Tesla Dealer Fight Erupts in Georgia as Retailers Seek Sales Ban

Aug 30, 2014 12:01 am ET

Aug. 30 (Bloomberg) -- Tesla Motors Inc., which has fought U.S. dealers over its direct sales of electric cars, faces a new challenge in Georgia where auto retailers want the Peach State to bar distribution of sedans from the company’s store.

Tesla sells vehicles in violation of the state’s rules limiting the annual volume of cars it can sell directly to the public, the Georgia Automobile Dealers Association said in a petition filed with the Georgia Department of Revenue.

The group, which represents 500 dealerships, asked that Tesla’s license be revoked and the agency block sales of Tesla’s Model S sedan at its shop in Marietta, near Atlanta.

The new dispute follows similar spats this year with dealers in Missouri, New Jersey, New York, Ohio and Pennsylvania. Elon Musk, Tesla’s co-founder and chief executive officer, has said the unique nature of the Model S, priced from $71,000, and electric cars generally, are best sold through the company’s stores and staff.

The carmaker’s license in Georgia allows it only to sell vehicles made “in accordance with custom design specifications of the customer” and retail fewer than 150 a year, the group said in the petition. Tesla sold 173 sedans at its suburban Atlanta outlet, its only store in the state, from October to June, according to the petition, a copy of which was obtained by Bloomberg News from the revenue department.

Liz Jarvis-Shean, a spokeswoman for Tesla, declined to comment on the petition. Nick Genesi, a spokesman for the Georgia agency, confirmed the petition was filed yesterday, without elaborating.

‘Groundswell’

“It’s difficult to find fault in the dealers association point that manufacturers should adhere to the existing laws,” said Eric Ibara, senior analyst for Kelley Blue Book in Irvine, California. “With the success of the Model S and the prospect of future Tesla products, it’s also not hard to envision a groundswell of Georgia voters petitioning their lawmakers into allowing for the sale of these cars in their state.”

The dealers’ action was reported earlier by the Atlanta Business Chronicle.

Tesla rose 2.2 percent to a record $269.70 yesterday in New York, the highest closing price since the company’s June 2010 initial public offering. The stock has risen 79 percent this year.

The company, based in Palo Alto, California, said yesterday it reached an agreement to create a vehicle-charging network with China United Network Communications Corp., the country’s second-largest mobile-phone company.

Musk, 43, has said Tesla’s sales in China may match its U.S. business by as early as 2015, and eventually become its biggest single market. The company’s overseas prospects may lessen the significance of its domestic disputes with dealers, Ibara said.

“It may be that Tesla’s future rests more with sales in China so these battles will become less critical for Tesla to win.”

--With assistance from Alexandra Ho in Shanghai.