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U.S. Dealers Fear Chinese Carmakers Following Tesla Model

Chinese automakers could pose a threat to the U.S. auto industry’s dealer franchise system by following Tesla Motors Inc. in selling directly to customers, the chairman of National Automobile Dealers Association said.

“It’s in the back of everybody’s minds at this point, just to make sure that we should talk to the Chinese as their cars evolve,” David Westcott, a North Carolina auto dealer, said yesterday at an Automotive Press Association event in Detroit. “Dealers won’t fight having those cars come in. Will we fight to make sure there’s a franchise system? Yes.”

Tesla, the world’s biggest seller of premium electric cars, sells directly to customers and has company-owned outlets. NADA, which represents almost 16,000 new-car dealers, has opposed the Palo Alto, California-based company’s decision to forgo the use of franchised dealerships while leaving legal challenges up to states.

The largest U.S. automakers are closely monitoring Chinese carmakers and the ambitions held by the companies and their government to someday enter the U.S. market. Great Wall Motor Co., China’s top seller of sport-utility vehicles, has the most traction among that nation’s automakers that are looking to expand abroad, David Schoch, president of Ford Motor Co.’s Asia Pacific operations, told reporters last week.

Tesla shares have soared fivefold this year after posting its first quarterly profit, repaying a U.S. loan nine years early and introducing its Model S sedan to Europe and Asia.

NADA leaders have met with Tesla Chief Executive Officer Elon Musk several times, Westcott said. He said he would be “glad to have” a Tesla franchise if the company decides to change course with its distribution strategy.

Musk, 42, “has even said himself that once his volume gets to a certain point, that he’s going to probably have to embrace the franchise system,” Westcott said yesterday. “Long term, we probably don’t disagree.”

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