Tesla’s recent triumph in Delaware’s Supreme Court allows for the direct sale of electric vehicles in the state, overcoming restrictions imposed by outdated laws designed to protect franchise dealerships. Ironically, these laws now impede new automakers such as Tesla, which follow a non-franchise model, from competing with dealers selling vehicles from other automakers.
While numerous states have taken steps to address the problem by revising their direct sale laws to avoid monopolies by third-party dealerships, a few states, where influential car dealers sway politicians, continue to exploit these outdated regulations to hinder companies like Tesla from opening their own stores.
In Delaware, the Department of Motor Vehicles (DMV) favored car dealerships by interpreting the law to prohibit any car manufacturer, including those without franchise dealers, from operating their own dealership. Tesla contested this interpretation in Superior Court without success, but the case was ultimately brought before Delaware’s Supreme Court, which ruled in favor of Tesla earlier this week.
The court ruling reversed the DMV Director’s decision and the Superior Court judgment, invoking the Franchise Act established by the General Assembly to rectify disparities in bargaining power. Tesla’s direct sales approach, which bypasses franchised dealerships in Delaware, does not fit within the Act’s parameters.