Legislation would allow Tesla to bypass state’s restrictive auto dealer laws

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A bill that would allow electric vehicle maker  Tesla to avoid the traditional dealership model has been introduced.

Click here for a copy of the legislation that was assigned to the House House Economic Development/Banking/Insurance & Commerce Committee.

Delaware, like all states, has legislation mandating a franchise system that bars manufacturers from owning dealerships outright.

Tesla has waged a state-by-state fight to change laws. It won a legal battle last year in the automotive stronghold of Michigan. 

Delaware has not been as big a priority due to its size and with dealerships being within driving distance. The closest traditional dealership service area for Tesla is in Devon, PA.

Tesla has a presence in Delaware, with a  “gallery” in Christiana Mall and a service center a few miles away at a former tire service center in Stanton. It also has a growing number of charging stations at  Wawa locations and elsewhere.

Tesla has long argued that it does not need the traditional dealership structure since its vehicles do not have the complexities of gas-fueled cars and trucks.

In defending the current system, Dealers cite low profit margins for new cars and reliance on servicing to keep their doors open.

The franchise system goes so far as to designate territories, with dealers having veto power over a new dealership being too close to an existing one.

Since the early 2000s, Delaware has seen virtually no new auto dealerships. Moreover, bankruptcy filings and other moves by General Motors and  Chrysler pared down the number of dealerships in small towns.

With more than 24,000 residents, Middletown does not have one new car dealership after losing a Chevrolet dealer. Plans for an “auto row” in the town have not materialized. 

In the meantime, large dealership groups like Hertrich and I.G. Burton have snapped up one-store dealerships in the region.

Dealers cite sizable capital costs for new locations and the ability of motorists to shop for cars online or by traveling a half hour or less to an existing dealer.

A growing number of people are using the Tesla model of buying cars without stepping foot in the dealership. The trend accelerated with the Covid-19 pandemic.

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