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Tesla Motors prides itself on promoting a disruptive technology — electric cars — but it was Tesla itself that was disrupted recently as New Jersey said it is illegal, effective April 1, to operate factory-direct car sales in the state. New Jersey is not alone. Arizona, Maryland, Texas and Virginia also ban direct sale of cars to consumers. Many wonder whether Tesla has been out to turn the car-marketing world on its head, do away with the franchised dealership system and change forever the way people in the U.S. buy cars. It can seem that way as Tesla fights to keep selling its cars direct to its customers, but missed in the speculative fervor is that Musk himself has said that as it grows, Tesla probably would be looking at expanding its presence — and sales — through franchised dealerships.
Today, progressive dealerships around the country representing every automaker are creating experiences that make car buying easier and deliver a high level of customer satisfaction. Musk could cherry-pick dealers who can deliver the experience he wants for his customers, just as Lexus did when it launched its brand in the U.S. in 1989. Selling and servicing cars is an entirely different business from making them. Using franchised dealerships relieves the car manufacturer of the tremendous capital burden of paying for and staffing brick-and-mortar facilities. That’s one reason the auto industry went with that model in the first place. Besides, car dealerships are important corporate citizens, pumping into the national economy hundreds of millions of sales-tax dollars, tens of millions of dollars in charitable contributions and billions of dollars in paychecks. That makes them valuable economically. It also gives them clout that few politicians want to challenge. More importantly for car buyers and car owners, a national network of franchised dealerships with local sales and service facilities can make buying and caring for a new or used vehicle relatively easy. You can see why the idea might ultimately appeal to Tesla.
Tesla — as innovative, different and disruptive as it may be — is still a small player in a very large arena. It sold just under 25,000 cars last year globally. General Motors sold more than that every day. If Tesla has an eye on significant growth, the traditional dealership model, in its most progressive form, is a path the brand shouldn’t ignore.