The Palo Alto company won dismissal of a lawsuit brought by the Massachusetts State Automobile Dealers Association that argued Tesla had violated Massachusetts law by selling cars directly to customers rather than setting up a dealership network.
Superior Court Judge Kenneth Fishman dismissed the case, saying that state law did not intend "to protect a motor vehicle dealer from an unaffiliated manufacturer operating a motor vehicle dealership."
Essentially, he ruled that because Tesla does not have existing franchised dealerships in Massachusetts, the automaker is free to open its own stores and sell directly to consumers. Fishman signed the ruling Monday and it was disclosed by Tesla on Friday.
Tesla has a dealer license from the Town of Natick's Board of Selectmen to operate a store within the municipality.
"We are delighted by the outright dismissal of this case and the validation that we are operating our business in compliance with the laws and expectations of the Commonwealth of Massachusetts," said Elon Musk, Tesla co-founder and chief executive. "We are confident that other states will also come to this same conclusion and look forward to following through on our commitment to introduce consumers to electric vehicle technology in an open, friendly, no-pressure environment."
He said a separate lawsuit filed against the individual elected officers on the town's board "is a very unfortunate action taken" against officials who "thoughtfully made a decision that was both legal and in the best interests of the citizens of Natick. We look forward to supporting the Board of Selectmen in this case."
When Tesla started selling its flagship Model S luxury hatchback last year, it decided to bypass the traditional dealership network to open its own stores. By selling directly to consumers, Tesla gets to keep the profit that dealers make on new-car sales.
It's also the only way an electric car will get a fair shake, Musk said at the time. "Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars," Musk said. "It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business."
But the sales strategy drew the ire of many car dealers and their associations. The nation's roughly 18,000 new-car dealers got a cut of every one of the 14.5 million new cars and trucks sold in the U.S. last year.
The franchised new-car dealership system dates back to the start of the U.S. auto industry, when hundreds of manufacturers were fighting for market share. Setting up showrooms was expensive and time-consuming. So automakers sold other entrepreneurs the right to market their cars in specific cities.
Tesla is the biggest nameplate to try to sell cars independently of the dealer network. It operates 16 stores in 12 states.