The Court of Appeals issued a ruling allowing Tesla to obtain a new license for 2017 while the company appeals the lower court’s ruling. This is a positive step forward but due to the language in the current law I think there is a good chance Tesla will lose on appeal. Consequently, updating our dealer laws is still the best route forward.
Missouri courts just shut down Tesla in the state. But it’s not the judge’s fault. It’s our out-of-date laws that are to blame.
Here’s what you need to know and how you can help:
The Law & Factual Background
Under the Missouri Motor Vehicle Franchise Practices Act and related statutes car manufacturers must use franchise dealerships to sell cars to consumers. More specifically, they are expressly prohibited from selling cars directly to consumers (see RSMo § 407.826.1(1)).
Accordingly, Tesla entered into a franchise agreement that named Tesla as the franchisor and the franchisee, applied for a license to sell cars in Missouri, and obtained approval from the Department of Revenue back in 2013.
Unfortunately, that ruffled the feathers of the traditional car dealer industry.
MADA v. Missouri Department of Revenue
The Missouri Automobile Dealers Association sued the Missouri Department of Revenue and argued that, due to the language in the statute, Tesla couldn’t be both the franchisor and the franchisee. Unfortunately, they are right, and the judge agreed because under the Missouri Motor Vehicle Franchise Practices Act, a “franchisor” is defined as “a person who grants a franchise to another person.”
As a result, a Missouri Judge held that the Missouri Department of Revenue could not issue a new license to Tesla for 2017. And since Tesla’s annual licensed expired at the end of 2016, they were forced to close their stores in Kansas City and St. Louis. (This image is from the Kansas City Tesla store on the Plaza.)
(However, I predict Tesla will fight back, just like they are doing in Michigan.)
Why Our Laws Require the Franchise Model
The traditional auto industry argues that franchise dealerships are consumer-friendly, that they promote competition, and that cars are so complicated and so regulated that we need local franchise dealerships to protect consumers.
Tesla owners rave about Tesla’s cars, their quality, and most importantly about the buying process, the transparent pricing, and the amazing customer service.
We don’t need franchise dealerships. We need more innovation in the auto industry.
Don’t Blame the Judge
Here’s the thing though, the judge is not at fault here. He is simply enforcing the law as written.
And here is the important thing to understand about laws: Laws are nothing more than rules enacted by the people we choose to represent us. And those rules are always subject to change!
Let’s Change Our Laws
Go here, type in your address, and find your two representatives in Missouri. Then call them both and tell them you are in favor of changing the law to allow businesses like Tesla to operate in Missouri.
With enough support we can get our representatives to change our laws. And once we do that, Tesla can then sell cars to consumers in Missouri again.
Side Note: There are some additional arguments and issues involved in the case but I don’t have time to do a complete write up because I have a four day old baby at home and I need to get back to swaddling, changing diapers, and being a dad. 🙂
*This article is very general in nature and does not constitute legal advice.