Several dealer associations in the U.S. claim that Tesla’s factory outlets (most in shopping malls) violate state franchise laws that prohibit factory ownership of dealerships, allowing the electric car manufacturer to sell vehicles at a lower price.

Protesters also say that they present unfair competition for rival dealerships and, if left unchallenged, ultimately threaten the franchise system.

“If a manufacturer sees that Tesla is successful with this kind of business model, who’s to say they don’t break out their own EV product lines and create a separate system that bypasses dealers?” said Bob O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association. “It’s extremely problematic.”

Factory stores are illegal in some states while others are tolerated under a grandfathering provision.

In Illinois, the Secretary of State told CEO Elon Musk that he’s breaking the law by listing himself as the owner of the suburban Chicago store. Tesla officials have asked for 30 days to respond.

Let’s see how this affects Tesla’s business model in Canada…

Source: Automotive News

2012 Tesla Model S at NAIAS front 3/4 view
Photo: Sébastien D’Amour