Tesla ad probe sought by California dealers association

The California New Car Dealers Association wants the state to investigate Tesla Motors Inc.'s advertising claims with the Model S sedan, which the group says can mislead consumers by making monthly payments appear much lower than they actually are.The association sent a letter to California's Department of Motor Vehicles calling for it to "investigate and remedy several egregious violations and advertising and consumer protection laws" by Tesla that include "packed external savings" involving fuel costs, incentives and federal tax credits.Tesla markets the Model S, an all-electric sports hatchback.The association, for example, claims an available $7,500 federal tax credit is "completely irrelevant" to the price of the Model S, which has a $71,070 base price, according to the request for an investigation.The group cited the Congressional Budget Office, which said that only 20 percent of potential tax filers qualify for the full $7,500 credit.By including the full amount of the credit in the advertised price of the Model S, the association says Tesla is "misleading 80% of the population."Electric-vehicle incentives can range from $7,500 to $15,000 depending on which state a consumer resides in, Tesla says on its website. California residents are also eligible for a $2,500 rebate from the state's Clean Vehicle Rebate Project.The association represents 1,100 franchised new-car and -truck dealerships in California, the nation's largest market for new-vehicle sales."We don't have any quibble with Tesla's ability to sell cars, it's how they are selling cars that is the problem," Brian Maas, president of the dealer association, said in an interview.Shanna Hendriks, a Tesla spokeswoman, said the company declined to comment.Tesla of Palo Alto, Calif., sells the Model S directly to consumers -- a practice that has drawn widespread protests and lawsuits from dealers nationwide.Even though Tesla isn't prohibited by California law from manufacturing and selling cars directly to consumers, it still must follow advertising guidelines that apply to all dealerships, Jonathan Morrison, the association's director of legal and regulatory affairs, said in a letter to California officials."The general thrust is that Tesla is misleading consumers into thinking the monthly cost that you're going to pay for one of their vehicles is substantially lower than the actual money" they'll have to pay out of pocket, Maas said."It's misleading," Maas added. "If you checked every box on their true cost of ownership series of inquiries, they claim you can get a Model S for $114 a month, which is lower than the cheapest [new] car available in the United States, the Nissan Versa -- which would cost you, with a lease deal, about $139 a month."Bloomberg contributed to this report. CA90771916.PDFCopy of association letterCA90771916.PDF

Tesla ad probe sought by California dealers association

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