Tesla opposes bill strengthening Louisiana ban on direct auto sales
Editor’s note: This articles has been updated to reflect that Tesla’s sales model is banned in four other states—Michigan, Utah, Connecticut and Texas—and not in most. Daily Report regrets this error.
Tesla’s fight to sell its cars in more states has reached Louisiana, where a House bill that would strengthen an existing state law imposing restrictions on direct-to-customer sales by auto manufacturers has made its way to the Senate floor with little fanfare.
House Bill 167 by Rep. Thomas Carmody, R-Shreveport—and 18 co-authors—unanimously cleared the House Committee on Commerce and the House floor, as well as the Senate Committee on Commerce, Consumer Protection and International Affairs.
But on Friday, Tesla’s policy arm tweeted a link to an online campaign, asking its Louisiana supporters to contact their representatives to stop the bill. The bill, the company says, would cause Louisiana to lose “millions in potential revenue.”
“If HB 167 passes, consumers in Louisiana will be forced to take their business to other states, losing us millions in potential revenue,” the campaign says. “We should be welcoming electric vehicle makers like Tesla to the state, which will support sustainable energy, modernize our economy, and create local jobs.”
Tesla enthusiasts on online message boards also opine about whether the bill would halt the automaker’s plans to establish a New Orleans service center.
Unlike most automakers, Tesla goes against the franchise model that’s long dominated the auto industry. It does not use independent dealers or franchisees to sell vehicles. The automaker’s sales strategy relies on a direct-to-customer model in which vehicles can be purchased via Tesla’s own showrooms and service locations, much like Apple sells its own products via its own stores.
In some states, however, Tesla’s sales model is banned. Competing dealers, and even some automakers, are working to make sure it stays that way.
“When you remove the dealer from that process it’s consumer competing against the manufacturer,” says Will Green, president of the Louisiana Automobile Dealers Association.
The National Automobile Dealers Association argues that competition among dealerships keeps prices low for customers. The dealerships also works on behalf of customers during recalls or when getting approval to finance a vehicle, the association says.
Tesla is fighting its battle on multiple fronts. The electric car company is trying for the third time to sell its cars in Connecticut, Bloomberg reports. A lawsuit was filed in Michigan late last year.
Noting the average dealership creates 61 jobs, Green says Tesla can sell its vehicles in Louisiana if it partners with independent dealers.
As for the bill, Green says the association simply wants to clean up the language in the current state law to clearly state the limited conditions under which manufacturers can step in for dealerships. Essentially, that includes situations in which a dealership is winding down or is for sale, or if a manufacturer partners with an independent dealer to complete the funding of dealerships, Green says.
“It wasn’t until the Senate floor that Tesla got engaged,” he adds. “It doesn’t change the longstanding law that’s common in a lot of a states; that manufacturers can’t sell direct.”
The bill is on the Senate’s calendar and is subject to call. It could be heard on the chamber’s floor as early as today or not at all if the state budget discussions dominate the remainder of the session. Regardless, direct sales are still currently banned, Green says.