Trouble in NC: Senate Bill 327

[bollar]

I'm not sure that is the case. Two questions come to mind.

1. Can Tesla be a dealership or do they need to create a wholly owned subsidiary that they designate as their dealership? Can they even do that, or does it need to be a separate company altogether?
2. If they have a dealership in NC, do they then become subject to all the franchise laws around the country that they are currently bypassing because they do not have and have never had any dealers?

1. Is easy -- unless there is a requirement defined outside this law, they are specifically allowed. See p2., lines 1-4

2. I don't know. That why delivery to a nearby State is likely easier. SC would probalby like to collect the sales tax. We know that VA has a similar view to NC.

http://www.ncleg.net/Sessions/2013/Bills/Senate/PDF/S327v2.pdf

 

[stopcrazypp]

I'm not sure that is the case. Two questions come to mind.

1. Can Tesla be a dealership or do they need to create a wholly owned subsidiary that they designate as their dealership? Can they even do that, or does it need to be a separate company altogether?
2. If they have a dealership in NC, do they then become subject to all the franchise laws around the country that they are currently bypassing because they do not have and have never had any dealers?

Number two is what I'm mainly concerned about. If this fight is only about direct internet sales, even if Tesla loses it, they only need to open a factory owned store and that's the end of it (at least until it's appealed to a federal court as interfering with interstate commerce). It's probably a waste of money right now, but it's better than not being able to sell cars in NC.

I imagine it's not that simple. NC might require Tesla offering a franchise and this will break Tesla's claim that they don't any franchises. The dealers might be using this strategy to impact Tesla's battle in other states.

 

[dflye]

Having sales and delivery run through the adjacent states of SC and VA would give most NC purchasers a way to acquire a Tesla without having to travel any significant distance. However, the tax and EV credit implications may be an issue, depending upon who the original owner would be in the neighboring state, whether the intended NC owner or some intermediary.

Not sure that the current service center in Raleigh could be considered a "showroom" as the lobby is tiny and the service area in back isn't much bigger!

 

[bollar]

Having sales and delivery run through the adjacent states of SC and VA would give most NC purchasers a way to acquire a Tesla without having to travel any significant distance. However, the tax and EV credit implications may be an issue, depending upon who the original owner would be in the neighboring state, whether the intended NC owner or some intermediary.

Not sure that the current service center in Raleigh could be considered a "showroom" as the lobby is tiny and the service area in back isn't much bigger!

It's not covered in this bill, but elsewhere (maybe DMV site?), the minimum showroom size was 92 sq ft. I'm thinking the SC or the new Gallery would qualify.

I'm sure there's some creative way to deal with the out-of-state delivery without creating an intermediary sale. Back in the dark ages when I was a child living in Hendersonville, we regularly bought our VWs from a dealer in Spartanburg and imported them into NC.

I really don't think North Carolina's sovereignty would extend to our ability to buy a car in California, take delivery in South Carolina and then subsequently bringing into North Carolina. Of course, the amusing part is that SC would then get the sales tax revenue and NC would lose their share due to their title transfer reciprocity agreements.

 

[JRP3]

I imagine it's not that simple. NC might require Tesla offering a franchise and this will break Tesla's claim that they don't any franchises. The dealers might be using this strategy to impact Tesla's battle in other states.

Tesla might be better off just avoiding NC in that case. It won't be long before the populace gets up in arms when the rest of the nation can buy Tesla's and they can't. Tesla is production constrained at this point anyway so ti's not as if NC sales will make any difference to them in the short term.

 

[qwk]

Tesla might be better off just avoiding NC in that case. It won't be long before the populace gets up in arms when the rest of the nation can buy Tesla's and they can't. Tesla is production constrained at this point anyway so ti's not as if NC sales will make any difference to them in the short term.

Yep, and we all know that people want to buy what thay can't have.

 

[brianstorms]

So folks in NC cannot even buy a Tesla via the website, with no pre-sale in-person interaction?

But on another note, I sure wish some enterprising, gritty investigative reporter would start sniffin' around to see if ALEC is involved in this and the Texas legislation. It reeks of ALEC.

 

[Jonathan Hewitt]

I live in South Carolina. If it gets down to it I will receive Model S's in exchange for test drives/rides kidding. but really. I have only seen one in person so far

 

[J in MN]

What does this mean?

The following license holders may operate as a motor vehicle dealer without obtaining a motor vehicle dealer's license or paying an additional fee: a manufacturer, a factory branch, a distributor, and a distributor branch.

 

[stopcrazypp]

What matters the most is what follows (bolded part was added):

Any of these license holders who operates as a motor vehicle dealer, including a license holder who uses a computer or other communications facilities, hardware, or equipment at any location within this State for the purpose of transmitting applications, contracts, or orders for motor vehicles purchased or leased by retail purchasers or lessees located in this State, may sell motor vehicles at retail only at an established salesroom.

What this law essentially says is every person in NC that uses a computer to order a car qualifies as dealer and that such a dealer must have an established salesroom in the state. That means direct internet sales are banned (Tesla must open a store). I have not dug through the whole thing to find if there are any franchises only provisions (if it's like other states there likely are and it might not even be in this document, but rather in other parts of NC's law).

 

[Cheerose]

I interpret that a little differently. As a dealer, Tesla can still open a store if they don't use it to create any orders.
The prospective buyer would need to use their own device to make the initial order.

What could work within the law is say "To start an order, you will need to visit our website. Now, by law, we cannot do that here, but as you can see, there are some strategically placed Internet terminals just outside the store's entrance..."

 

[JRP3]

Made the Yahoo home page: http://gma.yahoo.com/teslas-direct-sales-business-model-targteted-n-c-170402561--abc-news-money.html

 

[bollar]

I interpret that a little differently. As a dealer, Tesla can still open a store if they don't use it to create any orders.
The prospective buyer would need to use their own device to make the initial order.

What could work within the law is say "To start an order, you will need to visit our website. Now, by law, we cannot do that here, but as you can see, there are some strategically placed Internet terminals just outside the store's entrance..."

Among other things, the challenge is p2, lines 14-15:

may sell motor vehicles at retail only at an established salesroom.

The concerns are that 1) you have to be a dealer to have a salesroom 2) consumers can only purchase a car at a salesroom (not themselves at teslamotors.com). Tesla doesn't want to be a dealer and they want people to buy the car from their website.

For those new to the thread, Musk goes into quite some detail why this is their position on the Tesla blog: The Tesla Approach to Distributing and Servicing Cars | Blog | Tesla Motors

 

[TI Sailor]

Am I missing something. When I bought my Acura, I configured it on the internet, negotiated with multiple dealers by phone and emails, and only used the (best deal) showroom to sign the final paperwork. I never met the sales associate physically. Since NC already has at least one service center, why can't that act as the "dealer" showroom, e.g., where the paperwork is completed? In fact, given that service centers will soon have loaners, perhaps test drive appointments can be coordinated with service needs. It's certainly less expensive to hire an additional employee than open a store. Again, what are the nuances I'm not understanding? Please don't blow me up. I'm just seeking an answer to the legislative speed bump, not trying to stir the pot or anything similar. I live in FL and don't have a dog in the race so to spe

 

[dsm363]

It usually has to do with a 'franchised' dealer working the sale. At least in Texas, that is the problem. In your case, Acura still went through the dealership with the sale and delivery.

 

[bollar]

Am I missing something. When I bought my Acura, I configured it on the internet, negotiated with multiple dealers by phone and emails, and only used the (best deal) showroom to sign the final paperwork. I never met the sales associate physically. Since NC already has at least one service center, why can't that act as the "dealer" showroom, e.g., where the paperwork is completed? In fact, given that service centers will soon have loaners, perhaps test drive appointments can be coordinated with service needs. It's certainly less expensive to hire an additional employee than open a store. Again, what are the nuances I'm not understanding? Please don't blow me up. I'm just seeking an answer to the legislative speed bump, not trying to stir the pot or anything similar. I live in FL and don't have a dog in the race so to spe

I'm with dsm363. Although the NC law may not seem all that bad, it could set a precedent for other states that have franchise dealer laws. Opening a dealership in North Carolina could erode Tesla's position in other states -- Massachusetts probably being first, since there are already existing lawsuits against Tesla.

 

[gregincal]

I'm with dsm363. Although the NC law may not seem all that bad, it could set a precedent for other states that have franchise dealer laws. Opening a dealership in North Carolina could erode Tesla's position in other states -- Massachusetts probably being first, since there are already existing lawsuits against Tesla.

Actually, the fact that Tesla is trying to do exactly this in Massachusetts is why they are being sued there. Tesla created a subsidiary and was granted a license for a sales office (separate from their gallery). I'm pretty sure they've already done this in other states. For instance, I'm pretty sure the Portland store has an Oregon dealers license. The only thing Tesla can never do without creating problems is have a franchised (non-company owned) dealership. Texas is a problem because they outlaw all company owned dealerships. Some other states (like Massachusetts) only prevent company owned dealerships if there are franchised dealerships.

This law would still be a pain for Tesla, though, because people in NC would need to buy their cars only through the Tesla store.

 

[AudubonB]

As I believe has been brought forth in threads about these restrictions in other states, this apparent violation of interstate commerce suggests a trip to the US Supreme Court will be the ultimate outcome, with the goal to estop all states' similar actions. Tesla itself could initiate this, but in my utterly non-legal, ignorant ... but fairly experienced ... opinion, the better and more likely course of action would be for it to be proffered by an aggrieved would-be consumer.

 

[TI Sailor]

Actually, the fact that Tesla is trying to do exactly this in Massachusetts is why they are being sued there. Tesla created a subsidiary and was granted a license for a sales office (separate from their gallery). I'm pretty sure they've already done this in other states. For instance, I'm pretty sure the Portland store has an Oregon dealers license. The only thing Tesla can never do without creating problems is have a franchised (non-company owned) dealership. Texas is a problem because they outlaw all company owned dealerships. Some other states (like Massachusetts) only prevent company owned dealerships if there are franchised dealerships.

This law would still be a pain for Tesla, though, because people in NC would need to buy their cars only through the Tesla store.

Might not be as big of a pain as traveling out of state, paying out of state sales taxes and proving same to NC, etc.

 

[AudubonB]

As a follow-up, there now is a Forbes article re the Interstate Commerce aspect: North Carolina's Threat To Tesla Likely Unconstitutional - Forbes