Senate panel clears way for direct Tesla sales

2014-03-20T06:00:00Z Senate panel clears way for direct Tesla salesHoward Fischer Capitol Media Services Arizona Daily Sun

PHOENIX — Calling the approach and the product innovative, a Senate panel voted Wednesday to let Tesla Motors finally start selling their vehicles directly to Arizona consumers.

And it doesn’t hurt that the move might Arizona’s chances of landing a factory to manufacture batteries for the cars, one the company said might result in a $5 billion investment by 2020.

HB2123 crafts an exemption from a 14-year-old state law that says cars and trucks can be sold in the state only by independently owned dealerships. Put simply, it requires a middleman between the manufacturer and the ultimate customer.

The 3-2 vote by the Senate Committee on Commerce, Energy and Military Affairs Committee came over the vigorous objections of Bobbi Sparrow, president of the Arizona Automobile Dealers Association. She said there’s a good reason for the current structure, such as having someone to argue on a customer’s behalf with the manufacturer if there is a question about whether a problem is covered by warranty.

Other manufacturers also were none too happy with the legislation, which now goes to the full Senate, because they would remain stuck under the current system. That’s because HB2123 grants the exception only to companies that manufacture only electric vehicles.

Lobbyist Mike Gardner of the Alliance of Automobile Manufacturers said that precludes similar treatment for products like the Nissan Leaf and the Chevy Volt. And that, he said, is not fair.

But Barry Aarons, the lobbyist for Tesla, told lawmakers that forcing his client to live with existing regulations that were meant for a different kind of car and a different way of doing business.

“Suppressing new technology by forcing adherence to an ill-fitting business model does not advance us in new technology,” he said.

Tesla does sell cars in Arizona — sort of.

Anyone interested can kick the tires, check under the hood and slip behind the wheel at a Scottsdale showroom.

But the laws being what they are, there is no opportunity for a test drive there. And the staffers there cannot take orders or even really discuss specific prices on the cars that start in the $60,000 range for a base model and can approach $95,000, not counting federal tax credits.

Instead, those wanting a Tesla either can drive to California — or decide they like it so much they’re willing to put down a $2,500 refundable deposit to buy it online.

HB2123 would end all that.

The vote comes as Tesla is looking around for a site to build what has been called a “gigafactory” where it would manufacture all of its lithium-ion batteries. Arizona is in competition for the site, along with Nevada, Texas and New Mexico. In fact, New Mexico Gov. Susana Martinez said she would call her state’s legislature into special session to enact incentives if that’s what it takes.

Sen. Al Melvin, R-Tucson, questioned Aarons about how his client’s request relates to the planned plant, its $1.6 billion initial investment and the 6,500 jobs it might eventually create. But Aarons told lawmakers they should not link the company’s requested change in vehicle sales law with who ultimately gets the factory.

“Arizona is very much in the mix,” he said. “However, having said that, I don’t want anybody to think there is any kind of quid pro quo here, that if you vote for this you’re guaranteeing this, or that if you vote against this you’re guaranteeing that.”

The lure of the factory managed to get all nine members of the Arizona House delegation to send a letter Monday to Teslsa CEO Elon Musk touting the benefits of setting up shop here. It cited the state’s low 4.9 percent corporate income tax rate as well as the chances of qualifying for multiple tax credits.

It also is designed to appeal to Musk’s desire to use solar energy to power the plant, touting the 318 solar firms already located here with more than 8,500 workers.

Melvin, who ultimately voted against the legislation, was not convinced that Tesla, even as a small specialty car company, deserves special treatment. He pointed out, for example, that Lamborghini manages to sell its vehicles through dealers without any problems.

Aarons responded that the existing Arizona laws “would create some discomfort” for Tesla and how it likes to sell its vehicles.

Sen. John McComish, R-Phoenix, said he was not being critical of the current three-tiered system of manufacturers, dealers and customers.

“But I don’t see why that should prevent someone else who has a better idea from making an effort to enter that industry without having to set up a dealer network,” he said.

Rep. Warren Petersen, R-Gilbert, testifying in favor of the measure, was not so glowing in his assessment of the way things work now.

“Really, it’s a matter of wanting protectionism,” he said. “And I’m here to ask the question, ‘What about the consumer choice?’”

And Petersen said if other manufacturers want similar treatment — and exemption from the requirement for dealerships — he’s willing to consider that down the road.

Copyright 2015 Arizona Daily Sun. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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