Missouri May Be Next State to Ban Tesla Motors
Auto dealer lobbies have strong ties to state houses across the U.S., and a perceived threat to their dealerships from Tesla Motors direct-sale model is prompting them to ask politicians to enact sales bans. But banning the very popular green car doesn't sit well with the public, politicians have found. This has prompted stealth legislation, introduced quietly with few announcements and even less debate.
Missouri is the latest state to try to slip in anti-Tesla legislation without anyone noticing. The "Show Me State" legislature is trying to obscure their actions by slipping through legislation as its current session comes to an end this Spring.
Just this week, the state's auto dealers proposed new language in an existing bill that would force consumers to buy new cars and trucks only through franchised dealerships. The bill, HB 1124, has been bouncing around since late last year, and was passed by the state's House in mid-April without containing any anti-Tesla language. But this week, the bill reemerged with the new language aimed to stop Tesla from selling cars. This Senate version passed with no public consultation whatsoever, and will likely move to the House floor for a final vote, essentially without debate.
This change to the bill is not just a minor amendment, it has morphed into a bill that is completely unrelated to the original one, which related only to sales for off-road and all-terrain vehicles and barred the manufacturers from competing against their franchisees (for example, Ford Motor Company cannot compete against Ford dealerships). Tesla, which doesn't have franchisees or a dealership network, would not have been effected by the original bill.
The amendment also attempts to redefine the word "franchisor" to mean "manufacturer," a slick change of legal wording of which legislators may not even be aware. This goes beyond automotive dealers trying to protect their existing monopolies—this legislation seeks to create a new car-sales monopoly.
Back in March, New Jersey’s became the third state to bar Tesla from selling their cars directly to consumers without a middleman. The Christie administration said they supported the legislation because Tesla shouldn’t have the right to unilaterally change the way cars are sold. As TIME magazine notes, the CEO of the company, Elon Musk, blasted the move in a scathing blog post, saying the policy was made as a “backroom deal” to “circumvent the legislative process.”
Tesla sells its cars without using the franchise model. But most other car companies make a profit by granting individually owned dealerships the right to sell car brands. So Tesla is going up against automobile dealers who have a lot of power—which stems from their political contributions. According to Open Secrets, the National Automobile Dealers Association, a lobbying group that represents car and truck dealers, spent $3 million in political contributions in 2012 and another $3 million on lobbying.
Tesla CEO Musk explained the rationale of the sales model in a blog post.
“When Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them,” Musk said. “The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none.”
Musk added that electric cars need much less service than the gasoline cars, so there's less of a need for dealership franchises. “There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car...Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.”
The challenge in Missouri comes as Tesla begins its appeal New Jersey’s law banning direct auto sales. Texas and Arizona also bar direct sales of Teslas.
Last month, Forbes reported that New York's auto dealers obtained a promise from aides to Governor Andrew Cuomo that he would sign a Tesla ban that was working its way through the state legislature, but Tesla was able to work out a deal to keep selling cars there. Ohio has worked out a similar deal with Tesla.
The Federal Trade Commission have stated their support for Tesla's right to sell vehicles direct to consumers. In a blog post, the FTC said: "Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated." Separately, a letter signed by more than 70 leading economists under the banner of the International Center for Law & Economics soundly dismisses every dealer argument and concludes that these bans are only motivated by "economic protectionism that favors dealers at the expense of consumers and innovative technologies."