Concurrent with its legislative battle in Texas for its right to have factory-direct dealerships, the California-based electric car maker received some welcome news in the form of ruling from the New York state supreme court, in which a justice ruled that franchised dealers could not prove sufficient injury from the presence of Tesla’s 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)