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Pitched Battle Over Franchise Laws For Electric Car Companies

by | May 5, 2017 1:30pm () Comments | Commenting has expired | Share
Posted to: Business, Energy, Environment, Equality, Jobs, Legal, Transportation, DMV, Greenwich

Andrei Tudoran / Shutterstock HARTFORD, CT — Score one for the Connecticut car dealers in the latest attempt to keep Tesla, an American electric car maker, from selling its vehicles directly to consumers.

Earlier this week the Department of Motor Vehicles said what Tesla is doing at its non-sale, Greenwich Gallery is “not substantially different than business activities conducted by licensed new car dealers.”

The decision goes onto say that “but for the fact that a prospective Tesla purchaser must employ his or her personal computer to place an order for a vehicle with Tesla, the purchase process is identical to the business practice of a licensed dealer in the state of Connecticut.”

Tesla moved for reconsideration of the decision and was given a stay, which will allow them to keep operating in their Greenwich location until they can file an appeal.

Diarmuid O’Connell, vice president of business development for Tesla Motors, maintains that Tesla “was not permitted to — and did not — sell any cars” at its Greenwich Gallery.

In a letter to top lawmakers, O’Connell says the car dealers and their trade association, the Connecticut Automotive Retailers Association, know they cannot buy cars in Greenwich because it sent “secret shoppers” to the gallery in a failed attempt to “trick our local employees into selling them a vehicle.”

He said rather than fighting about what “educational activity Tesla can or cannot provide to Connecticut consumers at a non-sales location,” the state should allow Tesla to sell direct to customers so that “Connecticut consumers would finally have the freedom to buy the products that they want, and Tesla could create the jobs, business and improvements to sustainable transportation in the state that it wants.”

That’s why Tesla is back for the third year in a row to press the Connecticut legislature to allow it to obtain a new dealer license and sell directly to Connecticut consumers, bypassing the motor vehicle franchise system that other car manufacturers like Ford, GM, and Toyota have been required to use in order to sell their products.

Chip Gengras, who owns seven dealerships in Connecticut, said the franchise dealer system protects consumers and that it’s unfair that Connecticut would allow one car company to sell directly to consumers, while all the other car manufacturers have to use the franchise dealer system.

“The government shouldn’t be picking winners and losers,” and that’s what they would be doing if they allowed Tesla sell direct, he said Thursday.

Gengras said it also would not be good for consumers because when something goes wrong with the vehicle, where are they going to go for parts and services?

Tesla has one service center in Milford. The company could expand its service locations within new sales locations if the legislation passes.

O’Connell isn’t buying dealers’ argument and believes the franchise system adds costs onto consumers, while protecting the dealers.

“Dealer protection is bottle necking a lot of growth here,” O’Connell said. “It’s frankly shocking” that Connecticut is refusing to do anything.

Tesla is allowed to sell direct to consumers in hundreds of states and countries. They are prohibited from selling directly in Connecticut, Michigan, Texas, and West Virginia, according to O’Connell. 

There are about 1,300 Teslas registered in Connecticut, which represents 62 percent of the electric vehicles in the state, according to the Palo Alto, California-based company.

Gengras said they’re not afraid that Tesla would be able to sell more vehicles to consumers in Connecticut, but they would force dealerships to think about getting leaner and outsourcing some responsibilities they would have never considering outsourcing in the past, such as accounting services.

“We’re not worried we’re going to sell fewer cars,” Gengras said.

It’s the threat to the dealer franchise system that would cause the contraction, he said.

Gengras said that dealers would be more than happy to sell Teslas at their dealerships.

But Tesla isn’t buying it and the two sides, which initially looked as if they could come up with a compromise over the sale of the luxury electric vehicles, appear to be further apart than ever.

The Wall Street Journal and Automotive News have reported that Tesla is considering a federal lawsuit against states that don’t let them sell their products directly to consumers.

The bill passed the Transportation Committee by a 25-10 vote and was sent to the Finance, Revenue, and Bonding Committee Friday. It will have to pass that committee before going back to the House.

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