Tesla Motors Inc. scored a win for its direct sales model in Pennsylvania after the state House recently passed legislation – green-lighted by the Senate – that allows the electric carmaker to increase the number of its stores in the state and add more service centers. The legislation just needs the signature of Gov. Tom Corbett (Republican) to become law.
It managed to hurdle the House in an overwhelming manner, with a 197-2 vote. Diarmuid O’Connell, Tesla’s vice president for business development, said in a company statement that they are hoping that what transpired in Pennsylvania could serve as an example on how productive cooperation could result to a win for all parties involved – including dealers and legislators.
While its bid in other states faced strong opposition from an industry group, Tesla soared through the legislation in Pennsylvania thanks to cooperation with the Pennsylvania Automotive Association, O’Connel said. Ben Kallo, an equity analyst with Robert W. Baird & Co., quipped that state legislatures could be feeling pressure -- from constituents of all political parties instead of special interest groups -- to change state laws.
The Pennsylvania legislation is the latest victory for Tesla, which doesn’t sell its cars through traditional car dealerships. In June, the New Jersey Assembly passed a bill creating a loophole for direct sales of zero-emission autos, while New York Gov. Andrew Cuomo inked a similar measure into law. Tesla was also granted an exemption to an Ohio statute that bars direct auto sales. It likewise got through a similar ban in Missouri.
Karl Brauer, a senior analyst with Kelley Blue Book, remarked to Bloomberg that Tesla’s ability to avoid being shut out of states having strict franchise dealer rules shows that its chief executive Elon Musk is “disrupting” the traditional auto sales model.
In April, Gov. Jay Inslee of Washington State signed a bill allowing the Tesla to continue selling its cars directly to customers, instead of going through franchised dealerships in the state. Tesla currently operates has two stores in Seattle and Bellevue.
In a statement, Tesla remarked that the legislation should serve as a “model solution” for other states where it has been been facing stiff opposition from local dealers.
According to Bryan Imai, senior general counsel at the Washington State Auto Dealer Association, provisions of the new would ensure a fair balance between dealers and carmakers. The new bill further toughens existing laws between carmakers and state dealers that prevent other carmakers from selling directly to consumers.
Under the new bill, a carmaker with a dealership license as of Jan. 1, 2014, is exempted from the ban on carmaker ownership. Imai noted that Tesla held a dealership license in Washington as of the date. The wording of the bill essentially makes it illegal for other startup carmakers to set up direct-sales operations in the Washington State.
