Dealership Q&A: Robert O'Koniewski

In 2012, the Massachusetts State Automobile Dealers Association (MSADA) filed suit against Tesla Motors, claiming that the electric vehicle manufacturer was violating state auto franchise laws by setting up manufacturer-owned, boutique "dealership" storefront in Natick, Mass. In November, a Superior Court judge denied MSADA's injunction to shut down the store; the lawsuit is still pending. MSADA executive vice president Robert O'Koniewski spoke to Aftermarket Business World about Tesla, and the service implications of its current sales model.

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One of the issues you've brought up regarding Tesla has been the absence of on-site service capabilities. Can you explain how that relates to current Massachusetts franchise law?

Under the licensing law, when a dealer goes before a municipality to get a dealer license, they have to demonstrate that they have an executed, valid franchise agreement with a manufacturer, and they have to demonstrate that they have adequate repair facilities to be able to do warranty work on the vehicles. Our contention is that when Tesla went before the town of Natick, they did not demonstrate a franchise agreement, nor did they demonstrate a service facility tied into that sales point as required under the law.

Tesla says they found a place in some other town that is not Natick at which they were going to do the servicing. Our point: that is beyond the scope of the law. The law presumes that the repair facility is in the same town that is being regulated by the licensing authority. If an entity sets up a repair site that is not at the dealership that is being governed by the licensing board, that is an invalid point.

Have traditional dealerships had any trouble setting up remote service facilities under that legal structure? Is that even an issue with dealerships right now?

It's a function of their relationship with their manufacturer. By virtue of the agreement with the manufacturer, the dealer agrees to have repair facilities at that site. You find that among all manufacturers.

I don't know of any dealers that have tried to do that, but they would likely have had to work out individual deals with the manufacturer to accomplish that. I don't think it's a very prevalent issue.

The injunction to close the store was recently denied. What's MSADA's next step?

We're waiting to see what the judge decides. The judge hasn't ruled on the merits of the case, just ruled on the standing issue. They still need to adjudicate the merits.

I want to emphasize that we don't have a beef with Tesla's product. Our beef is the fact that Tesla is trying to operate outside the law. Just because they're coming from Silicon Valley and may have the next greatest idea, it doesn’t mean they don’t have to comply with the law.

Are there things about the current franchise laws that traditional dealers would like to see changed?

The franchise laws exist to maintain a level playing field for the dealer and the manufacturer. I think everyone will agree that these contracts are very one-sided, and there's very little wiggle room for the dealer to negotiate anything. I think 22 states have amended their franchise laws this year. The dealer groups and manufacturers respond to what's going on in the marketplace. If there's something the dealers would hope for, it's that the manufacturers would have a better attitude and treat dealers a little more respectfully.

In many instances, the manufacturers seem more intent on nickel and diming the dealers to death than treating them as equal partners. There's no need for that. If we're all in this together, and we all want to manufacture and sell and service cars, then some of that stuff needs to be set aside.

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