In its long-running battle to deal directly with the customers, Tesla Motors Inc., the innovator of electric cars, faces its next frontier in Virginia. The Virginia Automobile Dealers Association (VADA) has taken legal action to prevent it from putting up a second store, finding support in the terms of contract stating that this action is permitted to take place only in 2017.
Reuters reports that, VADA filed the charges against Tesla and Richard Holcomb, the commissioner of Virginia's Department of Motor Vehicles. It is based on an agreement made in 2013 that Tesla can only establish a second store in August of 2017. Tesla's first store was put up in Virginia's more affluent parts, close to Washington D.C., in 2015. Don Hall, VADA's president, further accuses both Holcomb and Tesla of setting their hearings quickly "under cover of night," allegedly hoping no one would notice.
Hall says that he learned of the meetings when one of his staff told him about Tesla's inquiries about property estate in the Richmond area.
The repercussions of this lawsuit go beyond following the arrangements of a prior contract. It will determine the course of Tesla's longterm and radical strategy to deal directly with the car-buying customer, in contrast to the automobile industry's tradition of having the car manufacturer sell their vehicles through a dealership. Tesla had recently won in Indiana against General Motors, which heads all the dealerships and franchises.
According to Bloomberg, Tesla emailed Indiana residents to stop their legislators from approving a bill that would have its cars marketed through a franchisee. The email warned the customers that only GM would profit in a move that would terminate direct contact between the individual customer and the car manufacturer. Tesla won when the Indiana state committee did not approve the amendment that would have given this requirement.
Tesla went another way to bypass the dealership hierarchy in Michigan by applying directly for its own franchise license. As Endgadget columnist Daniel Cooper observes, "...[Tesla's] direct sales is considered a threat by these wealthy third-party dealership networks which want to protect their business model."
The war is far from over, and Tesla appears ready for a long-term conflict. The outcome in Virginia could very well determine the next direction the wind will blow.
