Tesla's direct-sales battle reignited in Louisiana

Author

Colin Velez
August 27, 2024

Tesla’s challenge to Louisiana’s direct-sales ban is back in play after a federal appeals court reversed the case’s dismissal from last year.

Why this matters: Many states have franchise protections in place, guarding dealerships from competition with manufacturer-owned sales networks (aka direct-sale models). While Tesla is far from overturning the law in Louisiana, it now has a chance to argue its case in court. Depending on the results, this could have far-reaching consequences for dealers, consumers and automakers.

Driving the news: The 5th U.S. Circuit Court of Appeals in New Orleans overturned a dismissal of Tesla’s 2022 lawsuit. The court appeared divided, voting two-to-one in favor of the EV brand.

  • The lawsuit targeted Louisiana’s Motor Vehicle Commission, dealerships owned by commission members and the Louisiana Automobile Dealers Association.

  • Tesla claimed Louisiana has illegally banned direct sales in the state since 2017. The company does not use a franchise network to sell its products, relying instead on company-owned showrooms and online sales.

  • The brand went on to accuse dealers of leveraging their positions on the commission to oust Tesla from the market.

Zooming in: In his opinion, Circuit Judge Jerry Smith supported Tesla’s argument that members of the commission demonstrated “plausible actual bias.”

  • Smith referenced emails from the agency’s executive director reassuring the EV brand’s competitors.

  • Judge Dana Douglas disagreed, arguing that Tesla was using the judicial system to circumvent the legislative process.

Bottom line: The case is now back in the hands of District Judge Sarah Vance, the same one responsible for its dismissal. It remains to be seen how Tesla argues its case in court or whether it will succeed in getting its way. If it does, this opens the door to other EV brands that have been blocked from selling in Louisiana, such as Rivian.

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