Tags: Tesla | consumer | service | dealer

Tesla — Just Another Bad Deal From the Govt and Wall Street

Monday, 12 May 2014 07:45 AM Current | Bio | Archive

Anything that has both the government and Wall Street pushing it on consumers should immediately send up red flags.

Tesla Motors is a perfect example of this.

I was thinking of this recently when reading an article in one of the law journals about a lawsuit by a buyer claiming the Tesla was a lemon.

Apparently, there are a number of lawsuits or threatened lawsuits that do not get much publicity because the settlement terms are required by Tesla Motors to be confidential.

This, however, highlights an even bigger problem.

Tesla is pushing its political buttons in a number of states trying to sell directly to consumers. Then, like such consumer goodies as computers, books and underwear, they could be featured on Amazon.com.

But Tesla is a different kind of consumer product. Automobiles need local servicing. Electric-powered cars require highly trained technicians to deal with such complex mechanisms.

Shortsighted politicians (is that being redundant?) in Washington are considering giving Tesla a special exemption allowing Tesla to sell directly.

Tesla wants to make direct-to-consumer sales because it can take the manufacturer's profit and the dealership profit without providing local service or any other benefits to the buyer.

There are an estimated 17,600 dealers of new cars and trucks in the United States. Consumers get the benefit of being able to comparison shop at multiple dealer franchises and have the dealers be their advocates to manufacturers on a wide variety of issues such as warranties.

There is nothing like fierce price competition for getting consumers the biggest bang for their buck.

Auto sales represent approximately 15 percent of the retail marketplace, representing millions of local jobs and paying billions of dollars in state and local taxes. In many cities, towns and villages they are the major source of both tax revenue and for contributions supporting local civic and charitable causes.

Government programs (read as cronyism) are the main financial support for Tesla. A Tesla sold in California would generate a $7,500 tax credit for federal purposes and a $2,500 credit for state tax purposes. Colorado kicks in a $6,000 credit.

One remarkable reason why Tesla has revenue is that its automobile competitors are buying its zero-emission tax credits. If you get into the details of the earnings, it becomes readily apparent that if true generally accepted accounting principle accounting were used instead of bookkeeping gimmicks, then the company would be operating in the red.

Wall Street doesn't tell its investors that. It might drop the stock price.

If that happens, then how could they make commissions on stock trading and sales of the zero-emissions tax credits?

Tesla expects that many, if not most, of the buyers will get their car under a special lease plan. It's not really a lease as the lessee actually buys the car outright, but has a right to sell the car back to Tesla in three years. That is, if Tesla is still in business and can afford to buy back the car.

Then, of course, there are technical problems. Batteries that may catch on fire, cars that won't start, faulty steering problems and a whole laundry list of ills that normally would be serviced under warranty by the local dealer. If there is a dispute, then arbitration would be in California.

There is no question that the Tesla automobile is a good-looking car.

I certainly would be interested in buying one if it could be sold and serviced by my local Cadillac dealership and it came with the new 560 horsepower Caddy gas engine.

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Anything that has both the government and Wall Street pushing it on consumers should immediately send up red flags. Tesla Motors is a perfect example of this.
Tesla, consumer, service, dealer
Monday, 12 May 2014 07:45 AM
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