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Tesla battles Georgia car dealers claim that it broke sales rules

Tesla Motors CEO Elon Musk holds up a

Tesla Motors CEO Elon Musk holds up a bottle of wine given as a gift from one of his company's first customers on June 22, 2012, during a rally at the Tesla factory in Fremont, Calif. Credit: AP

Tesla Motors Inc., facing a challenge from Georgia dealerships over how it sells cars, said claims made in a petition filed on behalf of auto retailers in the state that it breached its license agreement aren’t valid.

The Georgia Automobile Dealers Association filed a complaint with the state’s revenue department last week, saying Tesla broke rules which stipulate it’s limited to selling fewer than 150 of its electric sedans directly to customers each year.

Tesla said the sales restrictions under its license agreement are applicable on a calendar year basis. GADA, which represents 500 dealerships, said in its Aug. 29 petition that Tesla sold 173 sedans in the period from October to June.

“Tesla has been and remains in full compliance with all Georgia laws in the opening and operation of its retail operations in that state,” Simon Sproule, a spokesman for the Palo Alto, California-based company, said by email Tuesday. The petition “is nothing more than a thinly veiled attempt to stifle new innovation and eliminate consumer choice.”

The Georgia dispute is the latest spat this year Tesla has had with dealers, following fights in Missouri, New Jersey, New York, Ohio and Pennsylvania. Tesla co-founder and chief executive Elon Musk has said the unique nature of Model S sedans, and electric cars generally, mean they are best sold through the company’s stores and staff. Dealers, on the other hand, say Tesla’s approach would set a precedent that could undermine how franchisees have sold autos for decades.

In Georgia, Tesla operates one store outside Atlanta in Marietta. The petition also said the carmaker breaks a condition of its license that allows it only to sell vehicles made “in accordance with custom design specifications of the customer.” The group asked the state agency to suspend Tesla’s sales license and prevent it from continuing to sell cars there.

“As with similar battles in other states, Tesla will use all means necessary to defend itself and the rights of consumers to decide how and where they spend their hard-earned money,” said Sproule. He declined to discuss Tesla’s sales volume in Georgia this year.

Nick Genesi, a spokesman for the state agency, didn’t immediately reply to an email message on the matter.

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