States banning Tesla direct sales might have a blind spot

Posted on October 03, 2021 by Charles Morris

Tesla has set out to improve or eliminate aspects of the car ownership experience that consumers don’t like, and car dealers are at the top of that list. From the beginning, the company has sold its cars directly to customers online. However, Tesla has also chosen to open company-owned retail sites, and this soon ran afoul of state laws that prohibit direct sales of automobiles to the public. 

Above: Tesla's fleet of electric vehicles parked in front of a sales and service location (Source: EVANNEX; Photo by Casey Murphy)

Tesla’s war with the powerful auto dealers began in earnest in 2012, and has continued on a state-by-state basis to the present (you can read about the highly colorful details in my newly-revised history of Tesla). Today, the country is a patchwork—some states explicitly allow Tesla to operate retail and/or service locations, some explicitly prohibit it, and in others some sort of compromise has been reached.

Keep in mind that, despite some of the headlines you may see, no state actually bans Tesla from selling vehicles. Customers in any state can order a car online, and have it delivered. The struggle is about whether Tesla can have stores, showrooms or service facilities in a state, and whether sales staff can discuss prices and offer test drives at such sites.

The situation in Texas is highly ironic—Tesla is building a massive Gigafactory in the state, a billion-dollar project that’s expected to create at least 5,000 jobs, but the state still bans direct sales, so once Tesla begins production at the Austin Gigafactory, any vehicles sold to Texans will apparently have to be shipped out of the state, then shipped back in.

Above: A look inside a Tesla Service Center (Source: Tesla)

In neighboring New Mexico, Tesla has been trying to get the state’s ban on direct car sales reversed for some time, without success. Now the company has found a loophole to get around the law—it has launched its first store and service center on tribal land.

Native American lands are technically sovereign nations, and within their boundaries, tribal laws generally take precedence over state laws.

Tesla recently opened a retail and service facility inside an old casino north of Santa Fe, which sits on land belonging to the nation of Nambé Pueblo. The new site will allow the company to offer services to Tesla owners in the Santa Fe region.

Above: A Tesla Service Center opens in Nambé Pueblo (YouTube: KRQE)

Tesla’s legal eagles have obviously researched the relevant laws, and expect the arrangement to hold up in court, so to speak. If it does, this might prove to be a way forward in other states that continue to ban Tesla’s retail centers. Tribal lands exist all over the country, and some are close to larger population centers. In many cases, tribal governments and state legislatures have been happy to take advantage of the legal situation in order to get around state bans on gambling and other lucrative activities. Will lawmakers prove similarly enthusiastic about welcoming Tesla to their states?

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Written by: Charles Morris; Source: Electrek

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