Anti-Tesla ruling overturned in Virginia, company gets a second showroom in the state

November 30, 2016

Virginia has given birth to many things, including Thanksgiving, fraternities, and streaking. Today, the state was also home to some drama in Tesla's never-ending battle to sell its all-electric cars directly to consumers. 

The stage for the current saga was set back in September, when Tesla applied to open an outlet in Richmond. If it had succeeded, it would've been the company's second shop in Virginia--the first being located in Vienna, near Washington, D.C.

But succeed it didn't: though the state's Department of Motor Vehicles commissioner, Richard Holcomb, was prepared to grant the company a permit for its Richmond store, the Virginia Automobile Dealers Association sued both Tesla and Holcomb to prevent him from doing so. Daniel Small, a hearing officer for the DMV, sided with dealers.

What's interesting is that, unlike other states, Virginia doesn't technically prevent automakers from selling directly to consumers. However, when companies apply to do so, they have to prove that they won't be cutting into the sales of existing franchised and independent dealers. Unfortunately for Tesla, Small didn't think that would be the case.

But of course, that wasn't the end of it. As anyone who's watched Tesla claw its way into markets might guess, the automaker fought back. Today, the company won that fight when Holcomb overturned Small's decision. Here's a key bit from Holcomb's ruling:

"Tesla’s business model differs from traditional car dealerships in many ways; but specifically, Tesla sells its vehicles at uniform prices whether a customer purchases through the Tesla website or at a Tesla store. Tesla could not or would not offer 'dealer discounts' or 'wholesale pricing' on new cars to a prospective dealership. VADA’s own experts agreed that it would be very hard or impossible for a dealership to be profitable unless Tesla offered their cars at wholesale prices."

In other words, Holcomb is saying that dealers--whether franchised or independent--can't realistically sell Tesla vehicles the way that Tesla insists they be sold. Therefore, Tesla has no direct competition in Virginia and no impact on other dealers. Game, set, match.

Well, almost. The Dealers Association has 33 days to appeal Holcomb's ruling, which still has to be approved by the state's Motor Vehicle Dealer Board. Tesla claims that those are minor obstacles and that Holcomb's ruling settles the matter once and for all.

The automaker has already begun work on its Richmond showroom, perhaps hoping that the sheer act of building out the space will make it a reality. But if we've learned anything from Tesla's fights with dealerships, it's that things are rarely so clean and simple.

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