Many states have laws restricting auto manufacturers from selling directly to the public. The state of Virginia doesn’t prohibit automakers from owning dealerships outright, but it makes approval conditional. A manufacturer that wants to open its own dealership has to prove that no independent area dealers are available to sell its vehicles. Tesla’s stance is that conventional dealership business models rely on vehicle service and repair to be profitable. Because Teslas have electric drivetrains with many fewer parts and a much lower need for service than vehicles with internal combustion engines, the company argues that a conventional dealership could not make money selling its vehicles.
In a hearing on Tesla’s request for approval for a Virginia dealership license in the Richmond area earlier this year, a hearing officer ruled that Tesla failed to prove there were no dealerships available to sell the company’s vehicles. The officer cited 11 letters from area dealers that said they were interested in selling Teslas.
In his November 30, 2016, ruling, Commissioner Richard D. Holcomb wrote that the 11 dealerships that submitted letters of interest had only done so at the urging of the VADA. Further, when the Commissioner questioned the dealership representatives, it did not appear to him that the dealerships had really done sufficient investigation into what it means to sell Teslas and therefore, although they stated interest, their presentations didn’t meet the spirit of the law in being ‘available’ to sell Teslas.
“Even VADA’s expert stated that the dealers had not taken the next step in preparing a staffing, financing, and operating plan for a Tesla dealership,” Holcomb wrote.
The commission also mentioned support from local Tesla owners in favor of a company-owned dealership.
It’s not a done deal for Tesla in Richmond. Unless the VADA appeals the Commissioner’s ruling in court, however, the way is now much more clear for Tesla to open a dealership in the area.
