Virginia’s state law requires all automobile manufacturers to sell their vehicles to consumers through independent dealerships. An exception is made only when there are no dealerships available that could sell the cars in a way that is “consistent with the public interest.” Tesla, the popular energy and electric vehicle manufacturer, managed to open its own direct-to-consumer store in Henrico in 2017. As reported by the Richmond Times–Dispatch, the Virginia Automobile Dealers Association filed a lawsuit contesting Tesla’s ability to operate its own showroom and service center.
Elon Musk, the mastermind behind the Palo Alto automotive company, was able to convince officials that no other dealer could sell its electric vehicles in a manner consistent with the public’s best interests and do so profitably. Virginia DMV Commissioner Richard D. Holcomb granted Musk permission to open its Henrico location even after another DMV official recommended denying the automaker’s application.
A Richmond Circuit Court judge upheld Holcomb’s decision that authorizes Tesla to sell its automobiles directly to consumers through its own dealership. This is despite Virginia’s law which prohibits a vehicle manufacturer from owning its own dealership in the state. The statute requires manufacturers to sell their vehicles through independent dealerships, and this ruling may significantly alter the way that cars are purchased and sold in Virginia. It may also affect the way Virginia’s lemon law is enforced.
Under the Virginia Motor Vehicle Warranty Act, consumers have certain rights and protections when they unsuspectingly purchase cars that are unsafe, not functioning correctly or have manufacturing defects. A significant number of legal actions have already been brought against Tesla alleging wrongful death from product liability. A defect that causes a vehicle to be dangerous to its passengers, the driver or others may qualify it as defective, or a “lemon.” When a consumer realizes they purchased a lemon, the manufacturer is obligated to provide a replacement vehicle or buyback the defective car. CNBC interviewed people who purchased a Tesla or reserved a model and then either returned or canceled their order only to wait months for a refund. It may remain to be seen how well Tesla’s manufacturer-owned Virginia dealership handles lemon law complaints.