It looks likely the controversial legislation that would prevent Tesla Motors’ direct-to-consumer sales model in Missouri is dead – for now anyway. According to PoliticMo.com , Missouri House Majority Floor Leader John Diehl, R-Town and Country, said he would not be moving House Bill 1124 and doubted it would pass in any form this year.
The Missouri Senate drew the ire of Tesla last week when they quietly attached language to the above bill that would mandate that Tesla and other automakers sell their vehicles via franchised dealerships. Here is what Tesla had to say about it on their blog:
We have just become aware of a last-minute attempt by the auto dealers lobby, via pressure on legislators, to bar Tesla from selling its vehicles direct to consumers in the state. This extraordinary maneuver amounts to a sneak attack to thwart due process and hurt consumer freedom in Missouri….Last night, the bill with the new anti-Tesla language passed the Senate after zero public consultation and could soon move to the House floor for a final vote, essentially without debate.
This change is not an innocent, minor amendment. It is completely unrelated to the original bill, which was about laws regarding all-terrain vehicles, recreational off-highway vehicles, and utility vehicles. It is also a complete 180 from current law. The current statute only bars franchisors from competing against their franchisees (for example, Ford cannot compete against Ford dealerships). Tesla complies with that statute because we do not compete with any franchise.
Tesla has remained committed to its direct-to-consumer sales model despite legislative challenges in many states similar to the one in Missouri. These challenges are the direct result of the power that the Auto Dealers Associations wield in state politics. They see the Tesla business model as a serious threat to their very existence, whether they admit to that or not.
Imagine a world where your car was cheaper to buy because the middle-man taking his pound of flesh (i.e. the dealership) is eliminated and you dealt directly with the manufacturer. This would also eliminate a great deal of the runaround that customers face when trying to get items covered under warranty from the manufacturer but have to go through that pesky middleman again. I think they have every right to be very, very worried.
The auto dealers even have the audacity to try and convince us that they are advocating anti-free market legislation for our protection and not their own, as evidenced by this quote from Bobbi Sparrow, president of the Arizona Automobile Dealership Association (the dealer’s prevailed with legislation in Arizona):
Tesla’s desired business model “is a decades old, failed idea to establish a vertical monopoly that is remarkably both anti-business and anti-consumer.”
And this quote from Doug Smith, president of the Missouri Auto Dealer’s Association, referring to the current law which does not apply to Tesla’s case:
We believe that the law protects Missouri auto consumers and promotes market competition and should continue to be in place.
The states that have placed the most constraints on Tesla’s ability to sell cars are also the ones who promote themselves as proponents of free market capitalism, namely, Texas, Arizona and New Jersey. Here is what Tesla has to go through to sell a car in Texas:
Store employees may not tell visitors how much a Model S costs. They can’t give test drives. They can’t discuss financing, leasing, or purchasing options.
Store employees are not allowed to refer interested people to an out-of-state store. No sales-related activity is permitted.
Service centers, which are owned by a local subsidiary Tesla Motors TX and operate as a sub-contractor to parent company Tesla, are not allowed to display the Tesla logo or advertise that they do Tesla warranty work or service.
Service centers are not allowed to discuss service problems or make appointments with Tesla owners: All such communications must be routed through Tesla’s head office in California.
At least the Show-Me state has decided to not to stand in the way of an American company’s success – for the near future anyway.
Tracey is an accountant and entrepreneur with a passion for nature. This passion is what spurred her interest in renewable energy, and the rest is history as they say. Tracey is a principal in Energy Think Group, the publisher of Solar Thermal Magazine and Tek-Think. She is also the principal at Women's Financial Help Desk. She spends her free time in the outdoors with her horses and dogs. She loves to travel.