Tesla co-founder Elon Musk defends retail strategy

Tesla Motors Inc. co-founder Elon Musk is defending the electric vehicle maker's retail strategy from charges that it runs afoul of state laws.

Dealers in Massachusetts and New York sued Tesla last week to shut down company-owned stores they claim violate state franchise laws and consumer protection laws.

The dealer groups behind the lawsuits say Tesla should use independent franchised dealers as other automakers do.

In a Monday blog entry, Musk wrote that Tesla does not want to change the franchise system and has taken "great care not to act in a manner contrary to those rules."

Musk supported Tesla's approach with several points:

• Existing franchised dealers have a conflict of interest between selling gasoline-powered vehicles, the bulk of their business, and selling EVs. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business," Musk wrote.

• Franchise laws are meant to prevent a manufacturer from unfairly operating stores that directly compete with existing franchised dealers who have invested time and money in their dealerships. "That would, of course, be wrong, but Tesla does not have this issue," Musk wrote. "We have granted no franchises anywhere in the world that will be harmed by us opening stores."

• By locating in shopping malls and other high-traffic locations, Tesla is trying to reach people before they decide what new vehicle to buy. The product specialists in Tesla's retail locations do not work on commission and aim to educate visitors about the vehicles in a low-pressure manner.

• Tesla will ensure that its vehicle owners have proper service coverage. By the end of 2012, Tesla will have more service centers in operation than store and gallery locations, he wrote. That includes service centers in cities without Tesla stores.

"In order to accelerate the adoption of EVs," Musk wrote, "we must be able to create and execute a business model that allows us to advance the knowledge of EVs in a convenient, accessible, no-pressure environment."