After testifying last week before Texas legislators, Tesla Motors CEO Elon Musk talked to Staff Reporter Amy Wilson about his reluctance to use franchised dealerships to sell his electric vehicles.
Q: Texas legislators want to arrange a meeting between Tesla and the dealers association. Is that happening?
A: I'm not sure what happened with that. Thus far we've not really seen any willingness to compromise from the Texas Auto Dealers Association.
We're in a tough spot because I'm not fundamentally opposed to franchising, but I think it's really difficult for a new company with a new technology to be franchised. It's not possible to effectively sell a new technology like electric vehicles, for a dealer to do that, without undermining the story behind gasoline cars.
You talked extensively to legislators about other electric car companies failing after choosing to use franchised dealers. But aren't there other reasons behind such failures? What about Fisker's battery supply issues?
Yeah, I agree. But even with the battery supply issues, they had unsold inventory at Fisker. Sales was a significant contributing factor -- in fact, the determining factor. A123 went bankrupt because Fisker wasn't buying enough battery packs from them.
What do you think about the resistance you're getting from dealers, and where you are today in Texas and other states?
We certainly have a lot of battles in a lot of places. So far we've been successful in those fights. It's because right is on our side.
In Texas we've got a really difficult battle. It's so ironic it should be in Texas, which prides itself on being the most free-market state in the country. Everyone in the industry is saying there's no way we are going to get legislation passed, given the power of the dealer association. And they might be right -- but we're going to fight it anyway, even if the odds are against us.
In Texas, it's the toughest of all because [the dealer association president] about 20 years ago was a really tough dude, and he worded it six ways to Sunday. Like Green Eggs and Ham, you know. If you're a manufacturer, you cannot sell it any which way, no matter what. You can't sell it in a house, can't sell it in a mouse, can't sell it in a grouse. It's like, OK, wow. You can't sell it.
Isn't your route more costly than it would be to use the franchise system in the first place?
Yeah. It would be cheaper for us to use the franchise system, except I don't have confidence that the franchise system would actually sell cars. It would not sell enough volume for us to be successful.
What are your thoughts about dealers? Your internal e-mail last week had some pretty strong words about dealers.
I didn't mean for that e-mail to be published. It certainly wasn't me who leaked it. One uses stronger language internally than one would use externally. But I feel like we are being attacked all over the place by dealers, and they're causing us to spend a ton of money on legal battles, and they've slowed down our licensing approvals at DMVs in various states, and they're just generally being pretty negative and behaving in an anticompetitive way.
If they think there's an issue, they should just focus on selling cars. They shouldn't focus on stopping us from being able to sell our cars. Obviously it's not going to make me love dealers. It's pretty hard to love someone who's attacking you viciously in multiple locations.
Have you had negative experiences with dealers buying a car yourself?
Yeah, I've had some bad experiences and some OK experiences. I've never had a good experience.
Is this distracting you from core engineering and design tasks in a way that hurts the company?
I don't think it's productive. I wish I was working on design and engineering of new products. Instead I'm distracted by these issues. Hopefully they go away in the not-so-distant future because it is taking time away from new product development.