Tesla Expanding Georgia Presence; Facing Court Battle from Georgia Automobile Dealers Association

Oct 30, 2014

Tesla, known as the electric car to the stars, is getting ready to open its second store in Georgia. At the same time, the car company is getting push-back from the state’s automobile dealers.

Decatur's Tesla showroom is scheduled to open Nov. 4, 2014.
Credit Jason Parker / WABE

With entry-level pricing upwards of $70,000, not everyone is in the market for a Tesla -- even with Georgia’s $7,500 electric car incentive.

But Tesla Motors already has a showroom and service center in Marietta and is gearing up to open another one next week on Church Street in Decatur.

At the same time, the company is getting ready to battle the Georgia Automobile Dealers Association (GADA) in court.

The controversy? Georgia law says vehicle manufacturers have to sell through franchised dealerships. There is an exception: manufacturers whose vehicles are custom designed are allowed to sell up to 149 vehicles a year through its own showrooms.

“They would like us to be able to sell zero cars within Georgia,” says Diarmuid O’Connell, Tesla’s Vice President of Corporate and Business Development. “They are in the business of preserving a monopoly in the distribution of retail cars that they’ve enshrined, you know, in law over the course of time.”

GADA representatives would not grant WABE an interview, citing pending litigation However, GADA’s petition filed with Georgia’s Office of Administrative Hearings claims Teslas do not qualify as custom designed cars and the dealers “may be injured” by Tesla’s direct sales.

Garth Heutel, Ph.D., is an assistant professor of economics at Georgia State University. He says what we are seeing is an evolution of the marketplace. “There’s this force in capitalism, creative destruction, where new technologies come about and replace older technologies,” says Heutel. “And that’s sort of good overall for the economy and for most people, but it kind of does leave some people and some groups behind.”

When talking about new technologies, Heutel is not talking only about the fact Tesla is an electric car but also about the company’s sales model: buy online -- or in a showroom -- direct from the manufacturer.

Georgia is not the only place Tesla is having trouble. According to MojoMotors.com, 26 states ban direct sales of cars to some degree. In Texas, Maryland and Arizona, Tesla has what it calls “galleries.” O’Connell says, in those three states, manufacturers are allowed only to show and talk about the product. It cannot sell it and cannot even directive prospective customers to the company’s website. Still, says O’Connell, it is still valuable to the company to have a marketing presence in those states.

Despite the legal fight here in Georgia, and even with the Decatur store not yet open, Tesla is planning another showroom at Lenox Square.