Tesla Will Seek Federal Ruling to Allow Factory-Direct EV Sales

Tesla Motors Inc. is readying a federal lawsuit in a bid to overturn laws in six states that ban it from selling its electric cars direct to customers, The Wall Street Journal reports.

Tesla’s move is likely to coincide with the debut of the company’s first mass market EV—the $35,000 Model 3—later this year, according to the newspaper. The company is counting on the car to push its annual sales to 500,000 by 2020 from 50,600 last year.

The Journal says Tesla may bolster its argument by pointing to a 2013 federal appeals court ruling that allowed monks in Louisiana to sell coffins without a funeral director’s license.

Arizona, Connecticut, Michigan, Texas, Utah and W. Virginia have franchise laws that require carmakers to retail new vehicles through independent dealers. Tesla, which has sold cars through its own outlets from the beginning, claims those decades-old laws were intended to prevent carmakers from going into direct competition with their own independent dealers.

The laws block Tesla from directly accessing about 18% of the U.S. new-car market, the Journal says. The company and its supporters claim such laws stifle competition and provide no benefit to consumers.