Online Electric Car Sales May Be Banned in North Carolina: Consumer Protection or Corporate Protectionism?

Tesla Motors Headquarters in Silicon Valley
/ Wikimedia Commons

Fox News is reporting that an effort is underway in the North Carolina legislature to effectively prohibit the Palo Alto, California-based Tesla Motors car company from directly selling its popular electric cars online to consumers located within the Tarheel state.

Consumer protection is the ostensible rationale offered by the state's legislators who have introduced a bill that would effectively require that a franchised local dealership actually sell the electric cars to consumers.

Tesla's Roadster / Wikimedia Commons

Tesla is known for setting up showrooms that display and allow inspection of the sample electric cars, but the actual sale of the car is transacted entirely online.  By cutting out the franchised dealer as the "middleman," Tesla effectively removes local dealerships from the process.  Reportedly, as many as 80 Tesla electric cars have already been sold to North Carolina residents.

Tesla says that its time-intensive customer service model just won't translate well to franchised dealers, and that most consumers would laugh at the notion that they're better served by the existing system, which requires an unnecessary local transaction. Tesla said the dealers' true interest is maintaining total control over the retail auto industry.

Experts note that Tesla could try to lobby for a federal law or seek a ruling from federal courts that would apply across the U.S. That strategy could include making a case based on the U.S. Constitution's Commerce Clause, which says only Congress can regulate interstate commerce.  Courts have also held that the Constitution forbids localities from discriminating against out-of-state companies, solely to protect locals.

However, the car company would need to prove that the legislature was targeting it specifically when it passes the proposed law, and that the consumer protection rationale is a pretext.