Score One For Tesla Motors

Tesla charging station

Photo courtesy Tesla Motors

Score One For Tesla Motors
| published July 3, 2014 |

By Thursday Review staff


As we have written in these pages before—Elon Musk loves a fight, as long as that fight is fair and square. Musk has taken his battles for business and contract fairness all the way to Washington, where he has taken public issue with the United States Air Force, NASA and other government agencies for locking his Space-X out of competitive bidding with the industry giants Boeing and Lockheed-Martin.

It took some doing, but Musk won that round—barely. Besides, with the U.S. and Russia at loggerheads over the crisis in the Ukraine, and with Russia slapping the U.S. with a no-access-to-Russian-rockets sanction, those entities in the U.S. who need to get their hardware and gear into space will now have to give Space-X a closer look.

Musk is also a risk-taker. Last month he opened up all patents related to his Tesla electric cars, especially those related to the design of his unique battery cell systems. Musk and his team at Tesla hope to spur constructive competition in the green energy and no-emissions auto marketplace. Musk also hopes, perhaps, to establish the standard for the all-electric automobile. If other car-makers and designers take his system and run with it, the market will open up, and both supply and demand might move at a faster pace.

But risk-taking means disruptions, and the Tesla car is a creature of disruptive behavior, at least according to car dealers and politicians in some states. At issue are those areas, like Pennsylvania, where auto dealership associations prevented Tesla from selling through its own company-owned retail locations. The Pennsylvania Automotive Association (PAA), which represents car dealers statewide, sought to prevent Tesla from selling cars from Tesla-owned dealerships. The PAA also sought to limit the number of service centers and even restrict the number of charging stations in Pennsylvania.

Deemed a sure win for the auto dealers of the Keystone State, the political spectacle backfired grandly. Supporters of green technologies said that the auto dealers were engaged in not merely backward, outdated thinking, but were in essence conspiring to keep Tesla out of their state. Musk has resisted selling his Tesla cars through dealerships other than his own, fearing that their cut would damage sales, and that their maintenance and marketing plans would fall flat. Worse, Musk feared that traditional dealers, by forcing him to sell only through their showrooms, would essentially limit the growth of Tesla in Pennsylvania.

This week, the Pennsylvania House agreed with Tesla, voting to allow the California-based electric car-maker to open more company-owned showrooms, more Tesla service centers and shops, and additional charging stations throughout the state.

Currently, there are about 100 Tesla charging stations in the U.S., and another several dozen in Canada. Tesla plans to open hundreds more within the next 18 months, and many of these will be located along busy interstate or U.S. highway systems. Pennsylvania is crucial for Tesla’s car-charging footprint as it will enable drivers of electric cars in places like New York and New Jersey to plan longer trips—westward through Pennsylvania—toward places like Cleveland, Detroit, Chicago, and beyond. Tesla wants to be able to fairly promote its footprint as coast-to-coast. Tesla also hopes to establish a bigger northeast footprint in an effort to overcome the image that it is a trendy west-coast operation—the sort of thing which might appeal only to well-to-do greens. Tesla plans to make its charging stations accessible to more than 95% of the U.S. population by the end of 2015.

Its website says that it currently provides charging stations for about 80% of the United States population. Since Tesla vehicle can take between 30 minutes and one hour for a charge, Tesla stations are often located near busy retail centers or retail clusters where restaurants, restrooms and shopping are easily available. Tesla does not charge owners of its cars to use its recharging stations, a bonus it hopes will encourage car-shoppers when they first encounter the high sticker price.

Reaction by auto dealers and their business advocates in Pennsylvania to Tesla’s out-of-the-box approach typifies some of the problems Tesla has run into. Tesla recently won a similar fight in Ohio where the state had, for decades, prohibited direct sales of cars unless through dealerships part of the statewide association. Tesla found a way to get around a similar prohibition in Missouri, which banned altogether direct auto sales by a car’s manufacturer—meaning that before Tesla, cars sold by say Ford, Nissan or Chrysler could only be sold by independently-owned dealerships, and then only those who were members of the association recognized by Missouri.

Politicians in many states are under more political pressure to ease, or rewrite, such strict guidelines, seen by many green advocates as antiquated regulation (at best) or backroom cronyism (at worst). Many of the auto-sales regulations which hamper Tesla are laws written in the 1970s or early 80s, and analysts who watch green technologies suggest that Musk’s disruptions of traditional car dealers are examples of the sort of clashes of culture Americans can expect in the near future. New York’s Andrew Cuomo recently signed a law allowing for a wide range of exemptions for those who sell zero-emission technologies.

Related Thursday Review articles:

Taxing the Green Driver; R. Alan Clanton; Thursday Review; June 28, 2014.

Tesla’s Open-Source Gamble; R. Alan Clanton; Thursday Review; June 15, 2014.