Monday, February 10, 2025
You can't buy a Cybertruck in Wisconsin. Tesla appeals after state denies 4-dealership plan
Jeff Bollier
APPLETON - Tesla Inc. estimates Wisconsinites each year buy 3,000 to 4,000 of its electric vehicles. None of those sales happen in Wisconsin.
Wisconsinites who want to buy a Cybertruck or Model Y have to go to another state, frequently Illinois or Minnesota, because Wisconsin’s “factory store” law bars vehicle manufacturers like Tesla and Ford from owning vehicle dealerships with few exemptions.
Tesla last year applied for an exemption to open its own dealerships at its existing showrooms in Madison and Milwaukee, plus indicated interest in two more dealerships in Glendale and the Appleton area. The request would have made Wisconsin the 28th state to allow Tesla to directly sell its EVs to customers, but an administrative law judge denied the request in October. Tesla objected, but a state administrator in December upheld the decision.
Earlier this year, Elon Musk-led Tesla filed a petition in Outagamie County Circuit Court asking a judge to either overturn the decision or order a new hearing on the request to open up to four direct-sales dealerships. The petition cited the 3,000-4,000 vehicle sales estimate for Wisconsin and indicated direct-sales dealerships in the state would likely increase that volume.
The Wisconsin Department of Justice has asked Judge Mitchell Metropulos to affirm the state’s decision. The Wisconsin Automobile & Truck Dealers Association (WATDA) wants the decision upheld and also has requested the case be moved to Dane or Milwaukee county. Tesla will have spent more than a year on the effort by the time Metropulos convenes a procedural hearing in late March.
Need a break? Play the USA TODAY Daily Crossword Puzzle.
Here's what to know.
What did Tesla want to do?
Tesla in 2020 opened two galleries and service centers in Wisconsin at 12011 W. Silver Spring Drive, in Milwaukee, and at 6624 Seybold Road, in Madison. Consumers can take a look at the vehicles available, learn more about Teslas and arrange service, but can't buy a Tesla.
In March 2024, Tesla applied to the Wisconsin Department of Transportation for an exemption to turn both of those galleries into direct-to-consumer dealerships owned by Tesla. The application also indicated the company wanted to open two more dealerships in Glendale and in Grand Chute, an Appleton suburb town along Interstate 41 on Appleton's northwest side.
More EV coverage:Trump administration freezes funds for Wisconsin electrical vehicle charging stations
Why can't Tesla or Chevy or Honda open their own dealerships in Wisconsin?
Wisconsin is among the states that do not allow vehicle manufacturers to own or operate sales dealerships. The state's "factory store" law aims to avoid unfair competition that could arise from a vehicle manufacturer owning the dealership, too.
Instead, vehicle manufacturers need to contract with independent dealers such as Wilde Automotive Group in Milwaukee or Bergstrom Automotive in northeastern Wisconsin.
A provision added to the state's 2019 biennial budget would have allowed Tesla to proceed with direct sales in the state, but Gov. Tony Evers vetoed the provision.
Factories can request an exemption from the state, but they must prove there is no independent, licensed dealer available to sell the company's vehicles in a manner that fulfills the public interest and meets a factory's reasonable standards and uniform qualifications.
Tesla says its business model rules out independent dealerships
Tesla, in its Jan. 15 court petition to overturn the state's denial, claimed it qualifies for an exemption because no independent dealer meets the company's qualifications and standards and profit under its flat-price, direct-to-consumer sales model. It alternately claims it qualifies because state law does not apply or bar a non-franchising factory like Tesla from operating a dealership.
The company had eight Tesla-owning Wisconsinites testify in the May 2024 exemption hearing, explaining that they enjoyed the uniform retail price system Tesla uses for its vehicles and the middleman-free purchase experience.
Tesla in its petition for judicial review claimed that no independent dealership could profitably operate a Tesla dealership because it could not mark up vehicle prices to make a profit since consumers could go online and purchase a vehicle from the company for less. It also said the state's decision violated the company's right to economic liberty (selling EV cars and trucks) enshrined in the Wisconsin State Constitution.
Wisconsin car and truck dealerships argue Tesla is not barred from selling cars in Wisconsin, it just can't sell them the way it wants
Wisconsin Automobile & Truck Dealers Association, the state's auto dealership industry group, requested to participate in Tesla's exemption hearing and had representatives from four major independent dealerships including Bergstrom and the Russ Darrow Group testify that not only were they interested in Tesla dealerships, they could profitably operate such dealerships without having to mark up Tesla's prices.
Dealership representatives said they could make a profit via used electric vehicles trade-ins and sales, as well as EV service and maintenance.
The association also responded to Tesla's constitution claim by noting state law doesn't bar Tesla from selling cars to Wisconsinites, but does bar the company from owning or controlling its vehicle dealerships.
A WADTA official on Friday declined to comment, citing the ongoing legal matter.
Administrative law judge rules against Tesla; state administrator upholds decision
The exemption request went to a hearing before Administrative Law Judge Kristin Fredrick, with the Wisconsin Department of Administration's Division of Hearings and Appeals.
Fredrick on Oct. 10 issued a ruling recommending Tesla's request be denied, which the company in November objected to. The company's reasons for objecting were reviewed by DHA Administrator Brian Hayes, who in a Dec. 17 decision affirmed the state's initial decision and denied Tesla's request for an exemption.
Hayes wrote that Tesla sought an exemption the state Legislature did not include in the "factory store" law that is based on "circular logic," namely that independent dealers can't qualify for a Tesla franchise solely because they are independent and not owned by Tesla.
"The law, as written, simply does not support the conclusion Tesla seeks," Hayes wrote.
What's the basis for Tesla's objections and appeal in Outagamie County Circuit Court?
Tesla cited six issues as grounds for a review of the state's decision in its Outagamie County Circuit Court petition. Tesla's attorneys did not return a request for an interview or comment.
- DHA erred by rejecting Tesla's argument its non-franchising business model rules out any franchised dealer as available.
- The law judge's conclusion that independent dealerships are available to profitably sell Tesla EVs was not supported by solid evidence presented in the case.
- The judge's determination an independent dealer could operate within the public interest is a legal error and unsupported. The company said its direct-to-consumer model saves consumers money compared to franchised dealerships.
- WATDA was improperly allowed to join the hearing and its witnesses, evidence and arguments should be rejected. Tesla suggested WATDA's involvement left the decision on whether Tesla qualifies for an exemption up to its competitors.
- The judge's decision rested on legal error in that the decision is unconstitutional because it infringes on Tesla's "fundamental right of economic liberty" as enshrined in the Wisconsin Constitution.
- DHA should provide Tesla with a new hearing before an impartial administrative law judge. Tesla argues that because the judge shared a her draft decision with the DHA administrators prior to with the parties involved, the company was deprived of an independent, impartial hearing and consideration of its objections.
The company requests Metropulos issue a judgement that Tesla is entitled to a dealership license. Alternatively, it requested he hold a hearing on the irregularities in the review process it cited, reverse the decision and direct DHA to correct any errors in the procedure and, if necessary, grant Tesla a new hearing.
Why did the auto and truck dealers request the case be moved out of Appleton?
Tesla in its petition said Outagamie County is the proper place to hear its petition because that is the location of one of its proposed dealerships affected by the state's decision.
WATDA on Feb. 5 filed a "change of venue" motion to move the case to either Dane County or Milwaukee County.
The association's attorney's argue the case belongs in Madison or Milwaukee because Tesla currently operates two galleries in Madison and Milwaukee and only applied for two dealerships, in Madison and Milwaukee, while merely indicating an interest in dealerships in Glendale and Grand Chute.
What has the Wisconsin Department of Justice said in response to Tesla's petition?
In a Feb. 5 filing statement of position filed by Attorney General Josh Kaul and an assistant attorney general, the state denied most of Tesla's arguments and the company's claims that it's entitled to a new hearing or approval of its request.
DOJ requested Metropulos affirm the state's original decision.
A request on Friday for an interview or comment from the DOJ was not returned.
What happens next?
A hearing on WATDA's request for a change of venue to Dane or Milwaukee county circuit court.
Metropulos will hold the hearing at 9:30 a.m. March 24 in the Outagamie County Courthouse, 320 S. Walnut St., Appleton.
Contact business reporter Jeff Bollier at (920) 431-8387 orjbollier@gannett.com. Follow him on Twitter at@JeffBollier.
Posts
