Injunction To Shut Tesla Store Denied In MA, Dealers To Fight On

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Tesla's retail store concept

Tesla's retail store concept

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Score one for startup carmakers trying to do things differently.

Last Friday, a judge denied a request by the Massachusetts State Automobile Dealers Association for an injunction that would have shut down the Tesla Store in Natick, which opened on September 28.

If the dealers' request had been granted, Tesla Motors [NSDQ:TSLA] would have been allowed to use its premises only for "an unstaffed display of a locked automobile."

Like all Tesla Stores, the Natick outlet has staff who educate consumers about electric cars and its new Model S all-electric sport sedan.

The stores are modeled after the much-lauded and very successful Apple Stores. The staff are not salespeople, Tesla says, and are not paid on commission.

All sales are conducted online between the buyer and the company itself.

The Massachusetts dealers sued Tesla on October 16, after expressing their opposition to the Natick store in June, well before it opened.

Local selectmen had approved the store's license, but the dealers first claimed that Tesla had no plans for service facilities on site, which is required for dealerships.

The Massachusetts dealers are far from giving up, however.

Robert O'Koniewski, the state group's executive vice president, told Automotive News that "dropping the lawsuit is not an option at this point."

While the group hasn't yet decided how to proceed, he added, it still feels that Tesla is illegally operating a factory store outside the state's franchise and license laws.

Tesla CEO Elon Musk weighed in with a conciliatory statement last month.

Musk argued that company stores were necessary because existing dealers earn the bulk of their profits from gasoline cars--and hence would not be able to educate consumers on the benefits of electric cars.

In respect to a pair of lawsuits filed by dealers against Tesla Motors, he said the company feels they are "starkly contrary to the spirit and the letter of the law."

Musk pledged that the company follows existing state laws to the letter. "We do not seek to change those rules," he wrote, "and we have taken great care not to act in a manner contrary to those rules."

Tesla Store - Portland OR

Tesla Store - Portland OR

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Dealer groups have been able to enact laws in 48 states that prohibit carmakers from operating their own sales outlets that would compete with existing franchised dealers.

As a startup, Tesla has no franchised dealers, so it is not competing with anyone.

Threatened dealer groups, however, have fought the Tesla Store model on many fronts.

In Colorado, for example, the local dealer group changed the state law on dealerships in 2010.

The previous law had protected existing franchises from factory competition; the revised wording flatly banned any automaker from operating any dealership or sales outlet.

The National Automobile Dealers Association said last month in a statement that it "is confident [Tesla] will re-examine its business model" as its sales grow, to "recognize the value of the independent, franchised dealer system."

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