Tesla warehouse in Freemont, California. [source: news.cnet.com]

Tesla, the all-electric car manufacturer based in Palo Alto, CA, has enjoyed a meteoric rise to fame. In the ten years since its founding, it has managed to secure the necessary funding, develop a technologically advanced product, successfully market their product,  and disrupt the conventional automobile market.  Tesla is on its way to offering practical electric cars at an affordable price within the next few years. But, their progress has been unnecessarily hampered by state-level lawsuits challenging their right to sell their own cars directly to consumers.  Despite recent court rulings in their favor, unfazed lobbyists from the National Automobile Dealers Association (NADA) are attempting to nullify their courthouse losses by amending state law.

Tesla has proven to be exceedingly good at manufacturing and selling cars.  They sold out of their entire first production run of their Model S and, as a result, have turned a profit for the first time this year, a full 5 years ahead of company projections. They’ve also begun paying back their government loans, and are building a network of charging stations that will allow Tesla owners to charge up for free with comfortable access in 98% of the continental US.  So this is the dawning of our new age of fossil fuel-free travel, right?  Not so fast.

Tesla is being sued in multiple states across the US for the crime of wanting to sell their own cars.  Confused?  You’re not alone.  Apple stores sell apple products directly to consumers, so why can’t a car company do the same?  The reason is the NADA has used its entrenched political power to shape franchise law to their advantage, making it so no manufacturer of any vehicle with an engine can sell their product without going through a third party dealer.

This destructive use of franchise law has been written about extensively over the past few months (here and here are the two great examples), but this case is disturbing in a broader sense as it demonstrates the willingness of special interests to use their political power to ignore court rulings and change laws in order to protect their profits and suppress competition.  How is it possible, in a country that is the foremost expounder of capitalism, for lobbyists to severely inhibit the sale of not just any product, but the highest rated automobile ever reviewed by Consumer Reports?

When faced with legal challenges in Massachusetts and New York, Tesla argued that they should not be bound by franchise laws since they are a new company and have never had franchises. They have since won these cases, and they are taking their winning strategy to take to courthouses across the country.

So can I buy a Tesla in from a Tesla store in Massachusetts?  Yes… for now.  Two months after the court ruled decisively against the NADA stating, “Dealers cannot utilize the Franchised Dealer Act as a means to sue their competitors,” Massachusetts Senate bill S.129  was introduced to amend chapter 93b by adding “This blanket prohibition on manufacturer ownership applies notwithstanding whether a manufacturer or distributor has previously used independently owned or operated dealerships to distribute its vehicles.”

What effect this bill will have is debatable, but its passage would be a reflection on the sorry state of our pay-to-play system of politics.  These “kill Tesla” bills have had mixed success; one was stopped in New York after massive public outcry, but a similar legislative action in Colorado managed to halt construction of any new Tesla stores in the state.

The NADA and state legislators depend on the lack of public knowledge concerning this issue to maintain these anti-competition policies, but win or lose, each court or legislative decision is helping Tesla’s cause with free publicity. Fair marketplace competition is valued by Americans across the political spectrum, and public opinion holds more sway on this issue since it is being fought at the state level.  Recently, the Tea Party of Georgia led the charge for personalized solar energy and broke the monopoly of the Georgia Power Company.   So if you hope to one day own an electric car (or start a company) and this bothers you, contact your state representatives and let them have a piece of your mind.

Tesla founder Elon Musk has vowed to not give up anytime soon, but now that the NADA has shown that it doesn’t let court rulings get in the way of their agenda, Musk might be in for a long fight.  In the event that public outcry and legal challenges are not enough, it might be more cost effective for Tesla to follow the tried-and-true method of donating to political campaigns to get what they want.


Dan Graham is a PhD candidate in the Department of Chemistry and Chemical Biology at Harvard University.