After Tesla granted approval for 2nd dealership in Virginia, auto dealers get in the way; judge allows VADA lawsuit to proceed

In the more-than-year-long saga of Tesla trying to open a dealership in Virginia, the auto dealers have just scored a victory (and consumers have taken a defeat), with a judge allowing the Virginia Auto Dealers’ Association (VADA) lawsuit against Tesla to proceed.  Tesla had argued that the VADA was not an “aggrieved party,” but a judge in Virginia ruled on Monday that they are and that they thus have standing to bring the lawsuit against Tesla.

This ruling does not stop Tesla from opening the store this summer as planned, but may force them to shut down after opening if VADA’s suit is successful.

This is just the latest step in the story of Tesla in Virginia.  Last March VADA sued Tesla to stop them opening a new dealership, in July the potential site for the store was approved by county supervisors, in September a DMV officer recommended against granting Tesla a license, and in November the state’s DMV commissioner granted Tesla the license anyway – just a few days after VADA put out a ridiculous video (which has since been removed) claiming that Tesla was “attacking” franchise dealerships who were “fighting as gladiators” to protect the rights of auto dealers.  Tesla is moving forward with their plans and as of June 21 it looks like their store is getting pretty close to its planned summer opening.

One of the arguments auto dealers have used against Tesla has been that Tesla does not properly protect consumers because their cars can only be serviced at Tesla’s own service centers, and that Tesla’s service centers aren’t deployed widely enough to be able to service customers across the country.  The auto dealers argue that the only solution to this is to go through the franchised dealer system, and that Tesla can’t possibly meet demand by expanding their own service centers.

But expanding their service centers is exactly what Tesla is trying to do, and yet various auto dealer associations across the country keep stepping in the way.  The legal fight over this one store alone has lasted for over 15 months now, and we still haven’t reached the end as this lawsuit will undoubtedly take even more time to litigate.  Even after the circuit court judge makes his decision, it’s likely that whoever loses will appeal the decision to the Virginia Supreme Court, so that a battle over a single store (albeit with ramifications for future stores) could take multiple years to sort out.

It certainly seems strange that in a country where so much debate centers around “removing burdensome regulations from business”, that many established businessmen (auto dealers) would argue so fervently in favor of creating more burdensome regulations to stop a new company from simply being able to sell and service their products.

Tesla is aggressively expanding their sales and service network in preparation for the Model 3 rollout, so they can better service their customers with a wider base of service centers.  This is just the sort of action which will help Tesla overcome the geographical “weakness” the auto dealers claim they have, and yet the auto dealers are doing everything they can to stop Tesla from solving this “problem.”

And is Tesla’s approach even a problem which dealerships need to “fix”?  Given that Tesla tops Owner Satisfaction ratings time and time again, and that auto dealerships are routinely considered one of the worst consumer experiences people can have (car salespeople are the second-least-trusted profession in America, ahead of members of Congress and behind insurance salespeople), it certainly doesn’t seem like the auto dealers have any “solutions” when it comes to improving the consumer experience of buying a car.

Of course, this backwards-thinking, rent-seeking, competition-strangling behavior by the auto dealers is the exact reason why Tesla has taken the right decision in forsaking them.