A new direction: do Utah's dealer franchise laws drive the auto industry or slow it down?

• Author: Francom, Sarah Ryther

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Imagine you're in the market for a new car--but this time you want something different. Something like a Tesla Model X, a luxury electric sports utility vehicle that boasts a 90 kWh battery providing 257 miles of range. As you research your dream purchase, you learn that you can't buy a Tesla in Utah. Tesla isn't permitted to sell its cars in the state because it doesn't use the dealership franchise system. You wonder, "What's this franchise system all about and why can't I buy what I want?"

The auto dealers franchise system and its corresponding laws were developed decades ago to help auto manufacturers distribute vehicles across the country. In many ways, the franchise system made sense. Vehicle manufacturers, who desperately struggled to sell their automobiles directly to consumers, could now build a robust network of community dealers spanning the country, from big cities to rural towns. Together, car manufacturers and dealers created a relationship that worked well for them and consumers. Though the franchise laws have been through twists and turns over the years, the system has primarily remained unchanged during its nearly 100-year history. Today, nearly every state in the country continues to use the dealership franchise system, with laws in place to guarantee it stays on track.

But times have changed, and the auto industry is changing, too. Some are beginning to wonder whether the franchise system remains relevant. New car manufacturers, like luxury electric car maker Tesla and three-wheeled economic car maker Elio, are challenging the status quo. Not only are manufacturers like Tesla and Elio making vehicles that are unlike customary models, their selling and distribution strategies are breaking the mold. In short, they just don't see a need for the traditional dealership network. Instead, they want to remove the middle man and have direct-to-consumer sales.

But many states, including Utah, have dealership laws in place prohibiting just that.

Tesla is now preparing to challenge Utah's dealership franchise system at the Utah Supreme Court. They join many voices who say it's time for auto sales to move in a new direction. But is it really time to change a system that has worked so well for nearly a century?

If it's not broken ...

Craig Bickmore, executive director of the New Car Dealers of Utah Association, says the franchise system is a win-win-win, benefiting manufacturers, dealers and, most importantly, consumers.

"The relationship between manufacturers and dealers can be a really good partnership, if it's properly done," he says. "The franchise law keeps the manufacturer doing what they do best, and that is to produce...