Why is Tesla not allowed to sell?

Tesla tries new trick to get around state car dealership laws

Carmaker Tesla has opened a store and repair shop on Native American land for the first time, marking a new approach to its yearslong fight to sell cars directly to consumers and cut car dealerships out of the process.

The white-walled, silver-lettered Tesla store, which opened last week, sits in Nambé Pueblo, north of Santa Fe, on tribal land that’s not subject to state laws.

The electric car company can only sell and service its vehicles freely in about a dozen states, while it faces restrictions in others. Some, like New Mexico, ban Tesla from offering sales or repairs without going through a dealership. In January, the company struck a deal with Michigan to resolve a 2016 lawsuit, a symbolic victory that allowed it to sell in the backyard of the nation’s largest carmakers.

Supporters of Tesla say the shop in New Mexico marks the first time the company has partnered with a tribe to get around state laws, though the idea has been in the works for years.

From Oklahoma to Connecticut and other states, consumers can’t buy Teslas because the company won’t partner with dealerships and hasn’t been successful in winning over the courts or lawmakers to allow its direct sales model.

“These states have lots of sovereign Native American nations in them that could be interested in Tesla,” said Brian Dear, president of the Tesla Owners Club of New Mexico. “I don’t believe at all that this will be the last.”

Supporters say dealership laws protect middle-class jobs and force dealerships to compete, lowering prices. Critics say people can get information online and direct sales would lower costs.

New Mexico, Alabama, and Louisiana have the strictest bans, barring Tesla from both operating dealerships and repair shops. That makes repairing a Tesla more expensive and more of a hassle. Owners have to get their cars serviced in neighboring states or through traveling Tesla technicians who fix problems with what they have in a van.

The New Mexico Tesla shop, built on the site of a former casino, is nestled between two gas stations along a highway about an hour and a half north of Albuquerque, where most of the state’s Tesla owners live, Dear said.

While sales are prohibited in neighboring Texas — where the company plans to make its pickup trucks next year — repair shops are allowed. New Mexico Tesla owners have been traveling to El Paso, Texas, or other out-of-state cities to get repairs.

To buy a Tesla, they have to drive hours to pick them up or pay thousands of dollars to have them shipped.

“We drove a gas car — Volvo station wagon — to Denver and then I was the ‘lucky one’ who got to drive the gas-powered car back,” said Howard Coe, a filmmaker who works for a laboratory in Los Alamos, New Mexico, about 30 minutes from Nambé and about five hours from the nearest Colorado Tesla store.

Coe drove his wife’s Tesla sedan to the new store in Nambé on Tuesday to ask if an SUV he ordered can be delivered there. The store told him it’s not accepting deliveries for the foreseeable future and won’t do repairs until later this month.

Tribal officials who brokered the deal over a two-year period say it lines up with business interests and cultural values like caring for the environment.

The tribe “has the responsibility to the land where we have resided for over 1,000 years,” said Carlos Vigil, president of the Nambé Pueblo Development Corporation, calling Tesla’s service center “a renewable business that lines up with our belief system.”

Car dealership advocates say they respect the tribe’s decision but that they hope customers will buy electric cars from companies that follow state rules, arguing dealerships compete to lower prices and can service vehicles in more parts of the state.

“We have competition, we have the expertise, we’re in your local communities,” said Ken Ortiz, president of the New Mexico Automotive Dealers Association. “We contribute to the taxes.”

New Mexico has tax treaties with the tribe for sales, gambling and gasoline taxes. But tribal and state officials say it’s unclear if Tesla will have to pay vehicle sales taxes or how the revenue would be split between them.

Tesla, which dissolved its public relations department and generally doesn’t answer media inquiries, did not respond to a request for comment.

In response to a Tweet complaining of wait times in the Northeast last month, CEO Elon Musk wrote, “Tesla will expedite service center openings.”

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The Real Reason Why Dealerships Don’t Want To Compete With Tesla

When I was on a podcast with Connecticut State Senator Will Haskell and Will Cross from Tesla Owners Club of Connecticut, the senator said something that helped me understand exactly why dealerships are fighting so hard against Tesla and other EV manufacturers.

Senator Haskell pointed out that dealers feel as if they have the superior business model and that customers love going to dealerships.

“I personally don’t think that that’s true. I think that they are not necessarily in love with the car dealership experience, but maybe they’re right. And the point of living in a free market is allowing the customer to decide. If dealerships truly believe that they’re serving customers in a superior way; that they’re the preferable option, well then customers will likely continue to choose to buy their car at dealerships even if direct sales is an option.

“But by restricting the free market, I find it sort of confusing. It’s like the world is turned upside down. I’m a progressive democrat in Connecticut begging to allow businesses to come to Connecticut and to enable free market dynamics to do what they do best which is empower the consumer to make a choice that’s best for them.”

While listening to Senator Haskell’s remarks, my mind went back to that article by The Day that was practically begging Tesla to give up on direct sales in Connecticut. In that article, the editorial board wrote an op-ed that emphasized the desire of dealers and their supporters for Tesla to play by the dealership’s rules — the law as it stands, referring to the current state law that bans direct sales of EVs in Connecticut.

It’s About Control

And then it clicked. The reason why dealerships don’t want to compete with Tesla or any EV manufacture that sells directly to the customer is that they don’t want to have to fight for something they are used to getting easily.

Up until Tesla, the only way to buy a car was through a dealership. With Tesla and other EV manufacturers such as Rivian and Lucid coming to the States, dealerships are now having to fight or compete for something they are not used to having to fight for. They have to fight for their piece of the pie, so to speak.

Before Tesla, dealerships could get away with screwing customers over because if you wanted a car, you literally had no choice but to go to a dealership (unless you bought a used car from someone). If you wanted a new car, you go to the dealers. It’s always been this way.

Dealerships Would Rather Sue Tesla Than Compete For Customers

Many dealerships across the U.S. and their associated groups are lobbying state governments to ban Tesla and other automakers from selling directly to customers. In Connecticut, Hoffman Auto Group is suing Tesla because Tesla is opening a service center (where it will service the vehicles, not sell them) for its customers.

The dealership claimed that it is suing Tesla because Tesla will be allowed to open a facility and do business with its customers. In other words, the dealership is suing Tesla because it doesn’t want to compete with Tesla for customers. Imagine if Samsung sued Apple because it has to compete for customers.

Dealers Don’t Want The Status Quo To Change

The dealer model was the only way a customer could buy a new car. Until Tesla. Senator Haskell also mentioned that in his state, there was a poll that showed enabling direct sales in Connecticut was an extremely popular idea. The poll, which took place earlier this year, had high support — somewhere between 70% to 89% of residents supported the direct sales bill.

“That’s shocking because 88% of residents agree on nothing, but the fact that they think that EVs should be allowed to compete in a free-market manner I think is really encouraging. Support was strong among the Democratic Party and the Republican Party, but what struck me most, and this gets gets to your point about car dealerships, support was highest among women and among people of color. And I that that’s not a coincidence. It’s because those are two groups that consistently face higher prices and other forms of discrimination at car dealerships.

“So the car dealership model, which has existed for many, many decades — almost a century — it doesn’t work for everybody. The status quo isn’t working for everybody, and that is why I think this bill is so popular, especially among those groups.”

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Tesla’s Found a Way Around Direct Sales Bans by Putting Dealerships on Tribal Lands

The dealerships and service centers will employ Native Americans from the area as part of an agreement.

by Rob Stumpf | PUBLISHED Nov 8, 2022 3:41 PM EST

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The car dealership model continues to draw the ire of customers and manufacturers alike. From egregious markups to cries of foul play over EV-related investments, dealer snafus are making the direct-to-consumer sales model more attractive by the day. There’s just one problem: automakers can’t sell directly to the public in a handful of states. Tesla, however, has learned to circumvent this.

In its now-home state of Texas, Tesla officially «sells» its cars from its California office, but offers a titling packet (that sometimes comes with some extra headaches) that allows consumers to register their car in the Lone Star State. And in nearby New Mexico, Tesla has figured out that it can actually host its stores on tribal land to circumvent the state’s ban on direct sales and service centers. Now, it will build another store to serve exactly the same purpose.

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Tesla’s first foray into battling New Mexico’s dealer franchise laws came last September when it opened up a sales center in Nambé. It’s a census-designated place home to the native Pueblo people. As the Albuquerque Journal reports, Tesla’s newest store will be in Santa Ana, which is roughly 60 miles closer to Albuquerque.

Santa Ana governor Joey Sanchez says that Tesla reached out to the Pueblo government last year, adding that the automaker is expected to open its latest store in May 2023. It will employ a group of tribal members as Tesla-trained service techs, as well as other individuals from surrounding communities.

Importantly, New Mexico is one of three states alongside Alabama and South Carolina that not only bans direct sales but also service centers. Seven other states—Connecticut, Louisiana, Nebraska, Oklahoma, Texas, Wisconsin, and West Virginia—only prohibit the former. It will soon be easier for New Mexico drivers to buy a new Tesla now that two dealerships on tribal land exist, making it possible to purchase in-state without having to jump through the hoops that come with otherwise forbidden direct-to-consumer sales. Likewise, existing owners will have an additional place to get their vehicles serviced.

To top it all off, consumers won’t be taxed twice for vehicles purchased on tribal land thanks to a new bill passed earlier this year.

While Tesla is benefiting from this partnership, other new automakers are still going to feel some pain. Startups that operate with direct-to-consumer sales face a complex purchasing process, much like Tesla before it struck a deal to sell on tribal land. However, established automakers argue that these startups are actually at an advantage. Ford CEO Jim Farley previously suggested that brands with direct-to-consumer models have a $2,000 price advantage over legacy automakers that operate using a dealership model.

Got a tip or question for the author? Contact them directly: rob@thedrive.com