For the second year running, Tesla Motors Inc (NASDAQ:TSLA) has tried and failed at passing a bill that would allow them freedom to sell electric cars straight from their stores without going through franchise dealerships. The bill, which was being sponsored by the Senate Majority Leader Bob Duff, was just last week in consideration and awaiting a vote in the state Senate. The bill however did not make it because of the intensive lobbying that was started and led by General Motors and the local dealership association.
The issue of selling cars through third parties is not a big thing in most of the markets, but it is restricted or strongly guided in some states which include Arizona, Michigan, Texas, Connecticut, Utah and West Virginia. Tesla is currently involved in a few battles over how it sells its cars through third party dealerships.
The effort to start direct sales will be put off for another year, until when Tesla will launch another effort in the Congress with Sen Duff again. Tesla had opened a service center and are planning to open a gallery in Connecticut. The developments were thought to be preparations for the new rule change.
Diarmud O’Connell, Vice President of Business Development at Tesla said the increased effort by GM on increasing its lobbying effort was part of the reasons why the bill had not gone through. He noted that General Motors was trying to shut them down using state legislators and its legislation to conduct their own personal business plans by shutting Tesla down at the same time they are bringing their own competitive product to Tesla on the market. He also questioned the free market fairness of the auto industry, mentioning that General Motors got the chance to do a franchise system back in the 1920s and 30s so Tesla deserved just about the same opportunity.
The Regional Director for Governmental Relations for General Motors, Chris Gimaldi said that they were fully behind the effort to stop the bill as they viewed as a way to promote an even playing field. He said, “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.”
One of the main reasons why the laws which restrict direct car sales were created was so that franchise dealerships could have immunity against any unfair competition from the car manufacturers themselves. Companies like GM are the ones to be protected against, and not against outside competition.
Tesla on the other hand has never had any contracts with the third party dealerships, and therefore if they do open their stores they would not be in conflict with it. GM on the other hand has 43 franchise dealerships in Connecticut alone.
Sen Bob Duff, sponsor of the Tesla bill said that the House had been divided over the issue. He noted the fervor with which the car dealers and their sponsors had had when they were lobbying, and promised to come back in another year and try again.
One nee recent report showed that Tesla might be looking to ditch the state to state battles it is currently held in and is deciding to go directly to federal court. It is believed the electric car manufacturers’ legal team has been studying a 2013 federal appeals court ruling which ruled in favor of a monastery in Louisiana to sell monk-made coffins directly to customers without any third party dealerships, in New Orleans.