Tesla Motors facing several legal battles with auto dealers regarding establishing their own stores.
Tesla Motors Inc’s recently announced that it will establish its retail stores in the United States; however this decision by the company was not very well received across the board. When companies start to own their own retail stores, this becomes an imminent threat to franchise automotive dealers considering the current paradigms of the automotive sector. So now the electric car giant is in an awkward position where it has been fighting legally with automotive dealers in various states including North Carolina, Minnesota, Missouri, Ohio and Massachusetts.
Almost a week ago, the House Bill (HB) 1653 was declined by the authorities; this after becoming a law would allow Tesla Motors to establish 12 of its stores in the vicinity of Texas. This state has acted like a force to stop the Tesla from establishing a direct sales mechanism within the region. Apart from Texas, there are several other regions like Iowa, West Virginia, Arizona and Michigan where this Palo Alto Based automaker is restricted from directly selling its item.
One of the prime reasons behind several auto dealers and large enterprises including the General Motors Company are not in favor of directly selling business mechanism because they assume by doing this, it will allow the company to start offering undue advantages which the remaining will not really offer. Moreover, the auto dealers are scared if the car maker is granted permission to manage their own retail mechanism, this will allow the manufacturers to strategize regarding the prices and will also be more rigid in terms of providing customer services to clients.
In opposition to this, the Morgan Stanley analyst mentioned in a report that the auto dealers should not discourage Tesla Motor from establishing its retail chain mechanism but many auto dealers of the state are “quietly” in favor of TSLA CEO-Elon Musk.
Adam Jonas, a renowned analyst mentioned in a note that a good number of auto dealers in US will not really have any issue with if the law for state dealer franchise that currently stops the automakers to establish stores gets nullified. According to the sell side firm, someone of the automaker stated that “We’d actually benefit from it.”
Hence, in a nutshell, there are adequate steps that can be taken by the state to overcome the reservations the company and auto dealers are facing. Tesla Motors at this point needs to come up with a strong stance that will allow them to overcome the legal battles. However, Morgan Stanley is optimistic about the venture.
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