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Tesla takes a win against dealerships in Virgina: DMV rules in favor of the automaker

Interior of the Cleveland store as line filters in.

Richard D. Holcomb, the Virginia Department of Motor Vehicles Commissioner, has pretty good timing. Just a few days after an embarrassing video of the Virginia Automobile Dealers Association (VADA) promoting a lobbying effort against Tesla getting a dealership license in the state came to light (and has since been removed), the commissioner ruled in Tesla’s favor.

He overturned a previous decision from a hearing examiner blocking Tesla from obtaining a dealership license in response to pressure from local car dealers claiming that they could sell Tesla’s vehicles in the Richmond area, where the company was trying to open a store. You can read the new decision in full below.

Tesla still has to get approval from the Motor Vehicle Dealer Board, but it is now clear from the DMV unless VADA appeals in court. It’s not a guarantee yet, but Tesla should be able to operate a store in the Richmond area.

In Virgina, automakers are not outright banned from owning and operating dealerships, but they need to prove that independent dealers in the region are not available to sell their vehicles. During the original hearing when the examiner ruled against Tesla, he cited 11 letters from local dealerships “showing interest” in distributing Tesla’s vehicles.

The commissioner found that those letters were prompted by the Virginia Automobile Dealers Association (VADA), which urged their local members to send the letters, but it didn’t prove that they were available to sell Tesla’s cars.

Tesla has always rejected the third-party dealership model, saying it wouldn’t work with Tesla’s business model. Earlier this year, Tesla General Counsel Todd Maron argued before the FTC that the automaker or dealerships wouldn’t thrive under a dealership model because independent dealers make most of their profit from servicing cars while electric cars have little long-term maintenance and fewer moving parts. Tesla claims that it doesn’t try to make money from servicing its fleet.

The hearing examiner concluded that the fact that Tesla doesn’t try to make a profit from servicing was “irrelevant” to its application for a dealership license, but today the commissioner disagreed with that assertion since VADA’s own expert admitted that it would be “very hard or impossible” for independent dealers to make a profit unless Tesla offered wholesale prices, which they wouldn’t do due to the company’s policy not to offer discounts (for the most part).

In his decision, the commissioner described the support of local Tesla owners and enthusiasts by showing up at hearings and sending letters as evidence that they support Tesla’s business model.

Here’s the commissioner’s ruling in full:

[scribd id=332823470 key=key-3LR1j5mxwVbqhoi7sPrM mode=scroll]

Featured Image: Interior of the Tesla Cleveland store as line filters in on March 31, 2016 – the first day to order the Model 3 – Jon Jivan.

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