Texas, Arizona, Colorado and Virginia will all have laws on the books prohibiting Tesla from direct sales of its vehicles in those states.
The state of New York might be next, making the Ohio deal all the more important. New York is home to five Tesla stores, one of the largest footprints the company has outside of California.
The Wall Street Journal reported that Tesla's vice president of business development, Diarmuid O'Connell, said the compromise in Ohio could serve as a model in other states, including New York.
"I do think the Ohio solution points to a way dealers and Tesla can resolve this issue for the present, while letting both sides see how this develops," O'Connell said. "While on the margin it's disappointing that we don't have the ability to grow freely in Ohio, the compromise we achieved in the past 24 hours is sufficient for now."
The Ohio Automobile Dealers Association, through vice president, Joe Cannon, said the agreement amounted to "a very fair proposal that is helpful to both sides."
Meanwhile, Tesla said it believed that to grow, the company had to be allowed to implement its direct-sales model everywhere. The ongoing state-by-state battles have become a distraction for Tesla, as the company has tried to focus on plans to build a "gigafactory" to mass produce batteries for its vehicles -- a far more important component to the company's growth plans.
The sponsor of the Ohio legislation, Sen. Tom Patton of Strongsville, told The Cleveland Plain Dealer that the bill provides protection for more than 60,000 Ohioans employed by auto dealerships across the state. Patton added, "If it turns out this is a good business model for the consumers, we can revisit it."
At the time of this writing, Jim Probasco had no position in any mentioned securities.
More from Benzinga
More like "existing business protection laws"
The rampant cronyism in this country needs to end. It stifles progress and hurts the economy. Most of these laws & regulations exist soley to protect the business models highest political donors and keep newer, more innovative business from entering the marketplace. If you need to have a law passed to protect your business, you don't deserve to be in business.
Companies should be free to choose whether they choose to use distributors and francises, or if they want to own their stores directly. Automakers have avoided this traditionally because it would require more working capital as well as the cost of owning buildings, more employees, etc.
However, for a modern start-up, I see no valid reason why they shouldn't use this model.
I don't see anyone protesting Apple owning their own stores. Mcdonalds is allowed to have both corporate and franchises. Goodyear used to own most of it's stores.
In reality with such a unique, product such as this, I'd rather have them sold directly to ensure sales people and technicians are properly train to educate consumers. I think the opposite is being argued. Most auto salespeople I've met don't really know their products, but know how to manipulate people.
Its pretty clear that this is about weather dealer owners wanting their piece of the pie, and automakers happy to keep a start-up down. I think they are honestly a little scared that this might work out.
"If it turns out this is a good business model for the consumers, we can revisit it."
IF it isn't then there would be no reason to revisit it as they would go out of business. But hey, this is politician logic. IT doesn't have to make sense as long as there is a good narrative.
If we are still driving any kind of car a Century from now, we have made little headway in travel.
Of course a Century from now there may not be roads or humans either...??
I don't know, but I'm not really sure I have heard about a lot of people getting excited about buying a Tesla yet ?
At least not in my neighborhood...
We still like the roar of a big old V-8 in a pick me up truck...
I wonder if UPS or the USPS makes a big enough box to mail back a Tesla to the Factory, when they have a recall....???
Seems when I hear all the whining, bitching and crying on here is when someone buys a piece of crap on-line...Then has all kinds of hassles, getting it fixed, repaired, returning it or getting their money back....
Just keep buying some of this stuff like that, and the only argument you will have someday will be with your computer....
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Fed keeps important 'considerable time' language in reference to short-term interest rates, but dissents and dots leave doubts.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.