Tesla bill stuck in neutral – for now

By Kevin Zimmerman

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Struggling to pass a state budget by a midnight May 4 deadline, Connecticut legislators appeared headed to a special session sometime in the following week to consider the so-called “Tesla bill,” which would allow the sale of electric vehicles (EVs) directly to consumers without having to go through the franchise dealerships model.

Sponsored by Senate Majority Leader Bob Duff (D-Norwalk), Senate Bill 3, titled “An Act Concerning the Licensing of New and Used Car Dealers,” is designed to allow any electric car companies that do not already have a physical presence in the state to have up to three dealerships in Connecticut. For now, Connecticut remains one of five states — Arizona, Michigan, Texas, Utah and West Virginia that ban direct retail sales of autos by a manufacturer.

Most major automakers including General Motors, Ford, Volkswagen, Toyota and BMW — sell EVs as well, but on authorized dealers’ lots next to their purely gas-powered brethren.

Tesla, based in Palo Alto, Calif., has tried an array of approaches to convince lawmakers to vote in favor of SB3, following the defeat of a similar bill last year. Last week Tesla published the results of a survey by Washington, D.C.-based Myers Research showing strong support for its direct sales business model in the state.

“According to the results of our recent statewide survey,” wrote Andrew Myers and Matt Johnson, “of 600 likely 2016 voters, an overwhelming majority of Connecticut voters (76 percent) favor changing state law to allow Tesla Motors to sell their products directly to consumers. Notably, as voters learn the specific details of the arguments from both sides of the debate on this issue, support for changing existing law remains remarkably stable, never falling below 70 percent — even after messaging from both sides.”

“If the auto association surveyed the public to see if they wanted to maintain dealerships and support our local economic activity against a national online company, we would also have strong support,” retorted Jim Fleming, president of the Connecticut Automotive Retailers Association (CARA). “We further believe there would be a lot more people that would affirm a stronger concern for keeping dealership locally owned and operated by generationally owned families than the limited concerns of a few people wanting a Tesla around.”

Upping the ante, on May 2 — hours after Duff conceded defeat — Tesla said it would open a regional distribution center in Connecticut if SB3 was passed, promising that the facility would add more than 150 jobs on top of the 25 jobs per store that the company had already said would result from the bill’s passage. All told, the automaker said it would create 275 new jobs in the state, with salaries ranging from $40,000-$100,000.

“Tesla is prepared to make a real and lasting commitment to Connecticut,” said Will Nicholas, the automaker’s government relations manager. “We want to invest here. We want to create jobs here and we want to serve Connecticut customers. The jobs created by this facility, in addition to the jobs created at each and every store, are good-paying jobs with good benefits.”

Duff seemed perturbed by Tesla’s late offer, but was continuing to seek votes for the bill as the legislative deadline neared. The senator has indicated he will introduce similar legislation next year if SB3 does not pass.

Opposition to the bill came from already-established auto dealers who protested that an exception to the long-standing Connecticut Franchise Act would open the floodgates to other out-of-state companies and put at risk some 13,000 jobs across the state — what CARA termed “a slippery slope [that would] expose Connecticut dealers to further end runs around the franchise system and undermine jobs in local dealerships.”

The Franchise Act, as noted by SB3, “enacted decades ago to prevent a manufacturer from unfairly opening stores in direct competition with affiliated franchised dealers who had already invested time, money and effort to promote their business.”

SB3 goes on to essentially call the Act outdated: “These laws are being exploited by franchised dealers to prevent car companies with nontraditional sales models, such as Tesla, from entering the market. Tesla has not, nor has it ever had, any franchise dealers anywhere. Instead, Tesla has always sold its vehicles directly to consumers. Due to the constraints of the Connecticut franchise laws, Connecticut consumers must travel to Massachusetts or New York to learn more about Tesla EVs and the purchase process.”

CARA has a powerful ally on its side: General Motors, which joined its lobbying efforts against the bill.

“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,” said GM’s regional director for government relations Chris Grimaldi. “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.’”

Tesla currently has 12 employees and several physical presences in Connecticut, including a service center in Milford and “supercharger” recharging stations in Darien, Milford, West Hartford and Greenwich, which allow up to 200 miles of range replenishment in as little as 30 minutes. The company also purchases a reported sum of nearly $3 million per year in parts and components from Connecticut-based businesses.

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