New law protects auto dealers but keeps opening for Tesla

Electric car maker Tesla became the beneficiary of new Washington state legislation that was originally aimed at forcing the company to alter its business model to fit that of traditional dealerships. With the Legislatures passage of Senate Bill 6272, Tesla will not only be able to keep operating under its current business model but also to expand beyond its two Washington locations in Seattle and Bellevue.

Tesla became embroiled in a legal battle that was initially being fought between car dealers and vehicle manufacturers. The company ended up becoming the center of the controversy because it sells cars directly from manufacturer to consumer, essentially circumventing a law requiring third-party dealers to be the point of sale to consumers.

Dealers originally drafted legislation to grant themselves more protection from the overreach and demands of car manufacturers, and language targeting Tesla was attached to the bill later. While the new law allows Tesla to continue operating under its direct-to-consumers model, it does not include provisions to any other vehicle makers entering the fold, making it a potential innovation killer in the state.

The law is a win for Tesla, which sells more cars in Washington than in any other state, according to the auto research firm Hedges & Co. But Tesla isnt faring as well elsewhere. New Jersey recently declared it will be illegal to operate factory-direct car sales there, and Arizona, Maryland, Texas and Virginia have also said no to the direct-sale idea.