Dealers sue Tesla in Mass., N.Y.
When dealer association executives meet in Chicago this week, Tesla Motors' retail strategy will be top of mind.
The Automotive Trade Association Executives' legislative conference comes a week after two of its members -- associations in Massachusetts and New York -- sued to shut down Tesla stores they say are operating illegally in their states.
"The big question for a lot of the states is do they have the kind of statute that addresses the issue of who's allowed to be licensed to sell cars for their particular state," said Mark Schienberg, president of the Greater New York Automobile Dealers Association. "Tesla is a good poster child because they're setting up all over the place."
Schienberg's association and one of its dealer members sued Tesla and the state Department of Motor Vehicles on Oct. 16. That challenge joins a complaint by the Massachusetts State Automobile Dealers Association and some of its dealers, also filed Oct. 16, seeking to shut down Tesla's store in suburban Boston. In the latter case, a hearing on whether to issue a preliminary injunction is set for Thursday, Oct. 25.
Tesla spokeswoman Shanna Hendriks said Tesla is aware of the Massachusetts action and that the company continues to comply with municipal and state laws. As of Friday, Oct. 19, she was unaware of the lawsuit in New York.
The electric vehicle maker, which models its retail approach on the Apple store experience, operates 18 U.S. retail locations in 11 states and the District of Columbia. Company officials have said they are working within the limits of state and local laws at all locations.
According to the National Automobile Dealers Association, 48 states prohibit or restrict factory ownership of dealerships. In some places, such as Massachusetts, Tesla says its locations operate only as showrooms and staffers direct shoppers to its Web site to make a purchase.
Dealer associations reject that defense.
"They claim they're operating under the guise of a nonsales showroom, and we call that out as an outright scam," Robert O'Koniewski, executive vice president of the Massachusetts association.
O'Koniewski says Tesla's Massachusetts store, which opened Sept. 28, violates the state's licensing, consumer protection and franchise laws. Massachusetts prohibits factory ownership of dealerships. O'Koniewski says Tesla's model could leave consumers unprotected by the state's lemon law.
In New York, Schienberg says both Tesla and the Department of Motor Vehicles violated state franchise law by seeking, in Tesla's case, and granting, in the department's case, a dealership license for a Tesla store in Westchester, N.Y. That license was granted June 21. The association made a similar challenge to Tesla's Manhattan store, which opened in 2009, but it was thrown out for being filed after a statute of limitations had expired.
Schienberg said factory stores present unfair competition to franchised dealers who typically can't spend as much on facilities and advertising.
"We are looking down the road -- what happens with China, what happens with India, with other manufacturers that come into the market," he said. "We're concerned about the precedent this sets."
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