Tesla now has the legal right to operate a dealership in Virginia after a fight with the Virginia Automobile Dealers Association (VADA) over the issue of an auto manufacturer not selling its cars through independent dealerships.
The Virginia Department of Motor Vehicles (DMV) granted Tesla the authority to open and operate a manufacturer-owned dealership in the Richmond area of Henrico County.
But the VADA appealed the decision of the DMV based on Virginia law that says it is unlawful for any automaker to own or operate a dealership, "except under limited exceptions."
Court documents say an automaker must sell its cars through independent dealerships in Virginia, but the exception clause comes in if no dealership is available in the area that can do so “in a manner consistent with the public interest.”
Tesla said it deserved a license to sell its vehicles because the automaker is a unique electric car manufacturer that is changing how the auto industry functions.
The judge didn't exactly buy that argument.
"But, rechargeable electric vehicles have existed for more than a century. Tesla’s Model 3 is no more a 'unique' electric car compared to at Baker Electric than a Ford Mustang is a 'unique' gas-powered car compared to a Model T. Simply put, Tesla’s professed innovativeness does not exempt it from the requirements of Virginia law," said Richmond Circuit Court Judge Gregory Rupe.
Judge Rupe says to operate a manufacturer-owned dealership, Tesla had to demonstrate there is no independent dealer around which would operate in the interest of the public.
The judge ruled the Virginia law gives broad discretion to the commissioner of the DMV and a Court "may reverse the Commissioner only when he acts arbitrarily or capriciously."
Although the judge ruled in favor of Tesla, he said he still had issues with Tesla's business model because it's structured in a way that no independent dealer could ever become profitable.
"It serves to ensure that Tesla retains complete control over their vehicles from their construction to their sale. It also serves to circumvent the franchise laws of this Commonwealth and those of many of its sister states," Judge Rupe said.
Based on allowing Tesla a dealer license, the judge said there is nothing to prevent any automaker from changing its business model and leave independent dealers out of the loop.
The judge was clear he disagrees with the thinking of the commissioner of the DMV in allowing Tesla a license, but Judge Rupe also says the commissioner no doubt made his decision in the best interest of the people of Virginia.
The ruling is the latest to involve legal tussles between Tesla and state car dealership associations that claim Tesla ignores state laws to sell its electric vehicles. As in the case of the Virginia ruling, the automaker has won some, but Tesla also knows what it's like to lose a few.