Dealers face-off with Tesla at motor vehicle law conference

Dealers face-off with Tesla at motor vehicle law conference

[I]Regulators in Baltimore last week tee-up Teslas quest to retail its cars [/I]

The National Association of Motor Vehicle Boards and Commissions (NAMVBC) convened its annual conference in Baltimore last week to compare notes among the 35 or so separate state agencies that comprise its membership on matters relative to regulating auto sales across the U.S.

Included in the two-day conference agenda was the issue of Tesla Motors quest as a manufacturer to sell its niche, high end, electric vehicles, at retail, directly to consumers, without having to comply with state dealer licensing laws. In a face-off format, Tesla representatives paneled up with an opposing team of auto dealer association representatives, to vet for regulator conferees the question of Tesla utilizing its retail model of selling its new, six figure, all-electric sports cars through abbreviated, shopping mall-style store fronts without a franchised dealer network.

The crux of this ongoing dealer group/OEM disagreement that has played out in state legislatures and motor vehicle agencies across the country over the past year is this:

Should California-based Tesla with its well-received $100,000 plus EV sports car series be allowed to utilize its Dell-computer sales model to retail its vehicles online? Or from Teslas perspective, shouldnt they be allowed to retail their vehicles through urban-centered, salon sized showrooms, supported by off-site service centers that may be in other states?

Acknowledging a significant departure from the standard new car retail model, Tesla insists its EV products represent cutting-edge advanced technology, which are best sold without dealers or through standard dealership facilities. And for state regulators, driven by franchised dealer associations, to thwart or outright deny the OEM licensure to retail its vehicles stifles innovation, Tesla says, in the all-important alternative fuels effort in the industry.

Taking exception to Tesla, franchised dealer representatives argued to regulators that dealer licensing laws protect consumers by: 1) requiring proper dealer facilities; 2) providing a litany of indispensable car purchase services (e.g., financing, vehicle registration, new car delivery); and 3) furnishing a host of after-the-sale services (e.g., warranty administration, safety inspections, vehicle maintenance and repairs).

Representing the dealers were Bill Wolters of the Texas Auto Dealers Association, and dealer lawyer Mike Charapp; for Tesla was Diarmuid O’Connell its vice president of business development; James Chen, its general counsel; and John Weistart, professor of law, Duke University.

A lively panel debate, aptly entitled Is it time to carve-out a limited exception to the franchise laws to accommodate start-up alternative fueled vehicles? effectively chronicled the well-publicized franchise dealer disputes with Teslas retail sales licensing efforts over the past year. It did little, however, to signal how Teslas quest to sell its vehicles in its own way will be settled with regulators and dealers anytime soon.

Other NAMVBC panel discussions included an analysis of the rocky roll out of the Consumer Financial Protection Bureau, pursuant to the Dodd-Frank Finance Reform Act, and the newly established agencys attempts to pull franchised dealer credit arrangers back onto the tracks, which U.S. dealers succeeded in hopping off, when Dodd-Frank was enacted year before last.

There was a related analysis of enhanced Federal Trade Commission enforcement of federal consumer protection laws against dealers, pursuant to Dodd-Frank, which included an update of FTC inspired consent agreements with dealers around the country for unfair and deceptive trade practices.

As a sponsor of the Baltimore NAMVBCs Conference, NADA had its president Peter Welch, open the program which was attended by sister dealer association CEOs, including Peter Kitzmiller of MADA and Gerard Murphy of WANADA.

WANADA commends Bill Wolters of TADA and Mike Charapp of Charapp & Weiss, for a job well done on the aforementioned Tesla panel.

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