Tesla Continues Fight For Right To sell Direct To Customers in Utah, Virginia — Despite Best Attempts of Auto Dealer Associations

Unlike most automakers — who sell their cars to customers through franchised, independent dealerships —  Tesla Motors [NASDAQ:TSLA] has always sold its cars direct to customers through Tesla-owned stores. At the same time, it has always owned and operated its own service operations, allowing Tesla to ensure customers get the same sales and service experience wherever they are in the world.

Modeled on the highly-popular Apple Store business model (and actually developed for Tesla by George Blankenship, the same person who transformed GAP’s retail outlets and helped bring the Apple Store to reality) Tesla Stores and Service Centers are loved by Tesla customers new and old alike. The only people who really hate Tesla’s fresh take on buying a car? The powerful auto dealer associations keen on keeping the status quo. Simply put, ever since Tesla has made and sold cars in the U.S., auto dealer associations have been working hard to destroy Tesla’s innovative and fresh-faced sales model.

Tesla had worked hard on the new Utah legislation -- until it was destroyed by auto dealer interests.

Tesla had worked hard on the new Utah legislation — until it was destroyed by auto dealer interests.

Here at Transport Evolved we’ve paid close attention to those struggles, watching as Tesla has won the right to sell direct to customers in some states and losing it in others. But while Tesla has been gradually winning bipartisan support in many legislatures across the U.S. and the number of states where it still can’t sell direct to customers is falling, two important developments this week in Utah and Virginia prove that Tesla isn’t about to go quietly into the night.

Utah first. While the Beehive state currently has fairly prohibitive auto dealer laws on its books dating back to the Great Depression designed to prevent any automaker from selling direct to customers, the past year has witnessed a concerted effort get an exemption to existing law on the books to allow Tesla to sell direct to customers. House Bill 384, the latest attempt to do just that, was originally penned with the help of Tesla.

Auto dealer associations really don't like Tesla.

Auto dealer associations really don’t like Tesla.

As of earlier this week, the bill had reached a legislative impasse and has been declared dead by legislators. As The Salt Lake Tribune puts it, “car dealers couldn’t make a deal.”

The reason? While Tesla supported the original bill, amendments pushed onto the bill by pro auto dealer legislators changed the original text so much that it no-longer made sense for the California automaker to support it. As GreenCarReports details the latest version of the bill would have required Tesla to deliver individual cars to customers homes rather than have them pick up their cars at a Tesla Store, prohibit the automaker from keeping an inventory of cars in state, and ban customers from signing paperwork in Tesla Stores.

As a consequence, Tesla worked with its supporters to kill the bill, causing it to be tabled indefinitely by the state Senate. Now, the automaker will have to continue with its plan b: a legal case pending in the Utah Supreme Court against the state in which it hopes to make a case (as it did in Massachusetts) that the current legislation is unfair and anti-competitive.

Of the bill and its ultimate demise, Tesla issued the following statement yesterday.

Tesla is grateful that HB 384 was sent to interim study rather than passed. HB 384 would have allowed Tesla to be licensed in Utah, but only with severe restrictions that would have harmed our Utah customers.

These restrictions were inserted into the bill at the request of our competitors, who would like to dictate the terms by which our customers can be served.

Because this bill was not passed, Tesla will be able to move forward with our pending lawsuit before the Utah Supreme Court and hopefully vindicate our right to serve our Utah customers without restriction.

But Utah isn’t the only state where Tesla is preparing to do battle in the courts. As of mid-week, the California automaker is readying its legal team to do battle in Virginia too.

Tesla is being sued by the Virginia Automotive Dealers Association

Tesla is being sued by the Virginia Automotive Dealers Association

As Reuters reported earlier today, the Virginia Automobile Dealers Association (VADA) has issued Tesla Motors with court papers claiming the automaker is in violation of a settlement agreement made between itself and VADA in 2013. That agreement, VADA alleges, granted Tesla to open one Tesla Store in the Commonwealth of Virginia, namely at the Tysons Corner Mall in the north-east part of the state forming part of the suburbs of Washington, D.C.  That agreement, says VADA, was reached with the understanding that Tesla would not open another store within Virginia until at least August 2017.

In addition, it alleges, the Virginia Department of Motor Vehicles, specifically its commissioner, Richard D. Holcomb, worked with Tesla to keep VADA in the dark about plans for a second Tesla store, rushing through plans to have a hearing to approve the store in double-quick time.

In its defense, Tesla disputes that the settlement made in 2013 prohibits it from opening a second store, and says it will work hard to defent its right to open a new store.

In an official emailed statement to Transport Evolved, Tesla made its intentions clear.

Tesla wants to open a second store in Virginia to serve its customers. VADA’s lawsuit, which seeks to stop Tesla from even going through the application process, is entirely without merit. Tesla has always complied with the terms of the parties’ Settlement Agreement. That agreement paved the way for Tesla’s current store in Tysons Corner, and does not contain any prohibition against Tesla seeking to open a second store. In fact, the agreement expressly states that it does not have “any effect on any future application that Tesla may file” and does not restrict Tesla from further petitioning the DMV for additional stores. That is what Tesla has done, and both Tesla and the DMV have complied with all laws in doing so. We will vigorously defend against VADA’s lawsuit and continue to fight for our customers and consumer freedom in Virginia.

As always, we’ll be keeping an eye on both these cases as they progress through their respective judicial systems, and we’ll update you as soon as we have any information to share.

In the meantime, if you’re a Tesla fan or owner in either state, now would be a good time to start showing your support for Tesla in any way you can.


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