NC trend: Ready, set, stop
By Bryan Mims
One day in late March, the line stretched around an unassuming brick building in north Raleigh. People brought their lunches, sat in folding chairs and plugged in their earbuds, waiting to get on the list for Tesla’s $35,000 Model 3, due to roll out late next year. The Palo Alto, Calif.-based maker of electric cars opened this store, its first in North Carolina, in 2013.
Early this year, Tesla wanted to convert its gallery in Matthews, near Charlotte, to a store, but nearby dealerships put the brakes on those plans. Tesla only sells cars directly to customers at its own stores and online, shunning third-party franchisees. Think Apple, which sells computers, phones and tablets in company-run stores, bypassing the middleman. Except Tesla’s Model X sells for as much as $115,000.
Four dealers, including Charlotte-based giants Hendrick Automotive Group and Sonic Automotive Inc., opposed the Tesla store in Matthews, along with the N.C. Auto Dealers Association, calling it unfair competition that hurts consumers. Hendrick, the largest privately held U.S. auto dealership, and publicly held Sonic had combined sales of $18 billion last year, dwarfing Tesla’s $4 billion. But a protest with the N.C. Division of Motor Vehicles prompted a May ruling in favor of the dealerships.
North Carolina and many states have decades-old laws that prohibit manufacturers from selling directly and bypassing auto dealers. The laws reflect distrust of the power of manufacturers, dating to a time when General Motors and Ford Motor Co. dominated U.S. auto sales. Allowing Tesla to sell direct could prompt peer companies to do the same, leading to rapid industry consolidation, the dealers contend.
North Carolina permits exceptions for manufacturers that prove direct sales are in the public interest. Tesla could easily line up franchisees, but CEO Elon Musk argues that dealers make their money from selling gasoline-powered cars and won’t suddenly promote a drastically different technology.
Tesla received a dealership permit to open its store in Raleigh in 2013 without protest from local rivals. DMV hearing officer Larry Green ruled that Tesla failed to make its case in Matthews. Now, if you visit the Tesla gallery on U.S. 74, you can sit in Teslas, talk with Tesla specialists, take Teslas for test drives and get Teslas fixed — you just can’t buy one.