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Will Tesla Change the Way You Shop?

  • Tesla sales are strong
  • States challenging Tesla’s sales model
  • Model S could change the way you shop

We’re only a few months into 2013, but it already has been quite a year for Tesla Motors. The long-awaited 2013 Tesla Model S — an all-electric luxury car that makes up to 416 horsepower and can cost more than $100,000 — is a runaway success, catapulting Tesla to profitability for the first time.

And North Carolina has just become the latest state, following Texas and a few others, to challenge the legality of the company’s sales — specifically, their direct-sales business model.

Allow us to explain. More or less since Henry Ford started sending Model Ts down the assembly line, direct sales from automakers have generally been prohibited by law in the United States. Instead, new vehicles must be shipped to franchised dealerships before they can be offered for sale. Historically, this division of labor enabled automakers to focus their resources on production, leaving the business of auto sales to franchises around the country.

But California-based Tesla has other ideas. Ever since the battery-powered Roadster debuted a few years back, Tesla sales have been conducted via company-owned stores, or “galleries,” that bypass the traditional franchise system. That wasn’t a big deal when the Roadster was the only vehicle in Tesla’s portfolio, because not many people bought one. But the 4-door Model S is a different story. Based on strong first-quarter sales, Tesla now projects that over 20,000 Model S units will be sold in 2013, which is more than enough to get the attention of traditional auto dealers around the country.

That’s why the North Carolina Senate is the latest legislative body to fire a shot over Tesla’s bow. The North Carolina Senate Commerce Committee unanimously approved a bill in early May that effectively reminds Tesla of dealer franchise laws, requiring all automakers to sell their cars only through licensed dealerships. Tesla counters that it’s more efficient for a small startup to sell directly to consumers, and that the more Model S units it moves, the more North Carolina’s economy will benefit.

What it means to you: Could we be witnessing the beginning of a new era in car sales? Or will Tesla be forced to adopt the tried-and-true dealer franchise model? It’s too early to tell, but we’ll certainly be watching this story closely in the weeks and months ahead.

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