New legislation that passed in Arizona on Wednesday ensures that Tesla Motors (NASDAQ:TSLA) is safe to sell its cars directly to consumers without having to go through a conventional dealer, a refreshing turn of events after the company’s legal setback in New Jersey last week.
Naturally, House Bill 2123 is strongly opposed by traditional automakers and especially dealers, who are bound by regulations that require manufacturers to sell cars through dealer networks. The same “we don’t want to ban Tesla but make sure it follows the rules” rhetoric has been heard in many states nationwide, though forcing Tesla to conform to a traditional dealer model has its downsides: Dealers make much of their money on service, and the Tesla Model S doesn’t require nearly the degree of maintenance that a conventional internal combustion engine does.
“Tesla is asking for a special exemption for them to have a separate set of rules for their electric cars,” Mike Gardner, a lobbyist for the Alliance of Automobile Manufacturers, told the Senate Commerce, Energy, and Military Committee, per the Associated Press. “What we’re opposed to is allowing one of our competitors to go around the dealer network and sell directly to consumers. We think we should all be treated the same.”
However, the sponsor of the bill, Rep. Warren Petersen, feels differently — and more in tune with those outside of the dealer family.
“This is a great opportunity for us to send a message that we welcome business and we welcome Tesla here to Arizona,” said Peterson, a Republican, to the Associated Press. “We shouldn’t deny our consumers from being able to purchase a product if they want.”
Tesla has a Scottsdale location, but a law from 2000 prohibits selling the vehicle through the shop. Instead, as is the case with other states, Tesla takes its orders online.
Interestingly, the bill that was passed was initially unrelated to Tesla’s predicament. It wasn’t until Wednesday that the bill was amended to apply to Tesla’s situation, and it now allows a company to sell vehicles directly to consumers if it only makes electric vehicles and has a service center in the state to handle repairs and warranty issues, the Associated Press reports.
Sen. John McComish, who applied the amendments, called the bill a “pre-emptive strike” against attempts to freeze Tesla out of the Arizona market in the future. ”What has happened … is that in some states, they are moving to outlaw that kind of operation,” McComish told the Associated Press. “But I think we should be about opportunities for innovation rather than stifling innovation.”
One can’t help but notice that Arizona is one of the leading locations for Tesla’s proposed factory site, the Gigafactory that’s estimated to cost about $5 billion and ultimately employ about 6,500 people. That’s a tremendous amount of economic activity for whichever lucky state gets chosen to host such a project, and it’s hard to imagine that Arizona lawmakers were constructing their legislation without that in mind. So was it a sincere attempt at true free-market principles or playing nice for Tesla to encourage some hefty investment?