State Supreme Court strikes down ban on Tesla dealership


The Delaware Supreme Court has reversed a Superior Court decision that upheld a state denial of a Tesla dealership.

The Delaware Department of Motor Vehicles had rejected the application based on a Delaware law that bars auto manufacturers from owning dealerships. Tesla appealed the decision that Delaware Superior Court upheld.

The DMV earlier allowed Tesla to open a “gallery” at Christiana Mall but ruled it could not sell vehicles from that location. Tesla went on to open a service center in Newport. Tesla is allowed to operate dealerships in neighboring states. Tesla also has an online sales option.

Despite the denial, Teslas and Tesla charging stations have become commonplace in Delaware, even though efforts to change the law in the General Assembly fell short.

Tesla photo

“The General Assembly enacted the Franchise Act to address the disparity in bargaining power, which permitted new motor vehicle manufacturers to exert economic pressure over their franchises. Its definitions exclude Tesla and its direct sales model, where new electric cars are not sold through franchised dealers in Delaware,” justices ruled.


The high court also noted that rulings in other states also rejected claims by car dealers and others that franchise laws covered Tesla’s direct sales model.

Justices also rejected other arguments from the DMV.

The laws were put in place decades ago amid fears that auto manufacturers like Ford and GM would compete directly with franchised dealerships.

Click here for the text of the decision.