Race for mass-market EV puts GM, Tesla at odds – Automotive News

Posted: Sunday, February 28, 2016

California carmaker wins round in Indiana, but fight’s not over

For most of its history, Tesla Motors Inc. has gone toe-to-toe with franchised dealers in America’s statehouses over the issue of selling electric cars directly to customers.

Last week, as state lawmakers in Indiana tabled a General Motors-backed bill that would have rescinded Tesla’s retail license there, it became clear that the Palo Alto, Calif., automaker is facing heightened pressure from its fellow car companies, which are beginning to see Tesla as a competitor rather than a curiosity.

For GM, which sells more cars in the U.S. in a given week than Tesla sells worldwide in an entire year, Tesla was hardly a threat while selling the $70,000-and-up Model S to a small but loyal group of wealthy buyers.

Yet the cheaper Tesla Model 3, slated to be unveiled at the end of March, would go head-to-head against GM’s Chevrolet Bolt, which will offer 200 miles of range at a starting price of $37,500, including shipping. It goes into production at the end of 2016.

“GM believes that all industry participants should operate under the same rules and requirements on fundamental issues that govern how we sell, service and market our products,” a GM spokesman said in a statement last week.

“Tesla could open a franchised dealership with an independent operator in Indiana today, but instead they insist that the state must first provide them with unique rules and special exceptions to suit their own business interests.”

Indiana law currently allows Tesla to sell cars straight to customers through factory-owned showrooms. Tesla opened a showroom in the Fashion Mall, an upscale shopping center in Indianapolis, about two years ago.

Under legislation from Indiana Rep. Kevin Mahan, such unique retail licenses would expire after 30 months with no option for renewal. Mahan’s bill, which passed the state House by a wide margin on Feb. 2, would have caused Tesla’s license to expire in July.

“This is nothing more than a protectionist effort by General Motors,” Bloomberg quoted Diarmuid O’Connell, vice president of business development at Tesla, as saying during a Jan. 27 hearing. “General Motors made a decision in the early part of the last century about their business model. I see no reason why, under general free-market principles, Tesla shouldn’t have that same right.”

After a hearing last Thursday, a committee in the state Senate sent the bill to “summer study,” tabling it until the end of the legislative session. In a statement, GM indicated that the fight isn’t over, saying the company “will continue to work on this issue in Indiana and nationally.”

If passed, the bill would challenge Tesla’s current business model, although CEO Elon Musk has long signaled that he would be open to franchised dealers in the long run. As the company grows, managing the daily operations of hundreds of showrooms and service centers could become a cumbersome distraction.

“At some point, we’d consider franchised dealers,” Musk said in 2015 at the Automotive News World Congress in Detroit, adding: “We would only do this if we were sure the customer would have a really good experience.”

You can reach Gabe Nelson at gnelson@crain.com.


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