Tesla Motors Inc (TSLA) can continue selling directly to consumers in Ohio

Posted May 19, 2014

The Ohio House has signed legislation that would let Tesla Motors Inc (NASDAQ:TSLA) continue to sell directly to consumers in the state. Senate Bill 260 (SB 260) passed on a vote of 88-0 and is now headed to the governor’s desk. Gov. John Kasich is expected to sign the legislation. SB 260 prohibits the state’s registrar of motor vehicles from granting dealers licenses to auto manufacturers that want to sell directly to customers.

The bill will allow Tesla Motors to continue to operate in the state. Tesla Motors has stores in Columbus and Cincinnati, while another store is planned for Cleveland. Tesla Motors was issued a dealer’s license by the state bureau of motor vehicles despite provisions in state law requiring retailers to contract with manufacturers in order to qualify for licenses.

Tesla Motors does not sell its vehicles through dealerships. Customers order and buy cars directly from Tesla’s website directly. The brick-and-mortar stories offer test drives and information for future buyers. Tesla Motors officials said the legislation protected the dealers’ monopoly and that blocking their growth is the equivalent of shutting them down.

Rep. Mike Dovilla said that the intention was to never shut down any company’s business. This is why he presented the bill on the House floor on behalf of sponsor Sen. Tom Patton. Central Ohio dealers sued Tesla Motors and the state over the licenses in Franklin County Court of Common Pleas in 2013. A magistrate said that the dealers lacked standing and an appeal to that case is on hold.