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TheStreet Open House

Tesla Takes Dealer Fight to North Carolina

Stocks in this article: TSLA

"You can't cut out a category for a brand new company when you've got Kia, Hyundai -- they're in here full blast -- Maserati, Ferrari, Rolls-Royce?" he said. "They have dealer presence in North Carolina, and I know they probably don't sell 80 cars."

Apodaca received a state-maximum $8,000 in contributions from the 7,000-member NCADA in 2012. He noted steady contributions from the industry date back years, and he's a top Republican with a pro-business reputation.

Tesla says that its time-intensive customer service model won't translate well to franchise dealers and that most consumers would laugh at the notion that they're better served by the existing system. O'Connell said the dealers' true interest is maintaining total control over retail.

The bill was initially pitched as a way to protect consumers from online transactions that don't offer protections, "but we saw through that veil and the reality has emerged," he said.

Francine Lafontaine, a University of Michigan economist who specializes in franchising, said the laws in place contributed to the collapse a decade ago of Web-based manufacturer Build-to-Order, whose founder, Scott Painter, dreamed of selling cheap and customizable cars directly to consumers.

"For someone who is kind of in business and looking at business models, it's not obvious the car industry is so different, but it's the only industry retail-wise that's protected to this extent," she said.

Those laws are likely to stay in place, considering franchise dealers account for about 20 percent of the sales-tax base at the state level and spend millions a year lobbying at the federal level, Lafontaine said. Tesla has shown resiliency, but the company shouldn't expect the roadblocks at the state level to let up easily, she added.

"I'm kind of pleased that Tesla has gotten as far as it's gotten," Lafontaine said. "In some cases I guess it's because it's electric. But they will need that national solution."

The company could try to lobby for a federal law or a ruling from federal courts that would apply across the U.S., O'Connell said. That could include making a case based on the Constitution's commerce clause, which says only Congress can regulate interstate commerce. Courts have also held that it forbids discriminating against out-of-state companies.

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