In Va., Tesla Motors has a showroom where it cant make sales

August 03, 2024

It hasn’t been a smooth ride for Tesla Motors in Virginia.

Nearly two months ago, the electric vehicle manufacturer known for its six-figure price tags opened a gallery at Tysons Corner. Potential customers can check out the Model S, chat with employees and pick up a Tesla T-shirt or baseball cap.

But they can’t buy a car.

Virginia law prohibits car manufacturers from operating their own dealerships, partly to encourage competition and protect consumers. So the California-based company is using the Tysons Corner location as a showroom where employees are forbidden from discussing purchases.

The car manufacturer has petitioned Virginia to grant it an exemption. If granted, it could set a precedent for car manufacturers looking to sell their cars in the state without the middle man.

“This would be opening the door,” said George Hoffer, a transportation economics professor at the University of Richmond. “There would be other people, other manufacturers, especially from abroad, who would like to come in and use this business model.”

Tesla’s current model revolves around selling its products not through a dealer but directly to customers, usually online, according to Diarmuid O’Connell, Tesla’s vice president of business development.

But Tesla is hitting roadblocks like the one in Virginia across the country, most recently in North Carolina, Texas, Minnesota and New York. Forty-eight states ban or limit direct sales of automobiles, according to the Chicago Tribune.

In the future, Tesla may use both its own dealerships and independently owned ones, O’Connell said, but for now the company wants to guide customers through the new technology.

Chief executive Elon Musk has said he might take his case to Congress or the federal courts. “If we’re seeing nonstop battles at the state level, rather than fight 20 different state battles, I’d rather fight one federal battle,” Musk told Automotive News in April.

Tesla’s journey in Virginia began in March 2012. An exemption to the no-direct-auto-sales law can be made if the commissioner of the Department of Motor Vehicles finds that no independent dealer in the community is available to “own and operate the franchise in a manner consistent with the public interest.”

A hearing officer twice recommended that Tesla be allowed to operate its own dealership, despite objections from the Virginia Automobile Dealers Association.

Tesla published notices, as required by law, in The Washington Post and the Washington Times in June 2012 inviting parties interested in running a franchise to attend a hearing at the DMV. None came.

“Could Tesla have done more? Of course it could. It could have placed notices in every journal in Virginia, Washington and Maryland,” hearing officer W. James Dangoia wrote. “It could have posted notices on supermarket bulletin boards and hired skywriters. But the only notice that is required is the publication of the notice that Tesla did in fact publish.”

DMV Commissioner Richard Holcomb, however, declined to authorize the exemption, saying in documents that he needed more information about Tesla's efforts to identify or solicit potential dealers.

Tesla filed an appeal with the Fairfax County Circuit Court last week and is starting to reach out to Virginia legislators ahead of the next session.

Over the past five years, more than 500 Tesla cars have been sold to customers in Maryland, Virginia and the District. There is a store in the District and a service center in Rockville, in addition to the Tysons Corner gallery. Tesla is also working toward applying for a license to directly sell its cars in Maryland, a spokeswoman said.

The Virginia Motor Vehicle Dealer Board will discuss the Tysons Corner Tesla location at a July 8 meeting, and it has invited Tesla representatives to explain how the gallery concept works.

“Tesla Motors, they’re in the business to do what? Sell cars,” dealer board executive director Bruce Gould said, but Tesla isn’t allowed to sell cars in Virginia. “It raises a little bit of ‘Huh?’”

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