Tesla Scores Big Victory in Virginia

Tesla Model X
Tesla Model X — pedal to the metal in Virginia.

First Uber, then Air BnB, now Tesla. Free markets in Virginia’s “new economy” are making steady ground.

Uber and Lyft, the revolutionary ride-hailing companies, overcame the taxicab industry two years ago to win the right to compete in the Virginia transportation marketplace. Last year, the General Assembly legalized Air BnB, an online marketplace for short-term rentals of private rooms and homes, after creating a mechanism for homeowners to pay occupancy taxes on the same basis as hotels.

Then yesterday, the Department of Motor Vehicles handed Tesla Motors, a manufacturer of electric vehicles, a major regulatory victory by ruling that the company could open a company-owned store in Henrico County. State law prohibits an auto manufacturer from owning dealerships, unless it can be demonstrated that no independent dealer is available to sell its cars “in a matter consistent with the public interest.”

DMV Commissioner Richard D. Holcomb accepted the California company’s argument that no independent dealer in the Richmond area could profitably operate under its retail business model. Wrote Holcomb in his ruling:

Tesla’s business model differs from traditional car dealerships in many ways; but specifically, Tesla sells its vehicles at uniform prices whether a customer purchases through [its] website or at a Tesla store. Tesla could not or would not offer “dealer discounts” or “wholesale pricing” on new cars to a prospective dealership. VADA’s own experts agreed that it would be very hard or impossible for a dealership to be profitable unless Tesla offered their cars at wholesale prices. Although many of the dealers testified that they could eventually make a profit with a Tesla dealership, they admitted that it would not be from new car sales. Those dealers indicated they could make a profit through other departments; and those areas, like sales of parts and used cars or profits on service and financing mark-ups, run counter to the Tesla business model.

That doesn’t come close to describing all the innovations the company would bring to Virginia. Founder Elon Musk’s grand plan is to integrate electric vehicles, home solar power, and battery storage to move the country toward a environmentally sustainable energy economy. (See my post outlining that vision.)

The Virginia Automobile Dealers Association (VADA) has vowed to fight Holcomb’s ruling, either through the courts or in the General Assembly, so Tesla’s victory may be temporary.

From my perspective, VADA offers one legitimate argument: The EV manufacturer should be required to abide by the same consumer-protection measures that automobile dealers do. The company says that its practices are effectively equivalent to those of the auto dealers, but it is not bound to them by law.

Just as Uber and Lyft were required to adopt certain consumer-protection measures so they would not enjoy an unfair advantage over taxis, it is reasonable for Tesla to accept consumer-protection measures to compete on a level playing field with automobile dealers. Tesla and other manufacturers — China-based automaker Geely also plans to sell cars in the U.S. through a direct-consumer model, according to the Richmond Times-Dispatch — should compete on their ability to provide a better value proposition to consumers such as better pricing, a better service model, and superior customer relations. I expect the details will be worked out in the 2017 legislative session.

Share this article


(comments below)


(comments below)


4 responses to “Tesla Scores Big Victory in Virginia”

  1. LarrytheG Avatar

    “in a matter consistent with the public interest.” is an interesting phrase that underlies a LOT of Govt regulation that ranges from pipelines and powerlines to payday loans, solar policy, long term (and other) insurance … thousands of regulations – in a contemporary world where everyone and their dog is grousing about regulation and demanding that the govt let the free market “work”.

    And at it’s core- the CONCEPT of regulation says that an unbridled free market is NOT in the best interests of consumers and that they DO have to be “protected” by a govt that many these days ALSO characterize as corrupt and incompetent – a “clown show” that should NOT be regulating.

    But I have to say that having THE industry that sells cars to the public, itself fretting about making sure that Tesla is “up” to acceptable standards of consumer protection – is pretty amusing…. when car sales ranks near the bottom of consumer trust on poll after poll EVEN BELOW government! 😉

    On the subject of whether or not people truly want a libertarian style free market and in turn the govt out of regulation by “faceless and unelected” bureaucrats in their “best interest” an interesting – and informative discussion on the merits, might be one on the difference between “admitted” and “non-admitted” insurance of which I suspect most folks have never heard of but it’s a common term in the insurance industry and a fundamental concept of govt regulation for insurance which actually can be sold without regulation and still be in the “public interest” for it to be sold that way.

  2. I do not know Holcomb so I don’t know if this was a political decision or logical position for Virginia. I read it will be contested in Court. If I lived in Richmond, I’d be glad to get the extra car tax revenues from Tesla sales.

  3. LarrytheG Avatar

    this is sorta like the payday loan industry opposing a new neighborhood credit union because it might hurt consumers……. and State regulators saying ” woe is us, oh what SHALL we do?”

  4. The theory of administrative law is that a specific complex task, usually decisional, is delegated by the legislature to a panel of “experts” subject to the legislature’s general guidelines. The more political the task, the more distance the legislature wants to put between itself and the agency’s decisions, the less prescriptive those guidelines are likely to be. Only the most political of agencies are sent forth to do their work with the most meaningless of guidelines. “In the public interest” means whatever the regulator wants it to mean; arguably it has even less prescriptive value than that other sage criterion, “just and reasonable.”

Leave a Reply