Litigious Shenanigans

Anyone who knows me or has read some prior blog posts knows I am a huge fan of Tesla Motors (TSLA) and electric vehicles in general. The math of electric cars is undeniably compelling and will be the subject of a future blog post.

TSLA has been on the receiving end of countless lawsuits in recent years by automobile dealer associations and others. Georgia, Massachusetts, Minnesota, New York, and Virginia and others have lawsuits in various stages of flight and appeals trying to completely block TSLA from selling to consumers, limiting how many vehicles they can sell, etc. In fact, it is currently illegal in Arizona, Maryland, New Jersey, and Texas for TSLA to sell directly to consumers. Despite this TSLA has stores in many states (see map above) including those that block the direct sale, where consumers can get more information, see and drive the car, and then go home and order online. The core argument of this litigation is that the direct sales model TSLA has violates state automotive franchise rules and that the TSLA sales model would set a precedent that ‘threatens the way independent franchises have sold and serviced vehicles for eight decades’.

This type of argument is so monolithic and predictable, with obvious$ motivations. It is unclear to me how this is a different approach than a local grocery store trying to block a farmers market or girl scout from selling cookies. It was not too many years ago when the big three sat with their hands out asking for a bailout simply because they were unable to adapt to the changing needs of consumers and watched competitors like Toyota make record profits by selling efficient and reliable cars. You would think that the auto industry would be watching the success TSLA is having and implementing options for adapting their sales model and products to compete, similar to what big box retailers had to do to compete with Amazon. The auto industry should also be reveling in the fact that TSLA recently made their patents public.

In his “All Our Patent Are Belong To You” blog post, CEO of TSLA Elon Musk wrote: “Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis. By the same token, it means the market is enormous. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” Of course the release of the patents initially scared Wall Street who thought perhaps Elon was having a Tony Stark (Ironman) like moment but despite all of the obstacles and naysayers, TSLA stock has had over 1000% growth in a few short years. At a time where numerous other companies are fleeing for tax inversion benefits or cheap overseas labor, it appears as though later today TSLA will officially announce that Nevada will be the site of the new 5 billion dollar battery factory which will create 6,500 jobs in northern Nevada. Seeing a CEO with the passion, vision, and ethical fiber to put environmental stewardship in high regard is refreshing and I look forward to the continued innovation.

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