Calif. dealers call Tesla referral deal illegal

SAN FRANCISCO -- A new referral program from Tesla Motors Inc. that offers discounts to buyers referred by a Tesla owner is drawing complaints from dealers in the electric-car manufacturer’s home state of California.

The California New Car Dealers Association, the dealers’ main lobbying group in Sacramento, sent an Aug. 26 letter to Jean Shiomoto, director of the California Department of Motor Vehicles, asking the agency to crack down on Tesla’s referral program. The letter argues that the program is illegal under the California Motor Vehicle Sales and Finance Act of 1968, which bans compensation of people who arrange sales without a license -- a practice known in the industry as “bird dogging,”

“While many other licensed dealers would like to offer similar referral fees to existing customers, California law flatly prohibits the practice,” the group’s letter says, adding: “Tesla is required to abide by the same consumer protection rules that apply to all other vehicle dealers in California.”

Tesla announced its referral program on July 29, calling it a “short-term experiment” that will guide the company as it crafts its future retail strategy.

Under the program, which runs through the end of October, any customer who buys a new Model S online by clicking a link provided by a current Tesla owner gets a $1,000 discount. The owner who provided the link gets a $1,000 credit toward service, gear or the purchase of another Tesla in the future.

Tesla has already modified the program in Virginia in response to complaints from the state’s Motor Vehicle Dealer Board. Now the entire $2,000 goes to the buyer.

Tesla has pushed back on the idea that state franchise laws should apply to its referral program.

“We looked carefully at those regulations,” Tesla spokesman Ricardo Reyes said in an emailed statement today. “They were enacted decades ago to prevent rogue salespeople, not from preventing friends from recommending products they love.

Tesla issued a similar statement last month referring to the Virginia law.