A battle between Tesla and the state of Delaware has finally concluded, as the Delaware Supreme Court overturned a previous ruling that banned the automaker from selling cars in the state. Previously Tesla was unable to open a dealership in Delaware, which disrupted the company’s direct-to-customer sales strategy.
In 2019, the Delaware Department of Motor Vehicles (DMV) rejected Tesla’s proposal to establish a dealership within the state, citing a violation of the Motor Vehicle Franchising Practices Act, which prohibits automakers from owning dealerships. However, Tesla was permitted to operate a “gallery” at the Christiana Mall and a service center in Newport, as long as vehicle sales did not occur at those locations.
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According to Delaware Business Now, buyers wanting a Tesla could make their purchases at Tesla dealerships in neighboring states. Online purchases were also an option for anyone wanting a Tesla in the state. Still, such workarounds were not seen as ideal.
Tesla appealed the DMV’s dealership denial, which was initially upheld by a Superior Court judge. But on Monday, the Delaware Supreme Court overturned the ruling, factoring in the fact that Tesla’s business model is very different to other automakers. “The General Assembly enacted the Franchise Act to address the disparity in bargaining power, which permitted new motor vehicle manufacturers to exert economic pressure over their franchises. Its definitions exclude Tesla and its direct sales model, where new electric cars are not sold through franchised dealers in Delaware,” justices ruled.
Such laws had been put in place decades ago over fears that automakers would exert pressure on franchised dealers by selling cars directly to the consumer. However, as Tesla does not operate with third-party dealers, it has been able to fight and win battles in other states with similar laws.
