Tesla can claim another victory in its multi-year war with franchise automobile dealers over its ability to sell directly to customers. Now five major battles remain for the electric automaker.
This week, the Missouri Court of Appeals reversed a lower court’s decision that had forced Tesla to close its stores in the state. Industry trade group Missouri Automobile Dealers Association sued the Missouri Department of Revenue in 2015, alleging that Tesla’s method of selling directly to consumers violates state law because it’s not a franchisee.
Tesla has a different business model than other automakers. The company sells its own cars directly online and through its own branded stores, not through franchised dealerships. All U.S. states have laws that prevent automakers with existing franchisees from opening their own dealerships to compete with them. However, dealer associations in a number of U.S. states have tried to expand the law to include manufacturers like Tesla that don’t have franchise dealers. In at least two case, GM backed efforts to shut Tesla or any company from selling directly to consumers.
Last year, a Cole County Circuit judge ruled in MADA’s favor and determined that Tesla’s motor vehicle dealer license should not be renewed. Tesla was forced to temporarily close its two Missouri stores as it awaited a decision in the court of appeals. The company was allowed to reopen the stores as its case went through the appeals process.
The Missouri Court of Appeals dismissed the case Tuesday, giving Tesla an important win. In its ruling, the appellate court said MADA lacked a standing to sue and reversed the court’s earlier decision.
“We respect the Appeals Court decision, although we certainly disagree with its findings,” MADA said in a post on Facebook.
Tesla has long argued that its model ensures the best possible experience for its customers, a point it reiterated this week.
“The decision today is a victory for Missouri consumers who want the choice to learn about and purchase their Tesla in their home state,” a Tesla spokesperson said in an emailed statement. “We have been serving customers in Missouri for almost five years and have contributed to the state economy and jobs for Missourians – something that will now continue.”
Tesla’s war with auto dealers, and in some cases automakers, isn’t over yet. The company is prohibited from selling directly to consumers in Connecticut, Louisiana, Michigan, Texas, and Utah. Tesla also faces some headwinds in New York, where a cap has been placed on the number of stores it can operate.
Tesla does have stores, or “galleries,” in Connecticut, Michigan, Texas, and Utah. In these stores, Tesla customers can look at the cars but not buy, test drive, or even discuss the price. Tesla doesn’t have a gallery in Louisiana, but the company is about to open a service center in New Orleans.
In short: Tesla has legal and policy work left to do. And there’s nothing preventing dealerships in once-safe states from renewing their fight against Tesla.
One of the bigger fights is in Michigan. In October 2014, Gov. Rick Snyder signed a bill initiated and backed by the Michigan Automobile Dealers Association that effectively bans Tesla from selling directly to consumers in the state.
In September 2016, Tesla filed a lawsuit in U.S. District Court Western District of Michigan Southern Division after the state rejected Tesla’s request for a“Class A” license, which would have allowed the automaker to open a company-owned dealership in the state. Tesla applied for the license to test the limits of a state law that prevents it from selling vehicles there directly to consumers, the company said back in February 2016.
Tesla opened in December 2016 a showroom in Michigan, taking a bold stance in the home of the Big Three U.S. automakers.
The fight in Texas is particularly problematic for the automaker because the state legislature meets in regular session every two years. The legislature will next convene in January 2019.
