Tesla is fighting restrictive direct sales laws in several markets like in Texas, Connecticut, Michigan, Indiana , but its fight in Utah is now the most “high-profile” since Tesla is challenging the state in its supreme court after it was blindsided out of its store.
The automaker built a $3 million store in Salt Lake City last year, but the full-fledged store was demoted to a gallery/service center two weeks before opening due to the Utah attorney general’s office ruling that it was against the state’s direct sales law following complaints from the local dealership association.
Now that the case is before the court, in order to counter the automaker’s argument that they are not good at selling electric vehicles, dealerships are saying that they could sell Tesla’s vehicles simply because “they have four wheels”.
Direct sales law in Utah bans automakers from owning dealerships. The system was designed so that established carmakers already using franchises, like GM or Ford, couldn’t set up their own stores to compete with independent dealers, but Tesla argues that they don’t have and never had any franchise dealerships and therefore, they are not unfairly competing with the current franchise system.
But after complaints from the dealership association, the state sided with the dealers and asked Tesla to go through the franchise system, something the automaker refuses to do.
Tesla General Counsel Todd Maron argued that the automaker wouldn’t thrive under a franchise 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.
Furthermore, Tesla doesn’t aim to make a profit on service and CEO Elon Musk is on record saying that he thinks it’s “terrible” to make a profit on service.
In the past, Tesla also stated that dealerships don’t properly explain the advantages of electric vehicles, whether it be because they don’t understand them very well or because pointing out all the advantages of electric vehicles result in pointing out all the disadvantages of gas-powered vehicles, which constitute the vast majority of the dealership inventories.
In court documents filed in late June over the case in Utah obtained by Associated Press, attorneys for the dealerships somewhat supported Tesla’s claim by explaining how they would sell Tesla’s cars:
“Tesla builds a car. It has four wheels. You press a pedal with your foot to make it go, and you turn the steering wheel to change direction. That you plug it in rather than gas it up is a trifle,”
It’s not the first time detractors used eyebrow-raising arguments for forcing Tesla to go through third-party dealerships.
Prior to going to court and when Tesla was still trying to get its license through the legislative process, a Utah state legislator made the argument that Tesla shouldn’t be allowed to let people test drive its vehicles in the state and then buy them online because his wife can’t try products from Amazon before buying them (starts at 34:12):
The court battle is still ongoing.