Tesla Motors Drives Into Legal Obstacles in Georgia

By Zack Laubernds,
Money and Investing Writer

This past week, Tesla Motors (NASDAQ:TSLA) became involved in what could be another legal battle regarding the means by which the manufacturer sells its vehicles.

The San Francisco-Bay based, electric automobile manufacturer is being investigated by the Georgia Department of Revenue due to a complaint filed by the Georgia Automobile Dealers Association (GADA).
They claimed that Tesla has violated a Georgia state law regulating the amount of automobiles that a manufacturer may sell directly to consumers.

In the state of Georgia, automotive manufacturers are limited to 150 Direct-Manufacturer sales per year. According to GADA, Tesla has sold 173 vehicles at its Marietta, GA dealership since last October.

Tesla spokesman, Simon Sproule said “Tesla has been and remains in full compliance with all Georgia laws in the opening and operation of its retail operations in that state.”

Tesla insists that the regulations on Direct-Manufacturer sales are applicable on a calendar year, and not a 12 month basis.
This complaint filed by GADA is seen by many as a move to get Tesla to concede and begin hiring independent dealers to sell the manufacturer’s vehicles.

Derrick Dickey, a spokesman for GADA, said “All we’re asking is that Tesla sell cars in compliance with the law,” If Tesla were to begin utilizing the services of independent dealers they would forfeit a good deal of the creative control over the marketing of its cars due to the independent marketing of dealers.

In addition to reserving its right to have complete control over its own marketing, Tesla also employs the Direct-Manufacturer sale strategy to keep from adding to the already sizable price tags that accompany its vehicles, with the average Tesla Model S setting you back about $71,000.

If Tesla’s sales in Georgia are ruled to have exceeded the allowed amount and if CEO, Elon Musk, stands firm on his “no independent dealership” policy. Then Georgia could be the fourth state in which Tesla would be unable to operate, the other three being: Texas, Maryland and New Jersey.

In those states Tesla has “galleries” instead of dealerships where interested car buyers may go to view vehicles, but the sales cannot be completed in person and must be conducted over the phone or online.

If the Marietta dealership is forced to close, prospective Tesla buyers in “The Peach State” would then be forced to travel to either Tampa Bay or Nashville to satisfy their environmentally friendly desires.

The loss of the Georgia market may not seem like a huge issue, but the infamously high traffic areas around Atlanta have a very high demand for electric vehicles.

If Tesla is unable to meet that demand, then the door is left open for other electric vehicles such as the Nissan LEAF and the Chevy VOLT.

Some believe that Tesla with eventually be forced to turn to independent dealerships, but until that happens it is bound to face more legal battles such as this in the coming years.

A version of this article appeared in the Tuesday, Sept. 9 print edition.

Contact Zack at
zachary.laubernds@student.shu.edu

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