A trade group for Ohio car dealers is asking a Franklin County court to yank Tesla Motors' license to sell new cars, citing alleged violations of Ohio law. The plaintiffs also include several central Ohio dealer groups, such as Midwestern Auto Group of Dublin, Ricart Automotive Group of Groveport and several of the Germain family dealerships.
A trade group for Ohio car dealers is asking a Franklin County court to yank Tesla Motors’ license to sell new cars, citing alleged violations of Ohio law.
The plaintiffs also include several central Ohio dealer groups, such as Midwestern Auto Group of Dublin, Ricart Automotive Group of Groveport and several of the Germain family dealerships.
“If a license is not granted with proper authority, then that license should be rescinded,” said Sara Bruce, vice president of legal affairs for the Ohio Automobile Dealers Association.
The defendants are the Ohio Department of Public Safety, the Ohio Bureau of Motor Vehicles and Tesla.
Unlike most auto brands, Tesla sells its all-electric cars directly to consumers through company-owned stores.
Companies such as Ford, General Motors and Honda sell through a network of independently owned dealers, and those dealers want to preserve the current system.
“This is the same kind of bullying from the dealers we’ve faced in other states,” said James Chen, Tesla’s vice president of regulatory affairs and associate general counsel. “The dealers, when they’re defeated in the court of public opinion, in the media and in the legislature, they then go to the courts.”
He was referring to the dealers’ unsuccessful attempt this month to get the Ohio General Assembly to outlaw Tesla’s business model.
“It’s incredibly hypocritical” for dealers to claim simultaneously that the model is illegal and that lawmakers must act to make it illegal, he said.
In the suit, filed in Franklin County Common Pleas Court, the dealers say that the state agencies improperly approved Tesla’s dealer license this year because the company did not provide a copy of its contract with the manufacturer of the vehicles to be sold.
Even though the manufacturer and the retailer are the same company, dealers say that the law still calls for proper documentation.
And, as the dealers see it, Tesla would be unable to submit a valid contract because the law requires such an agreement to be between “two separate contracting parties,” Bruce said.
The dealers’ argument twists the intent of the law and is almost completely based on procedural issues, Chen said.
The dealers filed the case last week and filed a motion on Tuesday asking for an injunction to immediately rescind Tesla’s license and prevent the Bureau of Motor Vehicles from issuing additional licenses to the company. No hearings have been scheduled. This type of motion often leads to a hearing within a month, according to a court official.
Earlier this month, Tesla opened a store at Easton, the automaker’s first retail outlet in Ohio. The opening happened the same week that state lawmakers decided not to hold a vote on a proposal submitted by the dealers that would outlaw Tesla’s business model; the proposal may come up next year.
“What’s the real fear? That other (automakers) will follow in Tesla’s footsteps,” said John O’D ell, senior editor for Edmunds.com.
Tesla faced similar legislative and legal battles in other states. O’Dell thinks the company has made an effective argument that it is not violating franchise laws because it does not have any franchises. But Tesla is going up against powerful and well-financed opponents.
“Dealers have a lot of clout,” O’Dell said. “They have a loud voice and are huge income generators in most states.”