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Tesla faces a setback in Virginia, DMV sides with dealerships on direct sales


Earlier this year, the Virginia Automobile Dealers Association (VADA) filed a lawsuit against Tesla and the state’s Department of Motor Vehicles (DMV) commissioner, Richard D. Holcomb, to stop the automaker from opening a second store in the state. Tesla currently operates a store and service center in Vienna near Washington DC, but it was also planning to set up shop in Richmond.

Now we learn that a hearing officer for the DMV sided with the dealerships and recommended to deny the automaker’s dealership license request and force them to do business in Richmond through local third-party dealers.

Unlike other states where Tesla is banned from selling its vehicles directly to consumers, like Texas or Michigan, Virginia doesn’t outright ban automakers from owning and operating car dealerships, but they need to prove that no independent dealers can sell their cars in the region in order to get the license.

Tesla said that it couldn’t sell through the local dealers, but Daniel P. Small, the hearing officer, wrote in his recommendation this week via the Richmond Times-Dispatch:

“Simply put, the evidence does not support Tesla’s request. There are dealers independent of Tesla — at least 11 of them — prepared to be Tesla dealers.”

Small’s recommendation carries some weight, but it’s up to the commissioner to follow it or not and it could take up to two months before we have the final decision. Nonetheless, VADA already said that they were pleased with the outcome so far:

“We welcome Tesla in Virginia, but the company must operate according to the commonwealth’s laws and the public interest.”

While it’s not the first time that dealers claimed to be willing to sell Tesla’s vehicles, the automaker argues that it wouldn’t be in its own or the public interests.

Tesla insists that it doesn’t make sense for the company to use a franchise dealership model. One of the main reason why Tesla refuses to go through third-party dealerships is their proven inability to sell electric vehicles either due to the lack of desire or knowledge. Of course, the other important reason is that dealerships make most of their profit on servicing the vehicles they sell, while Tesla aims not to make a profit on service.

A recent study on the electric vehicle shopping experience partially gave reason to Tesla and found that a lot of dealerships are not even charging electric vehicles on their lots resulting in potential buyers not being able to get test drives.

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