Electric vehicle maker Tesla has faced a number of legal challenges from traditional dealers to its direct sales model. In 2013, auto dealers in Ohio lobbied for legislation that would have effectively banned Tesla's business model in the state.
That effort failed, although new legislation has been introduced in the current session. In the meantime, the Ohio Automobile Dealers Association (OADA) and some large dealer groups have sued to have Tesla's license to sell cars revoked because the company failed to provide a copy of its contract with the manufacturer of the vehicle's being sold.
What are the OADA's primary concerns about Tesla's business model?
First, the reason we're challenging the licensing is not because of the business model per se, but because we don't believe that the law allows that model currently in the statute.
There have been some reports that it appears we're targeting one manufacturer or another. What we're saying is that the rules have not been followed. That's not Tesla; it's really the Bureau of Motor Vehicles that allowed them to do different things than they have allowed other manufacturers to do.
I know the licensing suit is separate, but dealers have raised questions about the direct sales model and things like access to certified service centers.
I think that the model that currently exists in Ohio recognizes that having a dealer who is separate and apart form the manufacturer does play an important role for the consumer. It protects that consumer on any number of different levels. I think service is one of those. When you have a manufacturer who has proprietary interest in keeping service, parts, and training, as some sort of proprietary item, then that means no one else can service the vehicle and no one else can get a part for it. There's no aftermarket part. It's also potentially anti-competitive, because you have one entity that is controlling price from the sale of vehicle, to what it costs to get work done on that vehicle.
Do you have any idea how long it may be before we hear a decision on the BMV lawsuit?
That's difficult to say, which is typical of any litigation. I think the court will try to decide the issue quickly, but exactly what "quickly" means is up to the court.
Is there anything else you think consumers should know about Tesla and how its model relates to current franchise laws?
I would want consumers to know that we believe the licensing statute is helpful for manufacturers, it benefits consumers and is beneficial to our members. But this is not about picking and choosing winners and losers. We want to make sure the rules are followed by everyone, so there is consistency in the market.
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