Tesla Motors Inc (NASDAQ:TSLA) won a major court ruling in Massachusetts this week, one that could set a positive precedent as the electric automaker faces similar cases in other states. As Businessweek reported, the ruling is only logical really, and yet it faced a steep challenge from miffed auto dealers who believe the automaker is subverting their car-selling authority.
The case was launched by the Massachusetts State Automobile Dealers Association, and auto dealers from states across the U.S have launched similar court challenges and raised a cry in protest to Tesla Motors Inc (NASDAQ:TSLA)’s sales model which cuts out the middleman (them), and sells their vehicles directly to consumers.
For Tesla Motors Inc (NASDAQ:TSLA), it’s all about getting their cars to their consumers as cheaply as possible, an ideal they strongly espouse. Yet they’ve been pitted against decades-old regulations in that pursuit, which were put in place to prevent automakers not from doing what Tesla Motors Inc (NASDAQ:TSLA) plans to, but from taking advantage of consumers, and more importantly, dealerships.
The Massachusetts ruling declared that Tesla Motors Inc (NASDAQ:TSLA) was doing nothing of the sort, and certainly were not undercutting or improperly treating franchises, since Tesla Motors Inc (NASDAQ:TSLA) does not use a franchising model and there are no official franchises. They are simply bringing their product to market.
It’s not actually the first victory in this fight for Tesla Motors Inc (NASDAQ:TSLA). In their Gigafactory deal with the state of Nevada, they were granted the right to be exempted from that state’s own franchising laws, which outlaw direct-to-consumer sales by automakers. Nevada’s auto dealers, who at one point threatened to sue over the matter, ultimately endorsed the deal.
The most recent ruling has largely been lost amidst the hubbub surrounding Morgan Stanley (NYSE:MS)’s sobering report on Monday, which sent Tesla Motors Inc (NASDAQ:TSLA)’s stock plummeting. It rebounded slightly yesterday, climbing 2.71% after its 9.08% loss on Monday. It is down slightly today in afternoon trading at $260.63.
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