Business & Real Estate

Sacramento auto group claims DMV memo aimed at Tesla’s ad practices

Tesla Motors CEO Elon Musk, above, got a letter from the California DMV challenging a buyer incentive program.
Tesla Motors CEO Elon Musk, above, got a letter from the California DMV challenging a buyer incentive program. Associated Press file

The state Department of Motor Vehicles, which recently sent Tesla Motors CEO Elon Musk a warning letter contending that the automaker’s “referral program” violated California laws, subsequently sent a memo that a Sacramento-based trade association claims is aimed at Tesla’s false advertising practices.

The California New Car Dealers Association on Thursday issued a media release saying that, more than two years ago, it alerted the DMV to “numerous advertising violations by Tesla.” The association claims DMV “finally issued a memorandum reminding manufacturer advertisers about truth-in-advertising laws.”

The group said the memo was issued this month and authored by Timothy Corcoran, DMV’s occupational licensing compliance unit chief. CNCDA says the memo does not mention Palo Alto-based electric vehicle manufacturer Tesla by name.

CNCDA said the memo includes a warning about advertising a “net price” for the purchase of electric vehicles. CNCDA says the memo warns that “manufacturers of electronic vehicles are advertising prices, which are not the manufacturers’ suggested retail price or cash price, but rather the ‘net price’ after deducting a potential federal tax credit, California rebate and other ‘savings.’

“These are false advertisements (and) mislead consumers and violate truth-in-advertising laws.”

“We couldn’t agree more,” Brian Maas, CNCDA president, said in a statement.

The memo, available on the DMV’s website, says the DMV will immediately begin to “enforce advertising laws with accusations against manufacturers’ licenses, and with referral of such cases to local, state, and federal prosecutors.”

“The DMV actively investigates complaints against occupational licensees, and takes appropriate action in the interest of the public’s protection,” said DMV spokeswoman Jessica Gonzalez.

Attempts to get comment from Tesla on Thursday were unsuccessful.

CNCDA said it asked the DMV in September 2013 to investigate Tesla’s website marketing for leasing a Model S, in which Tesla included potential availability of incentives as part of payment quotes.

Earlier this month, The Sacramento Bee obtained a copy of a Sept. 29 DMV letter sent to Musk that said Tesla’s online-advertised referral program violated California laws.

The program described on Tesla’s website said anyone ordering a “new (Tesla) Model S before Oct. 31 using the referral link of a current owner will get $1,000 off the purchase price. In return, the current owner will get a $1,000 discount that can be applied to a new car, service center visit or accessory. New orders must be placed prior to Oct. 31, 2015.”

In his letter to Musk, Frank Alvarez, chief of DMV’s Investigations Division, described the Tesla offer as “a practice commonly referred to in the vehicle sales industry as offering ‘bird dog fees,’ ” and warned of possible state action if the practice continued.

Mark Glover: 916-321-1184, @markhglover