Virginia’s 452 auto dealerships are under attack. And the predator—as Virginia Automobile Dealers Association President Don Hall sees it—is Tesla.
Tesla, the all-electric automaker and energy company sells its own cars directly online and through its own branded stores, not through franchised dealerships. The company has one store and service center in Virginia as well as one “gallery,” where customers can look at the cars but not buy, or even test drive or discuss the price. And Tesla wants to open up one more store, where it can actually sells its vehicles, in Richmond.
This isn’t sitting well with Virginia’s dealership association.
“For the last 29 years I have fought as a gladiator to protect the rights of the Virginia auto dealers and their franchise system,” Hall says in a YouTube video first posted in September and reported on by the Washington Post on Sunday. “We are under attack. This system is under attack by the likes of Tesla and many others out there who believe the franchise system is a dinosaur and no longer works.”
Hall then describes how other industries have succumbed to such attacks and that the dealership franchise system is the next on the “hit list.”
The video, which you can see below, was meant to promote the VADA’s town hall-style meetings to educate dealers how they can lobby legislators to “understand the importance of the franchise system.”
Hall closes the video with “Let’s all strap on whatever it takes to win and let’s win this fight to protect the franchise system.”
The VADA held its last town hall meeting October 4 in Richmond, according to updates on its website.
[youtube https://www.youtube.com/watch?v=HzOGihr8Kns]
The video provides just a sample of what legal and lobbying pressure Tesla is likely to face in the future.
Virginia Department of Motor Vehicles Commissioner Richard D. Holcomb is expected to decide on Tesla’s application for a Richmond store before December 14. And the VADA as well as Tesla have shown they’re willing to take their battles to court, if necessary.
Dealerships are protected in all U.S. states by laws that prevent automakers with existing franchisees from opening their own dealerships to compete with them.
Virginia law prohibits a manufacturer to own or operate a dealership. However, the state’s the Department of Motor Vehicles commissioner is allowed to grant a license if a hearing determines that there is no dealer independent of the manufacturer that can operate a franchise. Tesla was granted such a license through a settlement agreement in December 2013.
When Tesla filed an application to open a second store, the VADA responded with a lawsuit. The lawsuit, filed in March, claims Tesla and Holcomb violated a 2013 agreement that the automaker could not own or operate a second dealership in the state until August 2017.
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Virginia’s dealerships have considerable economic power. The state’s 452 dealerships generated $22.2 billion in sales in 2015, according to the National Automobiles Dealership Association. Tesla doesn’t provide a breakdown of how many vehicles it delivers per state. However, Tesla says it plans to deliver 50,000 vehicles total (that’s a global number) in 2016, according the company’s most recent outlook. In the third-quarter, Tesla generated $21.88 million of net income—its first quarterly profit (based on generally accepted accounting rules) in three years.
Dealer associations in a number of U.S. states, including Massachusetts, Missouri, North Carolina, and Washington, have tried to expand the law to include manufacturers like Tesla that don’t have franchise dealers.
Some states—such as Arizona, Michigan, and Texas—have taken an extra step and passed laws that ban direct sales. In these states, Tesla can still have a showroom, where consumers can look, but not buy, its Model S, Model X, and eventually, Model 3 vehicles. Tesla staff cannot discuss the cost of the car. They must instead direct customers to the website or a store in a neighboring state for more information.
