Tesla applied for a second dealership license in North Carolina to secure permission to operate another store in the state instead of going through third-party franchise dealerships. But last week, the DMC ruled against the EV firm obtaining a second dealership license; as a result, the automaker’s latest store in Charlotte has to operate as a “gallery.”
Opposition from dealers
According to Auto News, “The North Carolina Division of Motor Vehicles ruled Friday that Tesla did not meet the requirements to become exempt from state law prohibiting manufacturers from owning dealerships.”
The EV firm wanted to open a second North Carolina dealership location at its existing gallery and service center in Matthews, N.C., a suburb of Charlotte, the website said.
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
Four local dealership groups argued that it was possible for Tesla to go through local independent dealerships, following which, the DMV rejected its dealership application. The North Carolina DMV said the market has at least three independent dealers that can own and operate a Tesla dealership in a manner consistent with the public interest, which meant the exemption would not apply, the report said.
Tesla has one dealership in the state in Raleigh. The state does not outright ban direct car sales from automakers to consumers, but restrictions make it very difficult for them to operate a dealership without having to go through a third party.
Tesla can’t thrive under dealership model
Tesla has always been against the third-party dealership model, saying this model cannot work with its business model. Earlier this year, Tesla’s General Counsel, Todd Maron, told the FTC that it will be very difficult for the automaker to thrive under a dealership model because most of the profit independent dealers make comes from servicing cars, while electric cars need little long-term maintenance and have fewer moving parts. The EV firm does not even try to make money from servicing its fleet.
Tesla will use “galleries” instead of stores or dealerships to bypass the system and keep its Charlotte location. To ensure that state laws are complied with, Tesla employees at the galleries can show the cars to potential customers and educate them about the various electric vehicles and offerings from the company.
However, they are not allowed to discuss pricing or take an order. The customers will need to either go through Tesla’s website or be redirected to the Raleigh location, which still has a dealership license.