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Tesla stores' legality challenged

October 12, 2012
After opening several stores without much pushback, Elon Musk’s ambition to replicate the Apple experience in Tesla factory stores is now facing potential roadblocks.
The Illinois Secretary of State’s office has informed Tesla that it is illegal to list Musk, the company’s chief executive, as the owner of its new store in Skokie. Tesla has 24 locations in North America — including Oak Brook and Skokie, plus a service center in Chicago — and 34 stores worldwide.
In addition to Illinois officials, dealer associations in a handful of states say Tesla’s stores violate state franchise laws that prohibit factory ownership of dealerships.
The protesters say Tesla’s factory-owned stores present unfair competition for rival dealerships, are inconvenient for consumers needing repairs and, if left unchallenged, ultimately threaten the franchise system. Most of the boutique-style stores are in shopping malls, and Tesla asserts that they are not sales facilities.
In California, where Tesla is based, there is no legal factory-store conflict as long as it is placed at least 10 miles away from a competing franchise. Since Tesla is a newcomer, that has been an easy law with which to comply.
The National Automobile Dealers Association and some local authorities scrutinizing Tesla would like to see the upstart go to a traditional dealer model if it wants to continue to do business.
“Tesla may not yet recognize the value of the independent, franchised dealer system. But as its sales increase, the NADA is confident it will re-examine its business model,” Montana dealer and NADA Chairman Bill Underriner said in the statement. “Other companies such as Daewoo did. All companies should be complying with existing laws. ...”
Tesla has been dedicated to a maverick model since hiring veteran Apple marketer George Blankenship in 2010. He was at the time touted as enabling Tesla to carry forward principles that were successful for marketing computers. Its stores are located in high-traffic retail areas in an attempt to put the Tesla concept in front of people who might not even be shopping for a car.