Earlier this month, we reported on the North Carolina Department of Transportation (NCDOT) and the DMV holding hearings to decide whether or not to allow Tesla to get a second dealership license in order to operate another store in the state without having to go through a third-party franchise dealerships.

Now we learn that the DMC ruled against Tesla obtaining a second dealership license last week, which results in the automaker’s latest store in Charlotte having to operate as a ‘gallery’.

Auto News reports:

The North Carolina Division of Motor Vehicles ruled Friday that Tesla did not meet the requirements to become exempt from state law prohibiting manufacturers from owning dealerships.

Tesla had hoped to open a second North Carolina dealership location at its existing gallery and service center in Matthews, N.C., a suburb of Charlotte. The company has one dealership in the state, in Raleigh.

Direct car sales from automakers to consumers are not outright banned in the state back, even though dealerships tried back in 2013, but the restrictions make it very difficult for an automaker to operate a dealership without having to go through a third-party.

The DMV rejected Tesla’s dealership application after four local dealership groups argued that Tesla should and could go through local independent dealerships. Auto News::

“The North Carolina DMV, in an order signed by Administrative Hearing Officer Larry Greene, said there are “at least three independent dealers” in the market that would be able to own and operate a Tesla dealership “in a manner consistent with the public interest,” meaning the exemption would not apply.”

Tesla always rejected the third-party dealership model and says that it wouldn’t work with its business model. Earlier this year, Tesla General Counsel Todd Maron argued before the FTC that the automaker wouldn’t thrive under a dealership model because independent dealers make most of their profit from servicing cars while electric cars have little long-term maintenance and fewer moving parts. Tesla claims that it doesn’t even try to make money from servicing its fleet.

In order to bypass the system and keep its Charlotte location, Tesla will use what it calls “galleries” instead of stores or dealerships. To comply with state laws, Tesla employees at galleries can show the cars to potential customers and educate them on Tesla’s offering and electric vehicles in general, but they cannot discuss pricing or take an order.

Customers will have to go through Tesla’s website or be redirected to the Raleigh location which still has a dealership license.

The automaker is in a similar situation in Texas, but it looks like things could change soon.

Featured Image: via Leilani Münter on Medium

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