Car dealers win victories over Tesla in two states

The parade of good news for Tesla suffered a little rainfall this week, as two state legislatures decided against it in its ongoing battle with the large auto dealers’ associations.

 

The parade of good news for Tesla suffered a little rainfall this week, as two state legislatures decided against it in its ongoing battle with the large auto dealers’ associations.

In Texas, two bills that would have carved out an exception from the state’s existing ban on direct retail sales failed to move forward in the legislative session. Tesla’s supporters can try again, but not until 2015, as the Texas legislature meets only every other year.

In North Carolina, a bill that would make it illegal for an automaker to sell vehicles over the internet was unanimously approved by the state Senate’s Commerce Committee. It remains to be seen whether the bill will become law, and/or be challenged in court.

Tesla wants to build its own network of stores, rather than using independent dealers as other US automakers do. As CEO Elon Musk put it, “Franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars.” This strategy falls foul of laws in most states that prohibit automakers from selling directly to buyers, and legal battles between Tesla and auto dealer groups are underway in several states.

Musk discussed the issue at length at this week’s shareholder meeting. He pointed out that Tesla’s adversaries are no “mom and pop” companies, but groups of giant auto dealers with a lot of political influence, and he cited opinion polls from several states that overwhelmingly show that consumers support allowing direct sales.

Musk, an immigrant who has often discussed his reverence for American democracy and free enterprise, cast the issue as a failure of the system. “If democracy was working properly, and the legislators were implementing the will of the people…there would not be legislation trying to artificially restrict direct sales.” He said in an emotional tone (around the 51-minute mark), “I think it’s outrageous that they would crow about a perversion of democracy – that’s just wrong. I think they’re making a big mistake.”

 

Sources: Tesla, Green Car Reports, AutoblogGreen