Thursday, 16 May 2013
This is my response to Forbes contributor Bob Cook's article titled: "Why Tesla Motors Should Sponsor Youth Sports -- Now" published May 15, 2013.
As a former dealership owner and longtime dealer advocate that fought the good fight against oppressive OEMs for a decade, I am concerned about Tesla’s direct selling strategy. But, full disclosure after selling the family dealership, I became an electric vehicle industry consultant and I love Tesla cars. I also love the hope Tesla brings for more sustainable forms of transportation and I love Elon’s entrepreneurial spirit.
Like many industry insiders, my concern is that Tesla is circumventing the dealer franchise laws, laws which support the rights of small and medium sized privately owned businesses, at least in the short term (more on this last bit later).
Small businesses employ the majority of people in North America and do not typically outsource jobs and are not in the position to dodge human rights or squirrel away profits in tax havens. Dealerships are among the single largest groups of employers in North America. And on the flip side, one only needs to look to Bangladesh for copious examples of publicly traded corporations with abysmal records on corporate social responsibility. Why is this? Well, because global companies have mutilated tax laws everywhere to maximize shareholder return.
Now, I am not saying Tesla outsources or has a questionable human rights record whatsoever! On the contrary, I suspect they are highly responsible in these areas. What I am saying is there needs to be a way to protect dealerships because as described in the “Why Tesla Motors Should Sponsor Youth Sports — Now” article, dealerships often do support local community efforts and create local jobs.
Recently, some of Mr. Musk’s hi-tech chums like Michael Dell, have interestingly made efforts to shift back to privately owned by buying up stock. Sure Tesla is not in the position to make such radical moves in its corporate structure with only one quarter of profit under their belt, but wouldn’t it be great to hear something on the corporate social responsibility side from Tesla? An outside the box strategy would be to differentiate itself from other publicly traded/narrowly focused shareholder return motivated companies, that gobble natural resources and eventually exploit human rights at will.
The missing piece of the puzzle for me and others to adopt a totally fresh auto brand like Tesla that embraces clean technology, would be a company that is not publicly traded or even privately owned, but a co-operative. What a novel auto company that would be, one that wholly embraces sustainability for the benefit of all and addresses the hollowing out of the middle class!
Now with all this said, what has been stated by Tesla is that breaking into the auto industry as a start-up, is like breaking into Fort Knox (I paraphrase). The reason for the most part is the intensely competitive nature of a very mature auto industry. So this is why I tend to favour the approach that has been tabled in Texas where the direct selling bar might be temporarily lowered to a 5,000 vehicle per year level. This allows an upstart like Tesla to not have to bare the massive costs of setting up franchises from the word go. To me it sounds like Tesla knows that at some point they will have to invest in setting up traditional franchises, but for now, they need a chance–a lower cost route. This makes good sense to me to from a Competition Bureau or Anti-Combines Act perspective, because is reduces oligopolistic forces and allows innovation to accelerate. Lower the bar for a period and then, once you are on your feet thou shalt comply!
So let’s hope Mr. Musk and Tesla continue to build incredible zero emissions cars that transform thinking not just from and enviro-technological perspective, but also raise the bar on corporate social responsibility.