The California Department of Motor Vehicles (DMV) is not making it easy for Tesla or other automakers to sell cars directly to customers. In October, the DMV issued a cease-and-desist letter to Tesla dealers in California, claiming that they cannot operate as third party dealers without specific licenses. The DMV has since given extensions to these dealers, but the future remains uncertain. If you’re unfamiliar with Mitchell or his company, Tesla Motors is an electric car manufacturer based in Palo Alto, CA. Mitchell is also the founder and CEO of New Roads Communications, which operates Mitchell AutoGroup and its subsidiaries: The Tesla Company and Liberty Motors. These companies specialize in manufacturing electric vehicles with the goal of making them accessible to everyone. In this blog post, we’ll give you an overview of what’s going on with Mitchell and his businesses. If you want more details about these events or any other topic related to auto marketing and advertising, contact us today!
What’s Going on with Tesla and the California DMV?
In October 2017, the California DMV sent a cease-and-desist letter to Tesla, claiming that the company’s sales model is illegal. The letter states that all automobile sales must go through third-party dealers. The logic behind this demand is that dealers are necessary for consumer protection. The original goal of the dealer model was to ensure that consumers could get fair prices for vehicles. It also granted warranty and repair services. Today, however, the dealer model doesn’t serve either of these purposes. The customer experience with dealers is notoriously bad. The majority of consumers say that they would rather go to the dentist than visit a car dealership. The traditional model for auto sales has also been criticized for its effect on pricing.
Brief History of Tesla
Tesla was founded in 2003 by Elon Musk and a few other investors. In 2006, the company received $465 million in government incentives to start its factory in Silicon Valley. Tesla has since grown into a household name, offering an attractive product with a dedicated customer base.
The company has outsold all other electric vehicle manufacturers in terms of the number of vehicles produced. It has also received the highest customer satisfaction rating of any automobile manufacturer. Tesla’s strong brand and customer loyalty, however, have not prevented the company from facing regulatory challenges. Tesla’s vehicles are currently the only all-electric vehicles that can be purchased without visiting a dealer.
Why is the DMV Pursuing this Course of Action?
The California DMV is concerned that Tesla’s business model will affect the ability of auto dealers to stay in business. In a letter to the California State Senate, the DMV wrote that if manufacturers were permitted to sell directly to customers, “it will likely result in the closure of all dealer franchises.” Mitchell, who has been fighting for the right to sell Tesla vehicles directly, believes that the DMV is motivated by protecting its own interests. After all, the DMV gets a portion of the revenue from Tesla’s sales tax and registration fees. Mitchell also believes that the DMV is anti-competitive. He says that the same standards should not apply to Tesla as apply to other automakers. Because Tesla is a new and innovative company, he argues, it should be allowed to operate outside the conventional dealer model.
What does this mean for Tesla’s Dealers?
Tesla’s existing dealers could be put out of business by the DMV’s decision. If Tesla is forced to sell through dealers, it will lose the ability to offer direct sales. This means that customers will have to travel to a physical location to purchase a vehicle. They would also be subject to the same high prices and poor customer experience that has plagued the auto industry for decades.
Tesla’s dealers have expressed disappointment at the outcome of this struggle. They would have liked to continue selling Tesla’s products, but they are also realistic. They know that the rules are stacked against them. If Tesla is forced to sell through dealers, it will lose a significant portion of its customer base. That’s because most Tesla owners are not interested in visiting a dealership. They prefer the convenience and privacy of buying online.
What does this mean for Consumers in California?
If Tesla is forced to sell through dealers, it will lose a significant portion of its customer base. That’s because most Tesla owners are not interested in visiting a dealership. They prefer the convenience and privacy of buying online. Even worse, Tesla’s customers will be treated to the same poor customer experience that plagues the rest of the auto industry. They will be pressured to buy cars that they don’t want. They will be subject to high-pressure sales tactics. And they will have to deal with the same sky-high prices that exist at every other car dealership. Other automakers will continue to be able to sell directly to customers. That means that the average customer will be able to buy a car from Honda or Toyota without visiting a dealership. These customers, however, will have to travel to Tesla’s factory to make their purchases. Tesla will not be able to sell to customers who are too busy or too impatient to make a trip to Silicon Valley.
The California DMV is hurting Tesla and Mitchell’s businesses. It is also hurting California consumers by blocking sales at one of the most innovative car manufacturers on the market. The DMV’s decision is motivated by a desire to protect its own interests. It is also anti-competitive. Instead of applying the same standards to all automakers, the DMV is applying different standards to Tesla. Mitchell and his companies deserve to be treated fairly. In the end, consumers are the ones who will suffer from the state’s decision to block Tesla’s sales model.