The staggering pace of innovation has led to a number of industries being disrupted by upstarts providing similar services or products outside of the established model. Want a taxi? Use Uber. Need a hotel? Try Airbnb. Looking to watch television or a movie? The choices are almost already endless: Chromecast, Netflix, Roku, Apple TV, etc. As the Chicago Tribune reported recently, these business all face regulatory issues – state and local regulation.
Did you think that the Automotive Industry was immune? While it might be a manufacturing industry, not a service industry, it is just as susceptible to innovation and disruption. One of the most disruptive forces in the Automotive Industry today just might be Tesla Motors. Most people react to that statement by thinking of the fact that Tesla sells a fully electric car. However, this would be at least partially wrong.
The truly disruptive maneuver by Tesla in the Automotive Industry is with respect to dealers. Quite simply, Tesla does not have them. Tesla uses a direct-sales model. Want a Tesla, buy it directly from Tesla. As Bloomberg reported, this has led to a full scale war between Tesla and dealers all over the country. Specifically and most recently, Tesla is actively at war with the State of New Jersey and Governor Chris Christie according to Business Insider. According to Business Insider, as of April 1, 2014 (April Fools’ Day?), you cannot buy a Tesla in New Jersey except from a dealer. The New Jersey Motor Vehicle Commission approved a proposal (PRN 2013-138) requiring applicants for the licenses required to open a motor vehicle dealership to be “a motor vehicle franchisee.” Since “motor vehicle franchisee” is defined by New Jersey law as a “a person to whom a franchise is granted by a motor vehicle franchisor,” the law arguably forces Tesla to have intermediaries open dealerships – and prevents Tesla (or others) from doing it themselves.
As dealers fight state by state to stop Tesla, Tesla marches on seeking to disrupt this one aspect of the Automotive Industry. What it should tell companies is that whether their business model will be disrupted is not a matter of if, but a matter of when. What will be the next aspect of the Automotive Industry to be disrupted?
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney.
This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary.
The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites.
In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.