AP NEWS

Tesla Greenwich showroom faces uncertain future

March 11, 2019

GREENWICH — Tesla’s controversial showroom at 340 Greenwich Ave. has gone dark, as the electric-vehicle maker closes many of its brick-and-mortar establishments and moves all of its sales online.

The downtown gallery has been shuttered in the past week, an apparent reflection of the Palo Alto, Calif.-based company’s downsizing of its brick-and-mortar network to cut costs, to help shore up its finances and sell the standard version of its Model 3 sedan at $35,000. For the Greenwich center — Tesla’s first and only in the state — a closing would culminate a two-and-a-half-year run overshadowed by a prolonged court battle over whether the establishment has been making illegal sales.

“All Tesla sales now online,” says a placard in the store’s front window. “Please go to Tesla.com to order your car in about one minute.”

Tesla partially reversed its original Feb. 28 decision, with an announcement Sunday that it would now close about as half as many stores as previously planned but still sell entirely online. It has recently shut down about 10 percent of its locations. Another 20 percent are under review, with their future “depending on their effectiveness over the next few months.”

In response to a Hearst Connecticut Media inquiry Monday on the status of the Greenwich gallery, a Tesla spokeswoman referred to the Sunday update but declined to comment further on the showroom.

As a result of the reduced savings from the revised plan, Tesla said it would need to raise vehicle prices worldwide by an average of about 3 percent.

There would still be no increase to the $35,000 asking price of the standard Model 3. The cost hikes would apply only to the more expensive types of the Model 3, as well as the Model S sedan and Model X crossover-utility vehicle.

Long legal dispute

Brick-and-mortar Tesla establishments have operated in more than two-dozen states, including New York, Massachusetts, New Jersey, California, Florida, Illinois and Texas.

None of Tesla’s showrooms are franchised dealers. State laws dictate which stores can make on-site sales.

The Greenwich gallery has not sold cars, according to Tesla executives. Visitors interested in buying have been directed to the Tesla website or one of the New York galleries permitted to make on-site sales.

But even before the showroom opened in September 2016, opponents have questioned that explanation and tried to shut it down.

In July 2016, the Connecticut Automotive Retailers Association filed a petition that sought a ruling from the state Department of Motor Vehicles on the establishment’s legality. CARA argued that the center violated the state’s ban on direct sales to consumers from manufacturers that do not have a new-car dealer’s license.

“Legality is probably the most important issue facing us with Tesla, given their reputation for not giving due respect to regulatory agencies,” CARA President Jim Fleming said in a recent interview. “Their management would be located outside our state, which makes regulation even more difficult.”

In April 2017, the DMV ruled that Tesla was making sales at the Greenwich showroom and would need to procure a dealer’s license to continue.

Two months later, Tesla sued the DMV and CARA. It maintained that no vehicles were sold in the gallery. The company said it had gone as far as preventing customers from placing online orders, with their own devices, while they were in the store.

State Superior Court Judge Joseph Shortall disagreed. Showroom services such as test-driving scheduling and assistance with computer configurations of models that would be available to buy later exceeded constitutionally protected “commercial speech,” he wrote in a decision last December. He also concluded that Tesla had tasked employees with building leads to be converted into customers and rewarded them for doing so.

“If Tesla was not engaged in the business of selling motor vehicles at the gallery, it’s difficult to see what it was engaged in at that location,” Shortall wrote. “The record evidence is that gallery employees educated visitors to the gallery, with the goal of selling them Teslas. So, the argument that the gallery was simply a locus for public education about the virtues of electric vehicles borders on the fanciful.”

Tesla then challenged Shortall’s decision in the state’s Appellate Court. His ruling did not shut down the showroom.

Amid the contention, Tesla has garnered a number of local backers, including the Greenwich Chamber of Commerce. It held a networking event last year to support the company.

“Everyone was excited about Tesla’s commitment to help the environment,” said Marcia O’Kane, the chamber’s CEO and president. “The business community is sad to see another empty storefront but understands that this is due to Tesla’s strategy. The space would lend itself well to any retail establishment looking for a prestigious address.”

In the past few years, the state General Assembly has considered several bills to allow electric-vehicle manufacturers to sell directly to consumers. Doing so would enable the Greenwich showroom to make on-site sales. But all of those proposals have foundered.

pschott@scni.com; 203-964-2236; twitter: @paulschott