KANSAS CITY, Mo. – New Year’s Eve marked a tough night in the Show Me State for the nation’s pre-eminent electric car company. Tesla’s license to sell cars in the state of Missouri expired Saturday, but the company hopes a court ruling expected Wednesday keeps its three Missouri venues open.
Cole County Circuit Court Judge Daniel Green ruled in Sept. 2016 that Tesla had violated the franchise law by selling vehicles directly to consumers, instead of franchising their vehicles to dealerships. The law, originally written in 1980, dictates that a car may not act as a manufacturer and vendor of cars at the same time.
Since Green’s decision, Tesla has appealed the ruling and asked for a stay to continue selling vehicles at their University City and two Kansas City stores. The three locations have already closed their doors, although whether or not they stay closed depends on the decision reached by the Appeals Court in Kansas City Jan. 4 of whether or not to grant that stay.
If the judge grants the stay, they could stay open until the court reaches its final verdict on the appeal. If not, it could put those locations at risk of closing.
A spokesman for Tesla hoped the court granted the stay to “prevent an immediate and unnecessary loss of jobs, tax revenue, consumer convenience, and consumer choice for Missourians.”
“The Missouri Automobile Dealers Association has been fighting against our ability to continue to sell to our customers, including through a lawsuit that it filed against us,” a sign on one of the closed Kansas City showrooms said in a message to potential customers. “We will temporarily close our Missouri sales locations beginning January 1 while we await the Court of Appeals’ decision.
“We regret this inconvenience to our customers in Missouri.”
Tesla has sold cars in Missouri for nearly four years, but it has experienced similar problems with franchising in numerous other states like Michigan and Texas.
Sen. Mike Kehoe, R-Jefferson City, a former franchised car dealer, believes the ruling reached by Green simply puts all vendors and manufacturers on an even playing field by making sure that everyone in the car sale business adheres to the franchise law.
“We’re operating under it right now and dealers including myself and hundreds of other dealers across this state have had to operate by those same rules,” Kehoe said. “Let’s not establish a separate tier for somebody that all of the other auto dealers or manufacturers have had to follow since 1980.”
The word “cartel” gets thrown around a lot by critics to describe dealership organizations opposing Tesla from operating their direct-to-consumer-business model in the state, but Kehoe claims the situation is the opposite. The franchising language, he says, lowers prices for consumers by spurring competition between dealers as opposed to buying a vehicle at list price directly from a manufacturer.
Tesla has resisted transitioning to a franchise-based business model because they sell a relatively low volume of cars compared to more established manufacturers, even as demand increases and they look to scale up manufacturing in the near future. Their current low volume means that each car sold makes a bigger impact on their bottom line. Additionally, the new technology within a Tesla makes them a bit more difficult to sell, which means that a salesperson on a commission may be less inclined to sell a Tesla as opposed to a Honda for instance.
While Tesla has vented their frustrations about franchise laws in the past (Elon Musk, the company’s billionaire CEO has called them a “perversion of democracy”), Kehoe has nothing but good things to say about Tesla’s products like the Model S, Model X and Roadster. He would not mind selling them at his own dealerships and he knows other dealers that want them on their own showroom floors, as well. He just believes the infrastructure model under Missouri’s franchise law best serves everyone in the car buying business, including the consumers.
“We want Teslas in Missouri, we want to be able to sell them,” Kehoe said. “We think consumers will not only get a better price, they’ll have a place to get service, to get repaired and take care of the vehicle after they buy it.”