Chief Executive Officer Elon Musk’s strategy of selling his $70,000-and-up electric car directly to customers through the Internet or company galleries has in at least seven US states pitted him against franchised dealers who view Tesla’s marketing and sales models as threats to their existence.
Tesla delivered about 5,500 Model S in the third quarter, more than twice as many as it did in all of last year. It said Nov. 6 it plans to deliver “slightly under 6,000” this quarter with Musk saying demand exceeds supply. Its sales depend on access to customers, which it reaches through showrooms modeled on those of tech companies.
The fight with dealers isn’t the company’s sole challenge. Tesla also faces a threat in Washington, where its Model S is under U.S. investigation following three battery fires, and three workers were injured Nov. 13 at its only assembly plant in an industrial accident.
At both the state and federal level, the Palo Alto, Calif.-based company is running a risk Microsoft faced in the 1990s, when it found itself in the midst of a government antitrust action without an experienced advocacy team to shepherd it through the system and build allies for the future.
Musk is putting his star power against one of the best connected and most experienced U.S. lobbies, which has outspent Tesla by multitudes in state capitols and often has some of their own serving as legislators.
“The challenge we face, of course, is that the auto dealers are very strong and very influential at the state level, among the legislatures,” Musk told shareholders in June. Dealers, he said, are “making it harder to get things done.”
Dealers spent $86.8 million on state election races across the U.S. between 2003, when Musk created Tesla, and last year, according to the National Institute on Money in State Politics, a nonprofit in Helena, Mont. They’ve also pumped $53.7 million into federal campaigns, the Center for Responsive Politics found.
New York’s Assembly this year scrapped a bill that would’ve stopped Tesla sales in that state. Virginia granted Tesla one showroom license after initially turning it down amid threats from auto dealers to sue.
A lobby move that worked in North Carolina failed in Texas, where dealers spent nine times more than the company on 2012 elections and lobbying. Employees at Tesla’s Texas galleries can’t sell cars, offer test drives or discuss prices after legislation to repeal those restrictions failed to come to votes this year.