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Tesla Company Stores are Now Welcome in Some States?

Mar 26 2014, 8:12am CDT | by

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Tesla Thaw? Suddenly States Are Moving On Laws Favoring The Company's Stores
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Tesla Company Stores are Now Welcome in Some States?

Just two weeks after Chris Christie and New Jersey made Tesla’s company-owned stores illegal there, at least four states —  including the brash governor’s –are working on possible bills that could benefit the automaker. In Arizona, Texas and New Jersey those rules would overturn current regulations that limit Tesla to offering information about its cars but prevent it from actually selling them. In New York, the motivation is to prevent the state’s auto dealers from getting a new law on the books that would make Tesla’s currently licensed showrooms illegal, similar to what just occurred in New Jersey. The motivations of the states concern have common threads around jobs, but there’s a big prize potentially awaiting Texas and Arizona only: the $5 billion Tesla battery Gigafactory . The company needs to commit to a location soon and it seems unfathomable it will select a state where it can’t legally sell its cars. Here’s a rundown of what’s going on in each of the four sates:

New York

Among the four states in question, New York is unique in that its governor is a Democrat, Andrew Cuomo, and the state Assembly is also controlled by Democrats. That said, like the others on the list, the political power structure in Albany has been sympathetic to the demands of automakers to ban Tesla from selling its cars through company-owned storefronts. After meeting with Cuomo aides last month, the dealers were assured that if they could get a ban through the legislature, the governor would sign it, Deborah Dorman told Capital New York .

The dealers apparently will do whatever it takes to get that bill, including attempting to attach it to the state budget or pushing for a vote with limited debate, according to Marcia Bystryn, the president of the New York League of Conservation Voters, as reported in  Business Insider If these tactics work, the Tesla legislation is likely to pass as “virtually every legislator has auto dealers in their district,” Assembly David Buchwald told me last week. Buchwald, who is also a Democrat, is probably the last line of defense for Tesla in New York. He represents White Plains and says the Tesla showrooms in his district employ 35 people already.

“I firmly believe there’s room for compromise,” Buchwald said. He believes the bill the Assembly is considering could be amended to carve out room for Tesla. “A lot of the concern that I’ve heard from auto dealers is that they’re worried the Tesla model will create a precedent that other auto manufacturers will follow. It’s certainly possibly to create a bill that will address that situation while still allowing an innovative new American car manufacturer to see if its products can succeed in the marketplace.”

Buchwald held a press conference last Friday with Tesla’s vice president for regulatory affairs James Chen and several environmental leaders in attendance. He’ll need to get a clean debate on the bill in order to introduce any amendment and if Bystryn is correct, that may prove challenging. This drama should play out over the remaining 3 months of the legislative session if not sooner.

New Jersey

Governor Christie’s maneuver took matters out of the hands of the state legislature, but he was quick to pass the buck back to them. “”I’m not pushing Tesla out; the state Legislature did,” Christie said, as reported on NJ.com . “They passed a law — which is still on the books — which says if you want to sell cars in this state, you must go through an authorized dealer. My job is not to make the laws, it’s to enforce the laws. And Tesla was operating outside the law. I have no problem with Tesla selling directly to customers, except that it’s against the law in New Jersey,” he added. “What they were asking for was an exception from the law. I’m not the king. I don’t get to grant exceptions to the law.”

Those statements strongly suggest that if lawmakers overturn the existing rule, he’d be on board. Tim Eustace, a Democrat from Passaic, will attempt to test the governor’s commitment with a bill of his own . He’s attempting to thread the needle by making the proposed rule apply only to electric vehicles. That would basically make it a “Tesla bill” though depending on the final language other manufacturers could set up EV-only showrooms without their dealer network. In theory, this will limit opposition from incumbent auto dealers.

Texas

That said, a similar bill died in Texas last year. And that’s despite the support of Republican Governor Rick Perry , the erstwhile presidential candidate, who supported it. But Perry sounds more committed to seeing Tesla’s company-owned stores — which are currently against the law in Texas — made legal as soon as possible. While he’s been on the side of the free market for a while, Perry is clearly motivated by the prospects of getting the Gigafactory to Texas, along with its 6,500 jobs. “The cachet of being able to say we put that manufacturing facility in our state is one that’s hard to pass up,” he told Maria Bartiromo on Fox Business .

Perry pointed out that the laws banning manufacturer-owned stores have been on the books for a long time, before calling them “antiquated.” Perry acknowledged times have changed: ”We live in a different world than we lived in 30 years ago,” he said. Explaining that the laws were once then to protect consumers from having to deal directly with automakers, Perry believes people can hold their own. And at the very least, Texas should consider changing the rules to allow them to do so. ”We don’t need to be protected. I think it’s time for Texans to have a really open conversation about this. I think the pros are going to outweigh the cons.”

As to whether legislation will move quickly enough to impact Tesla’s decision on siting the Gigafactory, that’s another matter.

Arizona

Further west, however, a rival for the Gigafactory is already on the move with reversing its ban on Tesla’s stores. The Arizona law dates back to 2000, but if state Rep. Warren Petersen, a Republican from Gilbert, has his way, that law will be off the books soon. He told KPNX-TV that he wanted Tesla to know “Arizona is open for business.” Petersen echoed Perry in calling the Arizona law “archaic.” Because it precludes choice in where one can buy a car, Gilbert also referred to the law as “protectionist” on behalf of auto dealers. “We want a consumer, not the government, not an auto dealer, to decide who you can buy your car from,” Petersen said.

The bill squeaked through a State Senate committee, but passing the full House and Senate in Arizona will be challenging, given opposition from auto dealers.

Overall

The moves in New York and New Jersey aren’t time limited except by the legislative calendars. Texas and Arizona will bear closer watching, however. If Tesla awards the Gigafactory to Nevada, for example, neither state would have the incentive of a $5 billion capital project to motivate it to lift the ban on Tesla’s stores. On the other hand, the longer the electric-car maker can hold out, the better its prospects of seeing its stores legalized in both states. It would not then be obligated to place the factory in either, but it might take a much longer look at both as part of a very long game of playing politics with multiple jurisdictions. Tesla could find itself opening a second auto plant and even another battery factory early in the next decade and the states that “lose” now could be on the short list later. In the meantime, the sudden interest in supporting the company’s sales model is good news. If everything falls Tesla’s ways, Chris Christie might have done Elon Musk a favor by drawing so much attention to the issue.

Follow me on Twitter  and on Facebook . Find the rest of my Forbes posts here .

Source: Forbes

 

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