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Tesla Sues to Sell its Cars Directly to Consumers in Louisiana, Using its Constitutional Rights

Tesla Sues to Sell its Cars Directly to Consumers in Louisiana, Using its Constitutional Rights

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Tesla has filed suit to sell its cars directly to consumers in Louisiana and is challenging a state law that limits its ability to sell electric vehicles directly to customers and violates its constitutional rights.

Last week, Tesla filed a lawsuit with the U.S. District Court for the Eastern District of Louisiana against the Louisiana Automobile Dealers Association, multiple officials on the Louisiana Motor Vehicle Commission, and some dealerships in the state, according to The Wall Street Journal. The lawsuit seeks to open the state's markets to its direct-to-consumer model of selling cars rather than through dealers as intermediaries. In addition to violating the company's constitutional rights, the state law violates interstate commerce.

“Louisiana consumers’ freedom is being unduly restricted by protectionist, anticompetitive, and inefficient state regulation and laws,” Tesla said in the lawsuit.

A government ban on direct-to-consumer sales of cars went into effect in 2017. In effect, dealers have gained control over which cars will be sold in the state and at what price. Many Americans have repeatedly encountered buying from dealerships and know that their price is much higher than the recommended cost of the car by the manufacturer.

A smaller car like a Toyota Corolla or Mazda 3, for example, will have a fairly small markup between invoice and retail price—often around 5%. More expensive as well as in-demand cars can have much higher markups, often in excess of 10%. Hot, new, much-demanded vehicles can have even more crazy Additional Dealer Markups (ADMs), reaching over 35%. Obviously, this business is a goldmine, and the losing side is always the buyers.

Tesla filed a similar lawsuit in Michigan in 2016 after the state denied the company a license to open a store to sell directly to consumers. The dispute was settled and the state allowed the automaker to sell directly to customers in the state.

In addition, Tesla also claims that the defendants in the Louisiana case, citing state law, tried to prevent the company from leasing cars and opening auto repair service centers. There are currently approximately 3,000 Tesla vehicles in the state, and the defendants are effectively depriving customers of the right to have their vehicles serviced, harming the state's residents.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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Article edited by @SmokeyShorts; follow him on Twitter

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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