Tesla Wins Lawsuit Challenging Its Unique Sales Model

Tesla Motors has won a lawsuit brought by auto dealers who want the company to sell cars through dealerships instead of in shopping malls. 

A Superior Court judge in Massachusetts dismissed the lawsuit by the Massachusetts State Automobile Dealers Association.

“We are delighted by the outright dismissal of this case and the validation that we are operating our business in compliance with the laws and expectations of the Commonwealth of Massachusetts,” says Elon Musk, Tesla co-founder and CEO. “We are confident that other states will also come to this same conclusion and look forward to following through on our commitment to introduce consumers to electric vehicle technology in an open, friendly, no-pressure environment.” 

Tesla’s sales approach is similar to Apple’s retail store model – it introduces its electric cars to potential customers where they typically shop – at high-end malls and shopping districts, rather than car dealerships.

That prompted dealers in New York, Massachusetts, Illinois and Oregon to launch legal challenges. At issue is whether or not Tesla’s sales model violates state franchise laws that prohibit car manufacturers from owning dealerships. The other cases are still pending.

Musk says Tesla’s approach is necessary to educate the public about electric cars and that existing dealers aren’t motivated to sell them. "Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars," he says. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. This would leave the electric car without a fair opportunity to make its case to an unfamiliar public."

At last count, Tesla had 24 showrooms in North America and 34 worldwide.

The company is also investing in an extensive service center network – more than 85% of Tesla Model S owners in North America will be within 50 miles of a location.

Last year, the vehicle won the coveted "Car of the Year" award from Motor Trends magazine.

Tesla is also proceeding with a plan to build a nationwide solar-powered charging network.