National Automobile Dealers Associatio: "It's illegal for a car company to sell cars directly to the public in 48 states". True?

National Automobile Dealers Associatio: "It's illegal for a car company to sell cars directly to the public in 48 states". True?

I just read this article.

If this is true than there is a long way ahead for Elon Musk and Tesla Motors.

The legislation in all those 48 states will have to be changed, that's going to take a while.

But is it true? Does anybody know more about this?

rlarno | 11 avril 2013

Funny, I want to post a link to the TM blog, and it tells me the post is regarded as spam?

The Tesla Approach to Distributing and Servicing Cars

rlarno | 11 avril 2013

The Tesla Approach to Distributing and Servicing Cars

Benz | 11 avril 2013

@ rlarno

Thanks for the link, but it says nothing about the legislation in those 48 states. What is your point exactly?

David Trushin | 11 avril 2013

I think that regardless of whether it's true in the states, some states interpret the Tesla sales model as "direct sales from a dealer in the state" and others as "internet sales from an out of state manufacturer". Most court challenges and government intervention, such as in Texas come from the first interpretation. As originally intended, the legislation was designed to protect businesses from unfair competition. Now it is being used to prevent all competition.

As a side note, Costco sells cars by giving you a quote from a dealer and you have to get the car from the dealer. That's pretty much a pain. Once a dealer gets your phone number, you belong to him.

rlarno | 11 avril 2013

@Benz, since your link comes up dead:
We couldn't find the page you're looking for.
The link you used may be broken, or the page may not exist anymore.

I have no point, just thought the two were related.

Benz | 11 avril 2013

You are right the page has been deleted.

Benz | 11 avril 2013

Here is the full content of the link:

Reporter: Jon Xavier (Web Producer- Silicon Valley Business Journal)

Oct 10, 2012, 1:25pm PDT
Updated: Oct 11, 2012, 10:50am PDT

Tesla store legality questioned in several states

Walk into a Tesla Motors showroom like the one at Santana Row, and you know it's something different. From the high-end location, to the informative displays on the wall, to the low-pressure sales staff, it seems more like a place where you'd buy a tablet or a laptop than a car.

That's not accidental — Tesla (NASDAQ: TSLA) showrooms are the brainchild of George Blankenship, the chief strategist behind Apple's retail stores.

And it might also be a problem.

Tesla, like Apple, owns and operates all its retail locations. That's fine for electronics, but for cars, state franchise laws come into play. According to the National Automobile Dealers Association, it's illegal for a car company to sell cars directly to the public in 48 states. Rather, they are required to sell the cars to local dealership franchises that then turn around and resell them — something that, in theory, should promote competition and provide locals with opportunities to open small businesses.

Tesla says it's done nothing wrong and is complying with all state laws. Because you can't actually buy a car at many Tesla outlets (the staff will give you information and direct you to the Tesla website where you can order one and have it shipped to your house), the carmaker argues that these are not technically dealerships and thus aren't subject to the franchise laws. Dealer groups say this is quibbling, and that everything that takes place before money changes hands, from choosing a color to arguing about floor mats, is still part of the sale.

Tesla is in the middle of its national roll out, and currently has stores in only 10 states. Still, it's already met legal challenges in four of them:

- Dealer groups in New York filed a lawsuit over a Tesla store in Westchester county, which got thrown out for procedural reasons because it was filed after the statute of limitations to contest the store opening was already up. The dealers are currently exploring other options.

- In Oregon, the state dealer's association has sought to get the Portland Tesla store's license revoked, filing a complaint with the state transportation board.

- The state of Illinois told Tesla in September that its Chicago store violates state franchise laws because it lists Tesla CEO Elon Musk as the owner. Tesla acknowledged the problem and has been given 30 days to correct it.

- The Massachusetts dealer's association filed a protest with the city of Natick about the license it granted to Tesla.

Obviously, the situation is still developing and Tesla will probably face more legal challenges as it continues to expand in more states. A successful challenge by the dealer groups anywhere will probably lead to more challenges elsewhere, which could spell problems for Tesla's retail strategy. On the other hand, if the electric vehicle maker is able to weather the storm and roll out its unusual sales model nationwide, that might embolden other automakers to try cutting out the middleman themselves. That could be disastrous for the traditional, locally-owned-and-operated car dealership industry, and possibly for the cities and municipalities that depend on those dealerships for sales tax revenue.

The state to watch here is Illinois, where Tesla has to figure something out by the end of October. That will show how Tesla plans to deal with the issue, and might give some indication how well things will go in other states, as well.


holidayday | 11 avril 2013

If Tesla fails, it won't be because of the quality of the cars, it'll be because of Bull$#!+ like this.

Dealers can't handle it, so they get political.

Dealers, if you had a better business model, maybe you could compete in the 21st century. But since you play pricing games, your model is going to end.

alcassfast | 11 avril 2013

Tesla won't fail because of the quality of the cars it will fail because of the quality of our society.

joshnd03 | 11 avril 2013

Simple solution. "Sell" locations to "Dealers" organized as not for profits, who then subcontract all operations management back to Tesla.

Noah.S | 11 avril 2013

I know some states the law says you must have a dealer license to sell cars. The only question is, can the owner of the dealer license be a manufacturer? In some states (Tesla recently fought a battle in one) where there are laws that a car company can't sell cars to compete with dealerships of their own kind.

Tesla's argument is 'we've never had any other dealerships...' and it's worked

Brian H | 11 avril 2013

The laws were supposed to protect dealers from manufacturers exploiting their efforts to sell the car. Since no dealer has ever made any effort to sell a Tesla, the issue is null. I.e., it was supposed to protect GM dealers from GM, not from Tesls.

alanwwebb | 11 avril 2013

Brian is right, but that won't stop the dealer orgs from trying to fight Tesla.

Benz | 11 avril 2013

Just saw 2 tweets from Elon Musk:

"New York judge just ruled in favor Tesla, dismissing the legal attack by auto dealers to prevent direct sales!"


"New York judge states: "... dealers cannot utilize the Franchised Dealer Act as a means to sue their competitors". Exactly!"

Captain_Zap | 11 avril 2013

I'll be happy if I never have to deal with a dealer again.

I really appreciate Tesla working hard to break the paradigm and the monopolies.

ArieK | 13 avril 2013

@Benz: It looks like Autoweek read your post about the ruling in NY. Or they read the orriginal Twitter post from Elon ;-)
Anyway, it's positive news for Tesla on their website.

Benz | 13 avril 2013

@ ArieK

Thanks for the hint. Finally they seem to be writing a more positive article about Tesla Motors. And that is a good thing.

Brian H | 13 avril 2013


ArieK | 13 avril 2013

Oops forgot about that. Noyhing really new in the article, other than them mentioning BMW had intentions to sue Tesla. Don't know where they got that bit of info. It's new to me. They don't elaborate.

ArieK | 13 avril 2013

Noyhing = Nothing

evpro | 13 avril 2013

Yet another advantage of Teslas - no dealership bullshit. For the dealership associations to sue Tesla over this = bad PR and a sign of fear for the future of the whole ICE paradigm.

Benz | 13 avril 2013

@ evpro


Benz | 14 avril 2013

Will the State of Texas decide on this Bill in April, or is it going to take more time (May, June, July, etc....)?