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Tesla gets green light from DMV commish

Michael Schwartz December 1, 2016 2

Several Teslas dotted the DMV parking lot during the March hearing. (Linda Dunham)

Several Teslas dotted the DMV parking lot during the March hearing. (Linda Dunham)

Electric carmaker Tesla plans to drive full speed ahead toward opening its first local dealership after getting a favorable ruling on Wednesday from the state.

Virginia DMV Commissioner Richard Holcomb issued a nine-page decision declaring the California-based company is eligible to operate a corporate-owned dealership in Richmond.

The decision brings at least some closure to a nearly year-long process that pitted Tesla against the Virginia Automobile Dealers Association, a lobbying group for new car dealers in the state. The battle led to three public hearings before a DMV appointed hearing officer, who initially recommended in September to deny Tesla’s request.

The company, run by well-known CEO Elon Musk, said in a prepared statement Wednesday that it applauds Holcomb’s decision and it will now begin work in its dealership, which will take shape in the 30,000-square-foot former furniture building in Henrico County.

“We intend to swiftly begin construction to open our new store and service center at 9850 West Broad Street and look forward to joining Richmond’s business community.”

The company showed its confidence by leasing the space in the midst of its case against the VADA and won approval from Henrico County to rezone the property this summer.

The debate between Tesla and VADA hinged on a Virginia law that prevents car manufacturers from operating their own dealerships, unless it can be proven that no other licensed dealers would be willing and able to run such a dealership independently “in a manner consistent with the public interest.”

Tesla sought an exemption to that law, arguing that its business model only works if it is able to operate its own dealerships that sell straight to consumers and claims that independent dealers of its cars could not be profitable. At present, there are no independent Tesla dealers anywhere in the world.

Regardless of that business model, VADA, which has fought both of Tesla’s efforts to open dealerships in Virginia, had argued that there are independent dealers willing and able to run a Tesla dealership. It went as far as bringing 11 dealers in Richmond to the table expressing interest in opening a Tesla franchised dealership.

In April, Tesla leased the property formerly housed by Bassett Furniture.

In April, Tesla leased the property formerly housed by Bassett Furniture.

However Holcomb’s ruling deflated that argument, as he found that those 11 dealers expressed their interest only after being prompted by VADA president Don Hall, “in order to make Tesla’s argument ‘unsupportable.’”

Holcomb further points to the fact that most of those dealers offered no evidence supporting their interest at the DMV hearings. Interest letters alone are not enough to show that independent dealers are “available in the community.”

Those that did testify at the hearings did not show they were immediately able to operate a Tesla franchise, nor did they say how they would do so profitably. Some admitted they have no way of servicing Tesla cars independently.

The initial ruling from the hearing officer said that potential profitability of an independent Tesla dealer was irrelevant.

Holcomb said he disagrees with that assertion.

“A dealership must be capable of remaining in business in order to service existing customers and provide product for future customers,” Holcomb stated.

He pointed to Tesla’s business model, which he said “differs from traditional car dealerships in many ways; but specfivially, Tesla sells its vehicles at uniform prices whether a customer purchases through the Tesla website or at a Tesla store.”

That model leaves no room for the usual car dealer model of buying at wholesale and selling at a markup.

Holcomb ultimately found that “No dealer independent of Tesla is available in the Richmond, Virginia community or trade area to own and operate a Tesla dealership in a manner consistent with the public interest.”

Holcomb also weighed the public support for Tesla coming to Richmond during the hearing process.

“I believe it would be unreasonable and not in the public interest to require the removal of that relationship – Tesla to Tesla’s customers – and require the interjection of a third party which could possibly create distance from Tesla’s already proven successful concept,” Holcomb said, adding that Richmond car buyers would then be forced to travel to Raleigh or Fairfax to buyer a Tesla.

The ruling is a reversal from Holcomb’s decision against Tesla in 2013 when it sought to open a dealership in Northern Virginia. The company eventually took that fight to circuit court and was able to open a dealership in Fairfax only after a settlement with VADA and the DMV.

VADA also sued Tesla and DMV earlier this year, arguing that by seeking to open a second dealership in the state, the carmaker had breached their contract that allowed them to open the Fairfax dealership. Fairfax County Circuit Court dismissed the case in September.

Holcomb’s decision only makes Tesla eligible to operate the Richmond dealership; it must still obtain a license to do so from the Motor Vehicle Dealer Board.

And there is still room for the VADA or other opponents of Tesla’s plans to appeal Holcomb’s ruling. Any party that wants to dispute the decision has 33 days to send notice to the DMV and then file an appeal in an appropriate circuit court in Virginia.

A message left for Hall of the VADA was not returned by press time.

Tesla said it applauds the ruling.

“This decision will allow Richmond-area consumers to learn about and purchase their Tesla vehicles in closer proximity to their homes,” the company said in a statement. “We are thankful for the many Tesla owners and Virginians for their support.”

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2 Comments »

  1. Ed Christina December 1, 2016 at 5:09 pm - Reply

    So, my big question is, when people start using cars as a service, like a driverless Uber, that you don’t own but summon as needed, what will car dealers do then?

    What is the strategy at that point?

  2. Charles Batchelor December 9, 2016 at 11:03 am - Reply

    Good job, DMV! Let’s hope Virginia’s governmental leadership doesn’t stand in the way of change. I do feel for the dealerships, but they are not alone. Much of our economy and culture is driven by cars and it’s changing rapidly. Ed Christina’s point is can be extended to many businesses. Growth in demand for gasoline, for example, is seen as flat. Few gas stations needed. I can drive from Richmond to Atlanta now on one tank of gas. Takes ten hours, so where I stop along the interstate to shop isn’t so much for fuel as for food.
    https://www.bloomberg.com/news/articles/2016-12-03/electric-cars-could-take-an-opec-sized-bite-from-oil-demand

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