Tesla was green lit to open a gallery store in ultra-posh Greenwich, Connecticut a little over a year ago with the stipulation that the company didn’t actually sell cars out of it. It works that way in many states where Tesla is barred from directly selling cars, rather than going through franchised dealers. Now Connecticut is moving to shut down Tesla’s gallery, and the automaker says other dealers went to extreme lengths to make that happen.
The Greenwich Time reports the state’s Department of Motor Vehicles is arguing the gallery is, in a sense, a car dealership, “a means of merchandising its motor vehicles with the further intent to conclude all activities conducted there in a sale.”
But Tesla says sinister tactics were at work here: that the Connecticut Automotive Retailers Association sent “secret shoppers” to the gallery to repeatedly attempt to buy a car from employees, the newspaper reports.
Yet Tesla argues it didn’t work. From the story:
“It sent ‘secret shoppers’ to the Greenwich gallery in a failed attempt to trick our local employees into selling them a vehicle,” Diarmuid O’Connell, Tesla’s vice president of business development, wrote legislative leaders.
“Despite these fake shoppers’ repeated requests, our employees did not sell them a car or take their order. What our employees did, and what they continue to do, is educate visitors about Tesla, its cars and other products, and broadly about electric vehicle technology and its many benefits. It is a basic constitutional right for Tesla to be able to communicate with Connecticut residents about these topics. Ironically, even this limited non-sales activity is too much in the eyes of CARA, which is seeking to entirely shutter the Greenwich gallery.”
So even if it didn’t, the state is trying to shut the gallery down anyway. (I reached out to CARA to see what it has to say about O’Connell’s statement and will update when I hear back.)
To recap: Tesla sells its cars directly, often via its website, to customers rather than through dealers. Dealers don’t like that, so they’ve fought against this method in many states. Some states allow direct sales; others, thanks to a well-monied and powerful dealer lobby, require automakers to franchise sales out, hence the Tesla gallery stores, which show off Tesla cars and their features but don’t let you actually buy a car.
When the Greenwich Tesla facility was approved in March, 2016, attorney Tom Heagney who represented Tesla told local news: “...the space will be more like the art galleries already allowed on Greenwich Avenue. The imposed restrictions limit parking at the back of the building to employees only, and prohibit test drives, electrical charging stations and vehicle sales, regardless of any future changes made to state franchise laws.”
Tesla’s position is that Connecticut’s laws prohibiting it from selling cars are ridiculous in the first place, but have been followed nevertheless. Such restrictions do seem a little silly, since people can easily go to New York or Massachusetts, where Tesla’s direct-to-customer sales are permitted.
But Tesla’s direct-to-customer model cuts out a traditional car dealership’s opportunity to make money, so I can’t blame the local dealer’s association for fighting to keep Tesla at bay.
In a blog post against Tesla, CARA member David Baeza posits: “Consumers get the best deals because of competition between dealerships—in sales and service—and that doesn’t happen in Tesla stores.” Baeza also cites the number of jobs that Connecticut car dealerships provide as a reason to stick to the status quo of car sales.
Other public CARA statements have a similar tone: Tesla is the evil carpetbagger, local car dealerships provide important jobs for the state.
Even if Tesla cars aren’t direct competitors to whatever local dealers are selling, the potential success of the direct-to-customer sales scheme could pave the way for an industry-wide reshuffling of how cars are sold.
As it stands, the Connecticut DMV has reportedly issued a “cease and desist order to the electric car manufacturer on its Connecticut sales.” With its letter to state legislators cited above, Tesla will now move to prove it has not made sales in Connecticut while fighting against these regulations prohibiting the company from doing so.
Hat tip to Tomas!