The auto dealers group tried unsuccessfully to update a 1970s-era law to block Tesla and is now threatening to sue.
After a win at Minnesota's Capitol, an electric car manufacturer is closer to the license it needs to open retail stores over the objection of traditional auto dealers.
California-based Tesla Motors has gotten word that state officials would begin processing the company's application for a car dealer license. The Star Tribune reported Wednesday (http://bit.ly/YaEDbY ) that Tesla hopes to open a store this summer in Edina and a second at the Mall of America next year in which the manufacturer would sell cars directly to customers.
The set-up has drawn the ire of the Minnesota Automobile Dealers Association, which fears the sales model will allow Tesla and other manufacturers to undercut rivals by running dealerships without the overhead of having vehicle supplies on the lot.
"We think everybody should play by the same rules," said Scott Lambert, the association's executive vice president. "Tesla is trying to sell cars on the cheap, and it's just not fair because they don't have the cost of running a dealership."
The auto dealers group tried unsuccessfully to update a 1970s-era law to block Tesla and is now threatening to sue. Lawmakers turned back the anti-Tesla effort in a Senate committee last week and a House plan that was slated for a hearing on Wednesday was pulled from consideration.
The original law was designed to prevent Ford or General Motors from selling the same car models in competition with their own dealers. Tesla has never had Minnesota dealers and would be selling cars that are completely different from those sold by existing dealers.
The Department of Public Safety said Tuesday that it is pressing ahead with Tesla's application. Agency spokesman Bruce Gordon said the law on the books "does not prohibit a (car) manufacturer from becoming licensed as a dealer in Minnesota."
Tesla's $57,400 Model S electric car is billed as being able to go 300 miles on a single electric charge. While the company has yet to turn a profit, it has sales or service locations in 19 states. But Minnesota customers can only order a Tesla car by calling the company or using its website. Tesla hopes to sell a $30,000 electric car by 2016, officials say.
Diarmuid O'Connell, Tesla's vice president of corporate and business development, compared the car company's model to Apple's direct-to-consumer electronics stores.
"We're cutting out the middleman," O'Connell said. He added that the approach is unique in the automotive market. "That can disturb the status quo because it can change consumer expectations, which can lead to more competition."
Lambert said the auto dealers group's resistance has nothing to do with the type of cars offered.
"We're not opposed to electric vehicles," Lambert said. "If consumers want to buy them, we'd love to sell them. We're opposed to electric vehicles not being sold by a franchised dealer, because if manufacturers run the market, it will be far less competitive for customers."