Tesla accused of 'misleading' customers by California dealers

Tesla's marketing tactics have come under fire from the California Dealers Association, which claims the electric vehicle startup is misleading potential customers. Do the dealers merely feel threatened by Tesla? 

Kai Pfaffenbach/Reuters/File
A Tesla Model S car is displayed during a media preview day at the Frankfurt Motor Show last week.

Honestly, Tesla can't catch a break.

First, it had to make a fully electric car that didn't look like a doorstop or a computer mouse from 1997. No small task, that.

Then, it had to find a few backers, which caused consternation in some corners.

And then it had to jump perhaps the biggest hurdle of all: selling cars to the public without creating a network of dealers. (For that, the company brought in no less than the man who created Apple's outrageously successful chain of retail stores.)

Dealers' associations across the country have been suspicious of Tesla from the start. Early on, many dismissed Elon Musk's vision as a pipe dream, but when it became clear that he wouldn't give up, they aimed for his Achilles Heel: Tesla's unusual, showroom-based sales model.

What those associations didn't expect was that the courts would often rule in Tesla's favor. Nor did they expect that the public would often side with Tesla, too, as disgruntled car customers, tech fans, and innovators said, "Let the little guy give it a go!"

A NEW APPROACH

And so, according to AutoNews, the California New Car Dealers Association has changed its tactic. It now says, "Oh, you must've misunderstood. We're totally cool with Tesla's 'showrooms'. What we have a problem with is Tesla's marketing. Elon Musk is trying to pull a fast one on poor consumers!"

In a letter to California's Department of Motor Vehicles (PDF), the Dealer's Association claims that "Tesla’s Internet marketing violates multiple sections of Federal Regulation Z, the California Vehicle Code, the California Business and Professions Code, and the California Civil Code." For example:

"Tesla fails to provide required information and shatters the notion of comparison finance shopping by including the potential availability of incentives, gas savings, and tax savings into final payment quotes for prospective customers. This scheme is most blatantly demonstrated by the general ―$580 per month after gas savings advertisement found on several of its internal web pages."

The Association goes on to attack other Tesla claims, which reduce monthly payments and the costs of ownership. For example, the Association says that purchase prices on Tesla's website routinely include a $7,500 federal tax credit, despite the fact that the Congressional Budget Office states that only 20 percent of shoppers qualify for the alternative vehicle credit.   

The Association also criticizes Tesla's math on resale value, commute times (thanks to HOV-lane travel), and cost-savings associated with using electricity instead of gas. 

OUR TAKE

Factually speaking, the Dealer's Association is correct in its description of Tesla's website. But the site could only be construed as "misleading" if your name is Pollyanna and you zip through it without doing much reading. A quick skim of the "True Cost of Ownership" section makes it clear that Tesla's boasts are just that: boasts. 

For example, in the "Down Payment & EV Incentives" area, Tesla states:

"In many cases, you’ll recoup the cost of your down payment with electric vehicle incentives. You may even be eligible for more total incentives than you paid in your down payment. This will reduce your effective monthly cost. Incentives depend on the total price of your car and the state that you live in." [emphasis totally ours]

Words and phrases like "In many cases" and "depend on...the state that you live in" tell most people with adult reading skills that there's some uncertainty in Tesla's calculations. You "may" be eligible for these savings, but then again, you "may" not.

That's not to say that Tesla shouldn't play by the rules. It should, just as Ford dealers should, and Buick dealers, and Toyota dealers, and so on.

However, in this case, it seems as if the Dealer's Association may be grasping at straws. That that could be because its members realize that Tesla's new business model might be a bigger threat than they'd ever imagined.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.