Tesla plans a Louisville ‘dealership.’ Kentucky law could complicate that | In-depth

Tesla plans a Louisville 'dealership.' Kentucky law could complicate that | In-depth

LOUISVILLE, Ky. (WDRB) – In April, a Denver-based company that has done real estate work for electric car giant Tesla submitted plans for a “vehicle dealership” in eastern Jefferson County. 

The plans call for indoor and outdoor sales areas, service bays, more than 200 parking spaces and using an existing building on Gateworth Way in Middletown.

But Kentucky law poses a complication, since it largely bans auto manufacturers from owning, operating or controlling a dealership. Instead, that power rests with local franchises.

Tesla, however, long has resisted those local arrangements. It favors company-owned stores and direct sales, part of a strategy that co-founder and CEO Elon Musk has said reflects Tesla’s unique technology and approach. 

So what is being proposed on the roughly 4.5-acre site near Interstate 64 and Blankenbaker Parkway? It depends on who you ask.

Tesla has not responded to an email sent Friday morning seeking clarification about its plans.

But John Rougeux, president of the Tesla Owners of Kentucky club, said he believes the company is looking to open a service center, not a dealership. For now, Tesla owners in Louisville must drive to Cincinnati for service, although the manufacturer has mobile technicians as well.  

Middletown Mayor Byron Chapman also said his understanding is that Tesla doesn’t plan to open a dealership, but rather a store where owners can “pick up” cars once they purchase them. He said it’s tentatively scheduled to open during the first half of 2022; it would replace a Harley Davidson motorcycle dealership that is planning to move.

The Kentucky Motor Vehicle Commission licenses auto dealers, manufacturers and distributors in the state. Carlos Cassady, the commission’s executive director, said in an email that Tesla isn’t currently licensed or have an application pending.

But he said a service center would not need a commission license. Routine business approvals and licenses would be needed for that, such as satisfying local zoning requirements.

Tesla has been registered do business in Kentucky since 2019. The property it is eying is already zoned for auto repair and sales, and a development plan for the property filed with Metro Planning & Design Services has been approved.

Kentucky’s law prohibiting manufacturers from operating their own dealerships isn’t unique. Virginia has a similar law, which has forced Tesla to petition that state for special approval to open stores there.

In the most recent Virginia case, Tesla sought an exception in state law that would let it open locations in Arlington, Charlottesville and Norfolk. Late last month, the state’s Department of Motor Vehicles commissioner granted that request after he ruled that an independent dealership wasn’t able to “make a profit by selling new Tesla motor vehicles.”

Commissioner Richard D. Holcomb wrote that the two dealers who submitted proposals to sell Tesla vehicles indicated they would profit by parts sales and financing mark-ups.

“Those sources of income run counter to the Tesla business model, a model that both dealers stated they would follow,” he concluded.

Kentucky law does include an exception similar to the one the company has successfully used in Virginia. Nothing in state law here forbids manufacturers from setting up their own dealerships if the motor vehicle commission finds that an independent dealer can’t sell the cars “in a manner consistent with the public interest.” 

A manufacturer can request that hearing.

The Kentucky Auto Dealers Association said in a statement that it would “look forward to a franchise relationship with any new manufacturer seeking to do business in the Commonwealth; so long as that manufacturer complies with the laws and regulations of the Commonwealth.

“We passionately believe that the franchised motor vehicle system has provided price and service competition between brands and dealers of the same brand,” the statement said.

The statement also said the association is “all-in” on electric and other alternative-fuel vehicles.

“We will continue to monitor the Tesla situation as things develop,” association president Jason Wilson said in an email.

Copyright 2021 WDRB Media. All rights reserved.

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