Tesla prepares for federal battle over direct sales

March 30, 2016

Tesla is preparing to file a federal suit if it’s unable to secure the right to sell its electric vehicles directly to customers in six states, a new report finds.

For years Tesla has been fighting decades-old franchise laws throughout the United States that bar manufacturers from selling directly to consumers. Six states in particular — Arizona, Michigan, Texas, Connecticut, Utah and West Virginia — have proven difficult for Tesla to crack. The electric automaker is currently waiting on new legislation and dealer applications in those states to begin direct sales, but if those measures fail, Tesla could take its fight to federal courts.

Somewhat strangely, Tesla’s legal hopes could be pinned on a 2013 suit that was filed by St. Joseph Abbey in New Orleans to sell monk-made caskets directly to consumers. The abbey discovered after Hurricane Katrina that state laws restricted coffin sales to those licensed by the Louisiana Board of Funeral Directors. The abbey argued that there was no reason for the casket law other than to protect existing businesses from new competition, and the Fifth Circuit Court of Appeals ultimately agreed.

“It is widely accepted that laws that have a protectionist motivation or effect are not proper,” Todd Maron, the auto maker’s chief counsel, told The Wall Street Journal. “Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table.”

Tesla is hoping its direct sales battle won’t come to a federal suit, but it’s prepared to dig its heels in on the matter. That fight would likely come next year, around the time the company plans to start sales of its $35,000 Model 3 sedan.

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