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California car dealers claim Tesla deceives buyers

Association says the automaker's advertising of federal tax credits and other incentives amounts to 'illegal savings claims.'

By Douglas Newcomb Sep 18, 2013 6:26AM

Tesla Model S. Photo by Tesla Motors.Until recently, upstart electric-vehicle manufacturer Tesla Motors wasn’t seen as a huge threat to traditional automakers. Why would a niche car brand in the limited EV market, with limited production capacity and a limited model line, be cause for concern for the global auto industry?

But that was before Tesla became competitive with conventional luxury vehicles and the company’s stock skyrocketed, with a market value hitting a record high of $20 billion in August after only three years as a publicly traded company. And GM CEO Dan Akerson formed a group to study how Tesla could disrupt the establishment.

But no element of the auto industry has been more averse to Tesla than car dealers. They’ve sought to have Tesla dealerships in malls and storefronts blocked because they allegedly violate dealer franchise laws. The latest salvo in this ongoing legal war comes from the California New Car Dealers Association (CNCDA).

The group has asked the California Department of Motor Vehicles to probe Tesla's advertising practices, claiming that they “deceive consumers by making unsubstantiated and illegal savings claims in violation of several state and federal laws.” At issue is what the dealer group calls “misleading claims that customers can take advantage of multiple incentives, gas savings, and tax savings resulting in low monthly vehicle payments, when it is unlikely that customers will actually realize such savings.”

The state said if the CNCDA's claims are deemed valid, it could move to suspend or revoke Tesla’s dealers as well as its manufacturing license.

CNCDA's claim focuses on Tesla including the full $7,500 federal EV tax credit in its advertised pricing for the Model S. The group pointed out that in 2012, the Congressional Budget Office examined the federal tax credit for electric vehicles and determined that just 20 percent of taxpayers have the necessary tax liability required to receive the full $7,500 credit.

“By including the tax credit in the advertised price quote for the vehicle, Tesla is misleading 80 percent of the population of the actual purchase price,” CNCDA says. The association's president, Brian Maas, added, “Tesla’s inflated ‘savings packing’ claims that make the monthly finance payment for their Model S appear lower than would actually be the case is both misleading and illegal.”

CNCDA noted in a letter to the California DMV that Tesla’s website shows that Model S buyers "can lower their monthly payment quote to a mere $114/month. To put this into perspective, this is significantly cheaper than the current advertised lease special for the Nissan Versa — America’s cheapest new car — which has a monthly payment of $139.”

In April, Tesla announced a new lease financing program but was advertising lower rates than customers would actually pay, a move that forced CEO Elon Musk to apologize.

The crux of the complaints about the original deal, announced April 2, was over artificially low advertised payments that didn't equal half of the car's actual cost. Under the initial lease plan, Tesla said the Model S would cost customers as little as $500 a month after factoring in the savings on fuel prices -- projected at $5 per gallon, which is absurd, given dropping prices -- and the owner's personal time lost at gas stations. But the actual monthly payment for the Model S with a 60-kilowatt-hour battery pack was $1,051, with even higher prices for other versions, according to the company's website at the time.

But despite the controversy, Tesla is continuing to gain traction and become more of a concern for larger competitors -- including the field of autonomous vehicles. Wired reported that Tesla recently posted a job listing looking for an engineer “responsible for developing vehicle-level decision-making and lateral and longitudinal control strategies for Tesla’s effort to pioneer fully automated driving.” 

Even an August report from the CNCDA showed that more Californians have registered a new Tesla through the first half of the year than a new Cadillac, Buick, Volvo, Chrysler, Fiat, Mitsubishi, Lincoln, Land Rover or Jaguar. For the remainder of 2013, Tesla intends to deliver 21,000 Model S sedans and projects doubling that figure that in 2014. According to Musk, the demand for the Model S currently exceeds Tesla's ability to make it.

[Source: The Detroit News; MSN Autos]

Sep 20, 2013 6:23AM
Pot calling kettle black? How many times have we seen and heard advertisements on TV and radio by car dealer claiming "No money down, 0% APR for 60 months!", while failing to disclose that you pretty much need a perfect credit score? For car dealers to accuse Tesla of "deceptive and unsubstantiated claims" is like Putin lecturing America on freedom and democracy. 
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