For the second year in a row, Tesla tried to pass a bill sponsored by Senate Majority Leader Bob Duff, D-Norwalk in Connecticut, to allow the sale of electric vehicles directly to consumers without having to go through the franchise dealerships model. Last week, the bill SB3 was in consideration and awaiting a vote in the state Senate, but it is now officially dead following an impressive lobbying campaign led by GM and the local dealership association.
The electric automaker is currently entrenched in several battles over its business model of selling directly to consumers without a third-party dealership. While it is not an issue in most of its markets, Tesla is not allowed or under restrictions to sell its cars in several states including Arizona, Michigan, Texas, Connecticut, Utah and West Virginia.
Despite operating a service center and soon opening a gallery in Connecticut, direct sales will now be out of the picture until Duff and Tesla can launch another effort next year.
Tesla’s Vice President of Business Development, Diarmud O’Connell, placed part of the blame on GM increasing its lobbying effort (via CT Mirror):
“This is using state legislators and a legislative body to prosecute a business strategy whereby they are trying to shut us down at the same time they are bringing out a competitive product. The free market fairness question has to be asked: General Motors decided they were going to a franchise system in the 1920s and 30s. Good for them. Why wouldn’t Tesla as a free-market actor get to make that same choice now?”
GM’s Regional Director for Governmental Relations, Chris Grimaldi, said that it supported the effort to stop bill SB3 to promote an even ‘playing field’:
“GM believes that all industry participants should operate under the same rules and requirements on fundamental issues that govern how we sell, service and market our products. We, along with the Alliance of Automobile Manufacturers and Connecticut dealers, oppose the creation of two different sets of laws governing vehicle manufacturers in the state of Connecticut that would establish an uneven ‘playing field.’ “
The problem is that the main reason why the laws prohibiting direct car sales were created in the first place, was to protect franchise dealerships against unfair competition from their own manufacturers, like GM, but not against outside competition, which would be against all the principles of the free market.
Tesla never had a contract with a third-party dealership and therefore is not in conflict in opening its own stores, unlike GM which has 43 franchise dealerships in Connecticut. It would be the same thing for any new manufacturer trying to bring a vehicle to market, like Elio Motors for example.
Bill sponsor Bob Duff said that his caucus was divided on the issue:
“I think the car dealers and others have been very effective in lobbying in their favor. We’ll come back again and try in another year.”
A recent report suggests that Tesla might be looking into bringing the issue before a federal court, instead of the state by state battles it has been fighting for a while now. Tesla’s legal team led by General Counsel Todd Maron is said to have been studying a 2013 federal appeals court ruling in New Orleans that made it legal for a monastery in Louisiana to sell monk-made coffins directly to customers without having to go through a funeral home or having a funeral director’s license.
Tesla is drawing similarities with its own business model as an automaker selling cars directly to customers without going through dealerships.