Challenge: Tesla Grows Factory Stores in U.S.
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Automobile Dealers Quarterly Update

Industry Update

Challenge: Tesla Grows Factory Stores in U.S.
Electric car maker Tesla has been slowly expanding its chain of retail stores in the U.S., as the company battles challenges to selling directly to consumers. Tesla's store strategy conflicts with franchise laws in some states that prohibit auto manufacturers from selling directly to customers. Some auto dealer unions have lobbied against Tesla's plans, citing the franchise laws, and are trying to prevent other auto manufacturers from following similar plans, according to the Washington Post. The governor of Pennsylvania signed legislation in July 2014 allowing Tesla to operate up to five stores in the state. A petition asking President Obama to enable direct-to-consumer sales in all states has reached the White House, but the administration has indicated the president does not plan to intervene in what is considered a state issue.
Industry Impact
Auto dealers will want to be prepared for additional competition if Tesla auto stores open in their state or region.

Industry Indicators

U.S. consumer spending on durable goods, an indicator of auto sales, fell 2.1 percent in May 2014 compared to the same month in 2013.
The bank prime loan rate, which indicates the finance rates available to dealerships and automobile consumers, remained at 3.25 percent as of the week of July 21, 2014, unchanged from the same week in 2013.
U.S. retail sales for motor vehicle and parts dealers, a potential measure of demand for autos, increased 7.8 percent in the first six months of 2014 compared to the same period in 2013.

Fast Facts

Companies in this industry engage in retail sales of new and used passenger cars, light trucks, SUVs, and passenger and cargo vans.
Major companies include AutoNation, CarMax, Penske Automotive Group, and Sonic Automotive (all based in the U.S.), as well as Inchcape plc (UK), Jardine Cycle & Carriage (Singapore), Porsche Holding GmbH (Austria), and Zhongsheng Group Holdings Limited (China).
Sales of new and used cars and related products and services by new car dealerships account for 90 percent of industry revenue; used car dealerships make up the remaining 10 percent.
Marketing and promotional vehicles include newspaper, TV, radio, and outdoor (billboard) advertising and direct mail.
Sales are seasonal, with peaks during spring and summer.
Automobile Dealers
SIC Codes: 5511, 5521
NAICS Codes: 4411
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