In a landmark decision on Monday, Delaware’s Supreme Court struck down a lower court ruling that had affirmed the state officials’ prohibition of Tesla’s direct-to-consumer car sales. The move signifies a major victory for the world’s biggest electric vehicle manufacturer, reports The Associated Press.
In the ruling from last year, a Superior Court judge had backed Delaware’s Motor Vehicle Franchising Practices Act, stating it restricted Tesla from conducting direct sales in the state. However, the Supreme Court has now reversed this decision, stating that the franchise act was designed to prevent auto manufacturers from applying economic pressure on independent franchise dealers, not to impede a manufacturer like Tesla from selling directly to consumers.
Chief Justice Collins Seitz Jr. stressed in his statement, “The Franchise Act regulates the business relationship between a manufacturer and a dealer,” adding that the Act does not intend to block the direct sales model. He further clarified that the definitions of the law do not apply to Tesla, given its unique business model.
The court also acknowledged that Tesla has encountered similar legal hurdles in other states.
In 2019, Tesla applied for a dealer license with the Delaware DMV, resulting in the opening of a new car gallery in a local shopping mall. However, Tesla was not allowed to conduct in-store sales in the state. The DMV rejected a second dealer license application from Tesla in 2020, arguing that the company’s direct-to-consumer sales approach did not comply with the Franchise Act.
Subsequent appeals by Tesla to the Superior Court were unsuccessful, leading to the recent Supreme Court appeal. Despite initial setbacks, this Supreme Court decision marks a significant triumph for Tesla in its ongoing battle for the right to direct-to-consumer sales.
Chalk this up as a victory for consumers that do not want to deal with the legacy car dealership model. Tesla’s direct-to-consumer model with easy online ordering and transparent pricing is something most legacy automakers have been reluctant to copy, as the dealerships remain the lifeblood of traditional car sales.
