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Cars Elon Musk On Tesla’s Role In History, SolarCity, And Our Cleantech Future (VIDEO)

Published on March 15th, 2014 | by Guest Contributor

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Elon Musk Writes Letter To The People Of New Jersey

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March 15th, 2014 by
 
Editor’s Note: Following our first article and then second brief article on the Tesla–New Jersey controversy, here’s one more. I’m not going to add commentary unless I’m stimulated to down in the comments. Below is simply a letter from Tesla’s Elon Musk to the people of New Jersey. The article is excellent, imho — but what else would you expect from thoughtful Elon? I’m sure most of you will find it interesting or at least worth a read. Feel free to carry on the conversation in the comments!

To the People of New Jersey

By Elon Musk, Chairman, Product Architect & CEO

On Tuesday, under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the Governor, ended your right to purchase vehicles at a manufacturer store within the state. Governor Christie had promised that this would be put to a vote of the elected state legislature, which is the appropriate way to change the law. When it became apparent to the auto dealer lobby that this approach would not succeed, they cut a backroom deal with the Governor to circumvent the legislative process and pass a regulation that is fundamentally contrary to the intent of the law.

It is worth examining the history of these laws to understand why they exist, as the auto dealer franchise laws were originally put in place for a just cause and are now being twisted to an unjust purpose. Many decades ago, the incumbent auto manufacturers sold franchises to generate capital and gain a salesforce. The franchisees then further invested a lot of their money and time in building up the dealerships. That’s a fair deal and it should not be broken. However, some of the big auto companies later engaged in pressure tactics to get the franchisees to sell their dealerships back at a low price. The franchisees rightly sought protection from their state legislatures, which resulted in the laws on the books today throughout the United States (these laws are not present anywhere else in the world).

The intent was simply to prevent a fair and longstanding deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear. In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.

The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what’s easy and it is game over for the new company.

The evidence is clear: when has an American startup auto company ever succeeded by selling through auto dealers? The last successful American car company was Chrysler, which was founded almost a century ago, and even they went bankrupt a few years ago, along with General Motors. Since the founding of Chrysler, there have been dozens of failures, Tucker and DeLorean being simply the most well-known. In recent years, electric car startups, such as Fisker, Coda, and many others, attempted to use auto dealers and all failed.

An even bigger conflict of interest with auto dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.

Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars. I resolved that we would endeavor never to do such a thing at Tesla, as described in the Tesla service blog post I wrote last year.

Why Did They Claim That This Change Was Necessary?

The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.

There are other ways to assess the premise that auto dealers take better care of customers than Tesla does. Consumer Reports conducts an annual survey of 1.1 million subscribers, which factors in quality, reliability and consumer satisfaction. The Tesla Model S was the top overall pick of any vehicle in the world, scoring 99 out of 100. This is the highest score any car has ever received. By comparison, in the industry report card, Ford, which sells their cars through franchise dealers, received a score of 50. BMW, which makes competing premium sedans, received a score of 66.

Consumers across the country have also voiced their opinion on the sales model they prefer. In North Carolina, a Triangle Business Journal poll found that 97 percent of people polled said Tesla should be allowed to sell cars directly. A poll by the Austin Business Journal showed that 86 percent of respondents were in favor of direct sales, and in a Los Angeles Times poll 99 percent of respondents came to the same conclusion. These aren’t polls that we commissioned and there are many more like them. We have not seen a single poll that didn’t result in an overwhelming majority saying they preferred the direct model to the traditional dealer model. Democracy is supposed to reflect the will of the people. When a politician acts in a manner so radically opposed to the will of the people who elected him, the only explanation is that there are other factors at play.

Going Forward

Some reassurances are also in order. Until at least April 1, everything is business as usual for Tesla in New Jersey. It should also be noted that this regulation deals only with sales, so our service centers will not be affected. Our stores will transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our Manhattan store just over the river in Chelsea or our King of Prussia store near Philadelphia.

Most importantly, even after April 1, you will still be able to order vehicles from New Jersey for delivery in New Jersey on our TeslaMotors.com website.

We are evaluating judicial remedies to correct the situation. Also, if you believe that your right to buy direct at a Tesla store should be restored, please contact your state senator & assemblyman: www.njleg.state.nj.us/districts/districtnumbers.asp.

Finally, we would like to thank the many people who showed up in Trenton on Tuesday to support Tesla and speak out against the MVC’s back-door tactics in passing this regulation change without public consultation or due process. It was an amazing response at very short notice and much appreciated.

Elon

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  • Green Globe

    OOOOOHHHHHH, Porky….. the boys from Angel Beach are here….

  • Bubba Nicholson

    Republicans will always be republicans. How can we ever expect them to be anything else? We have got to accept them for what they are just as they must tolerate us for using their government to send our children to get unnecessary education, to build roads that anybody with a Hummer doesn’t need, that sort of thing. We fought the republicans, but it was a terrible mistake, they killed half of us and starved the others. Just live and let live.

  • GP

    Mafia protection, alright, what else?

  • greatnesslostislegend

    Christie is dead as a Presidential candidate. This shows the right, that now dominates the GOP, Christie is a RINO. A progressive who will just keep the corruption in Washington going. It was great however for Christie to show his real character well before the primaries.

    • Bob_Wallace

      I’d suggest you don’t write anyone off at this point. Most likely they’ll line up a bunch of people and burn them down as they’ve done in the past. Christie might get picked on round two. He may be the most acceptable to the corporate wing if Jeb doesn’t run.

  • Scot

    Elon, I live in Cherry Hill NJ , I have battled the powers at be, I would like to discuss how you can accomplish your goals. You can reach me at Cherryhilldude@gmail.com
    SCOT

  • RimKitty

    I guess those “free market” Republicans are only for unfettered capitalism when they are fighting unions or throwing the poor under the bus.

    • Bob_Wallace

      Is anyone surprised?

      • Ross

        No.

    • http://zacharyshahan.com/ Zachary Shahan

      i think the heart of the matter is really not what their supposed economic theory says, but what they are really for: benefiting financially more than others.

      when regulations get in their way, they are against them. when regulations support them, they are for them.

      what’s the difference between them and progressives? imho, a true progressive is someone who want to create the greatest net benefit possible. that’s not everyone who claims to be a progressive, but i think it’s the majority of them :D

  • Green Diva Meg

    hey clean technica! we are also in the IM family (the Green Divas). can you share the PR contact for Mr. Musk. Would love to get him on the show to talk about these NJ shenanigans. We are NJ-based. you should have my email w/ this comment. ;) GD Meg

  • Thomas

    Give our liberties back to the people, and let them flurish, Thomas

  • Senlac

    Cristie is a fraud. The thought of him becoming President is repugnant.

  • Larry

    Elon Musk is such a breath of fresh air. Imagine Donald Trump making a commitment like this–no, I’m not smoking pot right now. It restores my faith in humanity to hear someone like Elon speak the truth and back up his statement with facts. I’m surprised FAUX “News” hasn’t weighed in on this controversy yet. I’m sure they could find some excuse to wrap Chris Christie in the American flag and call anyone who questions them a communist.

    • http://zacharyshahan.com/ Zachary Shahan

      Haha, that last bit was hilarious. As for the first, I fully agree. His stance as a leading CEO is so unique. His since of morality & ethics is so refreshing for a person in such a position.

      • CGriffin

        It is very sad that in retaliation to this “Letter to the People of New Jersey”, the New Jersey Coalition of Automotive Retailers (NJCAR) is now resorting to publicly accusing Elon Musk of having a “hissy fit” about what was done to Tesla. It seems as though they are trying to make Elon sound like a spoiled little brat throwing a temper tantrum over his punishment.

  • Ross

    Car mechanics start retraining now. As the transition to EVs picks up the costs of buying and servicing an ICE will go up further accelerating the transition to EVs.

    • Matt

      While I would not recommend that a new HS grad go to ICE auto mechanic school. My guess is the ones already trained still have some years of work left. But the reduced service need of EVs will impact that job market in the long run.

      • Ross

        Yes, you’re probably right about that.

      • greatnesslostislegend

        This generation of EV, however going forward Tesla’s groundbreaking “American” version of the wimpy Leaf will lead to others to copy and improve. Imagine Ford building out a “F-22″ with five hundred mile range and 0 to 60 MPH acceleration in three seconds. It is always a horse race. As gas only vehicles fade from the scene over the next 40 to 50 years there will be plenty of mechanics needed. Meanwhile vastly improved EV’s will much more capacity will have their own sets of problems requiring people to deal with them. More electricians to deal with all those at home burning out their circuitry by not installing charging systems properly, (joke).

        I for one look forward to the first EV super-car the blows the doors off the fastest gas powered one so well people will line up in droves to have one. Do this for $80 grand you will kill gasoline super cars completely.

        I live in the State of Hawaii, and am involved in converting the entire State electrical system to geo-thermal and run of stream hydro electric base load, and away from Wind and Solar to a significant degree. Our aim is to have this state with the lowest electrical costs in America by 2030, and export through undersea cable several tens of thousands of megawatts of clean power to the mainland. Afterwards profits from this used to bring Hawaii state tax level to the lowest in the US.

        In this plan is infrastructure and electrical generation capacity to support two million electric cars, Pickups, busses, and commercial vehicles within the time frame.

        I am Republican.

  • WrongPassword

    This attack on free markets will kill the support he has left from fiscal conservatives in his party. The fat pig has no shortage of enemies who would be glad to call him the hypocrite that he is.

    • Bob_Wallace

      More likely it will get ignored.

      IOKIYAR

      • mds

        I’m with WrongPassword, republicans will throw the election (again) if they run Christie.

      • Matt

        Ignored by the general vote population, yes. But it is a clear signal to old boys club, that he is firmly on their side.

      • WrongPassword

        I doubt that would be the case if Christie seeks higher office. All a candidate has to do on both sides of the isle is point to Christie talking about free markets and then to Christie banning Tesla. The pig is not used to being on the defensive and in that situation would be roasted.

  • Matt

    Cristie is starting his run for the white house.

    • http://zacharyshahan.com/ Zachary Shahan

      Good way to start, eh?

    • Larry

      Christie should content himself with a run for the outhouse

      • WrongPassword

        His reputation is already in the toilet.

  • jim

    I can’t believe there a protection shakedown by Boss. Cristie in NJ

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