Tesla shares are down 1.8% in pre-market trading.
This comes on news that the California New Car Dealers Association wants California’s Department of Motor Vehicles to investigate Tesla’s advertising claims for its Model S car, reports Auto News.
One of it’s biggest grudges is with Tesla’s leasing-plan, specifically “‘$580 per month after gas savings’ advertisement found on several of its internal web pages.”
They argue that Tesla takes “a novel, but equally-illegal, spin on” payment packing — “a practice where an inflated monthly payment is agreed to by a consumer and ―packed‖ into that payment are one or more goods or services that the consumer did not request.”
In a letter directed to Jean Shiomoto, the acting director of the Department of Motor Vehicles they write:
“We write to ask the Department to investigate and remedy several egregious violations of advertising and consumer protection laws by a Department-licensed manufacturer and dealer of motor vehicles — Tesla Motors, Inc. (Tesla).
“While California law does not affect Tesla’s ability to both manufacture and directly sell new vehicles to California consumers, Tesla must abide by the advertising rules that apply to all dealers. Instead, Tesla has engaged in a long-term advertising strategy to mislead consumers as to the affordability of its vehicles in violation of several state and federal laws. These laws were created to protect consumers and promote fair and open markets for the sale of all new vehicles. When one licensed entity violates these laws, it gains an unfair advantage over competing dealers; this is where the Department must step in to restore balance to the market by ensuring Tesla conforms to all applicable legal requirements.”
Bloomberg points out that powerful auto dealers lobby groups have been opposed to Tesla’s decision to sell directly to customers. This is because typically, major automakers, sell through franchised dealers.
Earlier this month Tesla lost its bid to sell directly to customers in Texas. Jalopnik reported on Texas’ powerful car dealer protection laws, writing “but money talks and bullshit walks, and at the end of the day, Tesla didn’t have the money and power to compete with the big boys.”
The complaint included this screen-grab from Tesla’s site: