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Dealers sue Tesla over factory stores, Tesla vows to fight back

October 22, 2012

When we last checked in on Tesla's plans to sell its electric cars exclusively through factory-owned boutiques and online rather than franchised dealers, several dealers said they worried about the precedent Tesla could set. That concern was enough to drive two dealers to file lawsuits against Tesla last week in Massachusetts and New York, claiming the factory stores violate state dealer laws. Today, Tesla chief Elon Musk vowed to fight -- and hinted that the suing dealers had hidden motives.

According to Automotive News, dealer associations in both states accuse the Tesla boutiques of circumventing state rules forbidding automakers from owning stores that sell cars to the public. Tesla's 18 stores in the United States are just showrooms, with no vehicles customers can buy on the spot; shoppers who want to order a $90,000 Tesla Model S must do so over the web, and arrange for delivery when their vehicle is built. Both stores targeted by dealers have won approval from state officials.

In a post today, Musk defended the Apple-like approach to selling cars, contending the all-electric Model S would get short shrift if sold like any other model, and requires a sales staff that understands electric vehicles. He also vowed that the company would open more service centers than dealerships, with 85 percent of Tesla customers within 50 miles of one -- which matters because Tesla requires Model S owners to buy a $600 annual service agreement or risk having their warrant voided.

As for the lawsuits, Musk says they are "starkly contrary to the spirit and the letter of the law," and notes that one suing dealer also owns a Fisker franchise, while another "has repeatedly demanded that it be granted a Tesla franchise."

"They will have considerable difficulty explaining to the court why Tesla opening a store in Boston is somehow contrary to the best interests of fair commerce or the public," Musk wrote.

It's untrod ground for an automaker to challenge dealers this way; other automakers who attempted to run factory stores had franchise dealers who could complain of mistreatment. The first hearing in the Massachusetts suit will come Thursday, but given how much Tesla has staked on its strategy, don't expect either side to compromise soon.

Photo: Steve Jurvetson via Flickr