New York Supreme Court Rules in Favor of Tesla Factory-Direct Stores

Lately, it seems Tesla CEO Elon Musk has been on tour around the country speaking in favor of his factory-direct sales model, against influential state dealer associations that see factory-direct car sales as a threat to the traditional dealership business model. Musk was most recently in Texas at a legislative hearing defending the factory-direct model. A New York Supreme Court justice ruled on Thursday that franchised dealers could not prove sufficient injury to prevent Tesla from operating factory-owned stores, Automotive News reports.

Naturally, the Greater New York Automobile Dealers Association voiced its displeasure at the ruling, claiming Tesla's factory-owned model is "clearly prohibited" by state franchise dealer law. The dealer association has not yet said whether it will appeal the case, or seek recourse by other means. Tesla currently operates three stores and two service centers in the state.

The fear of state dealership associations across the country is that an exemption granted to Tesla would open the door to existing automakers to circumvent the independent franchise model and start opening factory-owned stores in competition with independently-owned dealerships. Franchise laws vary from state-to-state, from outright prohibition, to non-compete language preventing factory-owned stores from opening within a specified distance from an independent franchise.

Chrysler was forced to sell its Motor Village concept store in Los Angeles, after area dealers petitioned the DMV, alleging violations of state franchise law. Tesla's case is unique in that it is creating a network of new stores for an all-new brand, not opening new outlets for an existing brand.

Source: Automotive News (subscription required)

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