The California New Car Dealers Association doesn't have a problem with Tesla Motors Inc. selling cars in the state. The problem is how the cars are marketed, the association's president says.
The association, which represents 1,100 dealerships, wants the state to investigate Tesla's Web site advertising claims for the electric Model S sedan. The group said the site can mislead consumers by suggesting monthly payments will be much lower than they actually are.
But a Tesla executive called their arguments absurd.
"The dealer associations nationally and at the state level object to the fact that we're trying to educate our customers directly, sell them cars directly and service their vehicles directly because this runs entirely counter to the virtual monopoly they have in most states," Diarmuid O'Connell, Tesla's vice president of business development, said last week.
O'Connell said the dealer model, which is predicated on moving large volumes, isn't a good fit for Tesla now. But it's possible Tesla could one day use dealers, O'Connell said.
The association sent a letter to California's Department of Motor Vehicles last week calling for it to "investigate and remedy several egregious violations of advertising and consumer protection laws" by Tesla.
"Our hope at minimum is that they would urge Tesla to stop advertising their vehicles in the way they've been doing," said Brian Maas, president of the association.
For instance, the association says an available $7,500 federal tax credit is "completely irrelevant" to the price of the Model S.
The group cited the Congressional Budget Office, which said that only 20 percent of potential tax filers qualified for the full $7,500 credit in 2012. The amount of the credit varies, depending on a person's tax liability.
By including the full amount of the credit in the advertised price of the Model S, the association says Tesla is "misleading 80 percent of the population."
The group said it could not estimate the size of the credit available to a typical Tesla buyer.
O'Connell countered by saying Nissan and General Motors also use the federal credit in their marketing and advertising of the Leaf and Chevrolet Volt.
On its Web site, Tesla lets shoppers calculate the "true cost of ownership," described as a customer's out-of-pocket cost "when considering the savings from using electricity instead of gasoline, depreciation benefits and other factors."
In the default example on the Web site, a $71,070 base Model S would have a $980 monthly payment over 72 months with 10 percent down.
"It's misleading," Maas said. "If you checked every box on their true cost of ownership series of inquiries, they claim you can get a Model S for $114 a month, which is lower than the cheapest [new] car available in the United States, the Nissan Versa -- which would cost you, with a lease deal, about $139 a month."