Tesla Motors is one of those companies that is hard not to love. They have a cool, innovative product. They are all over the news, but no one you know has one. They are leading the zero emission vehicle (ZEV) movement just as governors in eight states have pledged to put 3.3. MILLION ZEVs on the road by 2025. And helping state and local governments build the infrastructure that will be required to support those vehicles. And they just recently announced they are giving their technology away … free! How great is that? Well, not so great that states legislators haven’t stopped trying to ban them from selling cars in their state.
Tesla has what appears to be a love-hate relationship with states and state government. Tesla has been battling the traditional auto dealers over Tesla’s direct-to-consumer business model. The auto dealers claim that they are acting in the interest of consumer protection. They fear that manufacturers selling directly to consumers could lead to a flood of poor quality cars from China and other countries. A valid concern, however, it has been demonstrated in many states that state regulators can easily control who sells cars in their state. On the other hand, Tesla claims that because technology is so new, it needs to have solely-owned showrooms to promote and sell both the technology and the car.
Often times legislators placed in the middle of this fight, debating the merits of each side’s claim. Many love Tesla’s innovation, potential for new jobs and cleaner cars. Just as many hate that local businesses in their districts see Tesla’s business model as bad for consumers and a threat to their business.
Marketplace bills aside, you can see that legislatures love-hate relationship with ZEVs is not ALL about Tesla. There are many issues that help promote ZEVs – tax credits, rebates, reduced tolls or access to carpool and high occupancy lanes, and funds for charging stations. And bills that would hurt would be Tesla and other LEV and ZEV owners, such as South Carolina’s annual road fee for hybrids, plug-in hybrids and electric vehicles (SC H3645).
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But the biggest issue Tesla is facing in state legislatures is the marketplace bills – these bills dictate how, or even if Tesla can sell cars in that state. Most of these bills strictly limit or are even attempting to block Tesla’s model of direct to consumer sales, whether the bills target internet sales, or sales through company-owned showrooms, or both. All of the tax incentives and infrastructure projects do not matter if Tesla cannot sell their cars in that state. Tesla is currently banned from selling cars in five states [source-Forbes] – Arizona, Maryland, New Jersey, Texas and Virginia, although there is an active bill in New Jersey that would lift the ban (see below).
Some states, though fewer, have introduced pro-Tesla legislation or have kept legislation Tesla friendly. But, even the pro-Tesla legislation is often restricting. Georgia’s HB925, for example, makes an exemption of the franchise rule, but limits manufactures of ZEVs selling less than 1,500 cars per year. New York’s Governor Cuomo just signed NY A07844 that will allow Tesla to maintain its five existing showrooms, but only open more through dealerships. Ohio lawmakers kept an anti-Tesla amendment off a moving bill, but Tesla was threatened with a second bill. In the end, Tesla negotiated a agreement approved by a Senate panel to limit growth in the state to three showrooms. Texas introduced a bill (TX HB 3351) that would have overturned the current ban on selling Tesla’s in the state, however the bill failed in committee. In Washington State Governor Inslee signed WA SB6272, which allows Tesla to continue to see direct to consumer, but prevents other manufactures from doing the same.
The ZEV and direct-to-consumer sales are fairly new issues for state legislators and regulators. They require complex policy decisions, and there are strong supporters on both sides of the issue. It is no wonder that many states simply can’t decide which side of the fence it is on.
Arizona and Texas have banned Tesla from selling direct in their states, but that didn’t stop them from trying to woo Tesla jobs to their states. Not to mention, and expected fight to overturn the ban in the 2015 Texas legislative session.
In Massachusetts, the Legislature has introduced a pro-Tesla bill (S129), an anti-Tesla bill (H241). If that is not enough, the Massachusetts Auto Dealers Association is suing the town of Nadick for issuing a dealership license to Tesla in the first place.
Earlier this year, the New Jersey State Motor Vehicle Commission passed a new rule that blocked Tesla from selling cars in the state. The company is getting a second chance, however. Just yesterday, NJ A3216 was recently passed out of the Assembly by a 77-0-1 vote, which will at least give a temporary fix to the Tesla problem. But a temporary solution is just that, temporary. The state will eventually have to decide – do they love Tesla, or hate them.
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