December 1, 2016 — Following a three year battle amidst tough opposition from car dealers in Virginia, Tesla Motors won the right to open a second store in the state.
Tesla says it will begin construction on the store, which is slated for Richmond. It will be the second Tesla dealership in Virginia that is allowed to sell vehicles directly to consumers. Tesla currently has a store in Tysons Corner that sells vehicles and a gallery in a mall in McLean where employees are allowed to showcase vehicles but not discuss sales.
Dealers likely will appeal in court the decision made by Richard Holcomb, Virginia’s Department of Motor Vehicles commissioner, who ruled in favor of Tesla after determining there were no dealers independent of Tesla in the Richmond capable of selling its vehicles.
Automakers are not allowed to operate dealerships in Virginia. But a settlement arising out of a 2013 lawsuit filed by dealers to keep Tesla from opening its Tysons Corner location, provides the DMV commissioner discretion in allowing Tesla to operate dealerships in areas where no independent dealer can be found to sell its vehicles.
At least 11 dealers expressed interest in contracting with Tesla to sell its vehicles in the Richmond area but none of the dealers submitted business plans showing how they would sell and service the vehicles. Dealers claimed they could not develop serious business plans because Tesla refused to share critical financial information with them.
Even though Tesla won the regulatory battle, it still needs to obtain a dealer license in Richmond, but that may be a formality.
Tesla has sales locations in Washington D.C. and 23 states including Arizona, which recently granted Tesla a dealer license following a judge’s decision in favor of the automaker. Tesla has galleries in three other states — Texas, Connecticut and Utah — but has not been able to secure dealer licenses to sell in those states.
The Virginia case is important in part because of the fierce battle waged by the Virginia Automobile Dealers Association to keep Tesla from opening a second store. The VADA filed a lawsuit in March claiming the automaker was violating terms of the 2013 settlement which kept it from opening another store until August 2017.
In a YouTube video that has now been removed, VADA President Don Hall urged dealers to “Let’s all strap on whatever it takes to win and let’s win this fight to protect the franchise system.”
It is a big loss for Virginia’s dealers. Hall has been one of the fiercest opponents of Tesla being allowed to bypass the franchise dealer model to sell its cars directly to the consumer.
But the ultimate battle between Tesla and dealers fighting to protect the retail system may be in Michigan. For the first time, Tesla has filed a federal lawsuit seeking to gain the right to sell cars in a specific state.
Tesla was unable to get a hearing with Michigan’s legislature this fall to argue its case after failing to obtain a dealer license in the state.
According to Tesla, the leadership of Michigan’s legislature in a meeting told Tesla, “The local auto dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here.”
One Tesla executive told TBR that it was a “Godfather-like moment.”
A win for Tesla likely will mean that it will be able to sell its vehicles nationally without having to resort to using independent franchised car dealers. And that is the one scenario that dealers fear could open the door for any automaker to sell directly to consumers.
But if it loses, Tesla will only lose the right to sell cars in Michigan, which it doesn’t have currently. Tesla’s standing in other states will not be affected.