By on June 24, 2013

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A proposed law that would have eliminated Tesla’s ability to sell cars in New York state has died on the vine, after lawmakers adjourned their legislative session without taking any action on the bill.

The bills, introduced in both the lower house and state Senate, would make it illegal for an auto maker to operate a dealership in the state, and any current licenses would be ineligible for renewal, save for those issues prior to July 1, 2006, which would be grandfathered in. Tesla has faced various legislative battles in Virginia, North Carolina, Texas, Massachusetts, and Minnesota and has so far succeeded only in Minnesota.

Tesla would have had to close their three stores and two service centers in New York if the bill passed. Lee Zeldin, a Long Island Republican who sponsored the bill in the upper house, reportedly proposed a separate measure to make an exception for Tesla, echoing a “compromise” from Mark Scheinberg, the head of the Greater New York Auto Dealers Association. Scheinberg told Automotive News that he had offered to extend the grandfathering date, but Tesla refused. Even so, he denied trying to put them out of business, since, after all, Tesla could still establish a franchised dealer network.

According to AN, Tesla denied ever receiving the compromise – and even if they had, they would have rejected it.

 

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12 Comments on “Tesla Dodges A Legislative Bullet...”


  • avatar
    nine11c2

    Could someone somewhere in this post say WHY they wouldn’t be allowed? Perhaps They are worried about a manufacturer owning its own dealers? This article needs to include those facts to be worth reading…

    • 0 avatar

      As far as I can tell, it could be the “why not me?” question that the ADAs are trying to avoid. After all, if Tesla Motors can sell and service their cars direct, then what prevents Toyota from cancelling all their franchise agreements [costing thousands of jobs and revenue] and selling direct as well?

      • 0 avatar

        There’s probably more than just laws preventing Toyota from doing that.

      • 0 avatar
        Scoutdude

        Sorry but mfgs already operate dealerships in the state hence the wording that those stores that aren’t grandfathered in by being in existence since 2006 would have to close. No mfg is going to cancel franchise agreements and go to only selling over the internet. They would still need service facilities and a place to sell, store the used cars that are traded in, and re-market the lease returns the actual revenue centers of a dealership. The only person to loose their job would be the owner the sales, service and finance dept staff would be safe. The reality is that taken as a whole new car dealers account for a massive amount of any given state’s payroll and in states that have sales tax those revenues so the gov’t does listen to them.

      • 0 avatar
        Type57SC

        Not sure about any NY specifics, but in general, OEM owned dealerships are only allowed for a short time to facilitate a transaction or bail out a dealer. The OEMs aren’t allowed to own a dealership for the long term because they would be in competition with their dealers. The OEMs apparently abused their supplier power in the first half of the last century and have since been barred from owning their dealerships even though many other industries have shown that supporting margins in non-owned distribution allows for higher net profitability and return on capital than undercutting non-owned distribution (dealerships, stores, etc) through low prices in factory owned stores.

  • avatar
    OneAlpha

    Since we constantly hear from the dealers and their representative trade organizations about how direct sales is a terrible idea that’ll hurt the customers, let’s run a test to find out.

    Actually allow a car company to sell directly to customers, over the internet or whatever, and measure the results.

    If it’s a bad idea, let’s find out how bad. If it’s a good idea, let’s find out how good.

    • 0 avatar

      Well, Tesla has done it, and as far as I can tell, customers are pretty happy with the experience.

      Maybe that’s why dealers are scared. After all, the reputation of the auto dealership industry has never been the best …

      D

  • avatar
    Felix Hoenikker

    State legislators are hopeless pawns of special interest groups with contributions to make. The dealer groups will lobby this to the bitter end. I’m suprised that the NY legislators let this die in committee.
    While Tesla will not be a direct threat for a long time if ever, the dealers probably see Tesla as the tip of the iceberg. If Tesla succeeds with their direct sales model, other manufacturers will spring up and start a prolonged attack on the franchised dealers model. Perhaps a GM joint venture in China exporting to the US as a new brand. I see Tesla’s hope in getting their case before the US Supreme court where I predict that the whole dealer fanchise house of cards will crumble.
    In the mean time,let the games begin!

    • 0 avatar

      “State legislators are hopeless pawns of special interest groups” BINGO!

      I say let the makers sell direct and let the dealers turn to service centers. dealers make their money on ongoing service, not one-time sales.

      • 0 avatar
        wumpus

        I’ve always felt that attempts to take power from the federal government and move it to states implied that bribery costs were less than 1/50th at the state level. Plenty of Americans have no idea who their congresscum are or how they voted, but when was the last time you saw a state legislator in the news (unless arrested or on “stupid things politicians say” webpages).

  • avatar
    stuki

    Nice!

    That’s one of the beauties of the Tesla business model: They focus their appeal on exactly the kind of progressive rabble that would surely have gone through with the ban, had the direct entrant been an Chinese econobox or pickup truck maker. It’s not entirely dissimilar to how Chinese “child labor” is much more acceptable when the “creative” guys at Apple are the ones employing it…

    Good for Tesla. And New York. And, in due course, perhaps even America.

  • avatar

    I figured something musta happened…

    I got a courtesy call from Tesla around 5PM today.


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