Utah Supreme Court rules against Tesla in push to sell cars

A Tesla Model S on display. Sao Paulo, Brazil, Nov. 19, 2016. Licensed under CC 4.0 | Photo courtesy of Mario Roberto Durán Ortiz, St. George News

SALT LAKE CITY (AP) — Tesla’s push to sell its all-electric vehicles in Utah hit another roadblock Monday when the state Supreme Court upheld a decision by Utah licensing officials to deny the automaker a license to sell new cars.

FILE – In this file photo, the Tesla Motors showroom in Salt Lake City. The Utah Supreme Court has ruled against Tesla in a push to sell its sleek, all-electric vehicles in the state. The court said in an opinion issued Monday, April 3, 2017, that Utah’s State Tax Commission was correct in a 2015 decision denying Tesla a license to tell its cars in Utah. The company built a $3 million showroom in Salt Lake City but hasn’t been able to sell new cars there because officials decided it would break state laws about car makers owning dealerships. Salt Lake City, Utah, April 1, 2015 | AP Photo by Rick Bowmer, File, St. George News

Tesla had argued that a state law barring car manufacturers from owning dealerships didn’t apply to the company. Tesla sells its cars directly to customers rather than using independent dealerships, something Tesla attorneys argued is vital to their business.

Tesla must sell its own cars because a sale depends on convincing customers that electric cars are better than those with a gas engine. The company also argued that Utah law doesn’t block car makers from selling directly – it only blocks car makers from owning a dealership that’s set up as a franchise.

In the decision Monday, Supreme Court justices didn’t address whether Utah law blocks a car maker from selling its vehicles directly or whether it’s vital for the car maker to sell its own product.

The justices instead focused on a subsidiary company that Tesla set up to sell cars in the state, called Tesla UT. Tesla UT applied for an auto dealer license, and because Tesla UT is wholly owned by Tesla, state licensing officials were correct in a 2015 decision denying the license, the justices wrote.

In a statement, Tesla said the ruling was “disappointing for Tesla and all Utah consumers interested in consumer choice, free markets, and sustainable energy.” The company said it will pursue all options in Utah, including working with the Legislature, and will continue offering service in Utah for Tesla cars.

The Utah Automobile Dealers Association has argued that Tesla is required by to comply with the franchise law, which is designed to keep large car makers like GM from pushing out independent dealers selling the same cars.

Tesla has said that law protects a monopoly by locally powerful car dealerships and violates free-market economic policies in Utah’s constitution.

An effort to try to change the law earlier and accommodate Tesla failed in Utah’s Legislature earlier last year after the company pulled its support, saying the fix wouldn’t allow it to keep any inventory in the state. Unable to sell cars through its $3 million showroom in Salt Lake City, Tesla instead decided to take its fight to Utah’s Supreme Court.

The company has a used-car license for its Salt Lake City showroom, which allows people to test-drive and buy used cars but not new cars.

The company has run into similar legal problems in other states.

Written by MICHELLE L. PRICE, Associated Press

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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7 Comments

  • Caveat_Emptor April 3, 2017 at 9:48 pm

    I am sure those folks who are willing to spend near $100K for a new Tesla will find it only modestly inconvenient to fly to Las Vegas to pick up their pre-ordered car and drive home. The paperwork for UT registration is pretty simple, and the state gets its sales tax.
    Perhaps Tesla erred in thinking their powers of persuasion would work, without the help of “lobbying” the state legislature.

  • Craig April 3, 2017 at 9:58 pm

    I’m not sure a state should have the power to tell a company how it must sell its cars.

  • Brian April 3, 2017 at 10:54 pm

    This is idiotic. I can see not allowing the manufacturer to own a dealership AND have other individual-owned franchised dealerships as well. That is a clear conflict of interest and the non-manufacturer owned dealerships would get the short stick every time.

    But this is entirely different. What’s the problem?

  • Not_So_Much April 4, 2017 at 7:50 am

    Free market capitalism seems to have hit a bump in the road. Tesla could force anyone in becoming a franchised dealer. Perhaps our friendly local Ford/GM/etc dealership doesn’t want their manufactures to get any ideas.

    • Brian April 4, 2017 at 10:39 am

      Tesla isn’t forcing anyone to become a franchised dealer. Quite the opposite, they want to own their own dealerships. This is no different than the Apple Stores. Why doens’t Utah outlaw them as well, and force everyone to buy their Apple products at Simply Mac, etc? Why? Because everyone would realize how stupid of an idea that is! It’s no different just because the product is a car. If Tesla wants to sell and service their product directly, why on earth can’t they?

  • tcrider April 4, 2017 at 9:39 am

    When they are referring to the independent dealers, do they mean like Ken Garff Ford that owns a monopoly of dealerships that prevents a competitive free market because customers don’t have anywhere else to buy a Ford unless they drive to Vegas?

  • utahdiablo April 4, 2017 at 9:39 am

    Guess Tesla didn’t pay off enough Good ol’ Boys here in Utah…

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