North Carolina Senate Passes Bill To Block Direct Tesla Sales

4 years ago by Jay Cole 28

North Carolina House of Representatives, North Carolina General Assembly

North Carolina House of Representatives, North Carolina General Assembly

Last week the North Carolina General Assembly approved Senate Bill 327, and sent it to the Senate floor.

Now, as of Monday night, that bill has been passed by the Senate in a unanimous vote, and will be sent to the House of Representatives for a final vote.  If enacted,that will mean no sales can happen without using a licensed dealer.

The bill, if unchanged, would see North Carolinians prohibited from purchasing the Model S electric sedan from Tesla by limiting how it can be sold, forcing Tesla to adapt a traditional private dealership model to sell in the state or leave entirely; Tesla is not keen on either option.

Tesla Plans On Opening More Non-Dealerships In North Carolina If Senate Bill 327 Doesn't Pass

Tesla Plans On Opening More Non-Dealerships In North Carolina If Senate Bill 327 Doesn’t Pass

According to the legislation, original equipment makers can not “use a computer or other communications facilities, hardware, or equipment” to sell vehicles in the future, an important distinction in compared to even the battle currently waging in Texas, that only pertains to how employees at boutique showrooms can interact with potential customers.

The bill is backed by the North Carolina Auto Dealers Association, and sponsored by  Sen. Tom Apodaca, (Republican from Henderson), who coincidentally also received $8,000 in campaign contribution from that same group.

Mr. Apodaca says the bill is to prevent “unfair competition.”

Robert Glaser, president of the North Carolina Automobile Dealers’ Association said of the bill:

“We believe that Tesla, like all the other auto dealers in the state, should get a license, appoint a dealer, fall under the protection of the Department of Motor Vehicles, and sell cars.  We just want them to play by the same set of rules that the other 7,000 dealers in the state do.”

The Bill Would Force Tesla To Set Up Dealerships Akin To Other EV Sellers In The State

The Bill Would Force Tesla To Set Up Dealerships Akin To Other EV Sellers In The State

Glaser went on to explain all that is required of Tesla is to set up an agreement with a franchisee, that is also licensed and regulated by the DMV.  That dealership would then be required to then have a showroom, but it can be as small as 96 square feet,

“It can be in a mall…I just don’t know why they don’t do it.”

Diarmuid O’Connell, Tesla Motors’ VP of business development, told ABC News that the bill was a “fundamentally protectionist effort to lock down the market and force us to sell through the middle man.”

O’Connell said that it was a “mismatch” for Tesla to sell through a dealer, who are primarily focused on selling gasoline vehicles.

“We’re not in the business of tearing down the dealer model. We simply believe that to successfully introduce this technology to the market, it needs to be done in a focused fashion, by us.”

Tesla May Be Forced To Leave North Carolina Shortly

Tesla May Be Forced To Leave North Carolina Shortly

Unlike in other states, this new legislation is the most rigorous, extending into cyberspace, as it prohibits Tesla from doing transactions or even interactions with customers online, a fact Mr. O’Connell is not happy about accepting as a reality.

“We are happy to play by the rules in North Carolina right now, but what (lawmakers) are doing is changing the goal posts…and in doing so, they are eliminating a fundamental right of North Carolina residents to transact a vehicle online in the privacy of their home.”

A DMV spokeswoman for North Carolina, Marge Howell, told ABC News “the bill will need to be sent to the state’s House of Representatives by Thursday, before it is put to a vote.”  After which, Tesla would then be open to challenging it on grounds it violated the commerce clause.

So far in 2013, 49 Tesla Model S sedans have been registered in North Carolina, bringing their total to date to more than 80, with another 60 orders pending in the California automaker’s system.

Perhaps in anticipation of this fight (and it not going so well), Tesla has no boutique/dealer stores in North Carolina, but does operate a service center out of Raleigh.

ABC News

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28 responses to "North Carolina Senate Passes Bill To Block Direct Tesla Sales"

  1. Malcolm Scott says:

    Looking from afar and not knowing all the issues, this seems very anti-competitive? Surely this is a restriction of trade across state boarders. Why a new bill to introduce this anti-competitive outcome, and passed unanimously by the Senate? What issue is so compelling to get a unanimous vote? Even corrupted politicians would hardly arrive at a unanimous position. Hardly the land of the free, or free market.

    Are there no Apple stores in NC?

    Baffled from afar

  2. Schmeltz says:

    I just struggle to see the wisdom in Tesla fighting this so vigorously. How much time, money, and resources have they spent on this already? How much more are they going to spend until it’s over? This argument that people want to buy their cars on-line is pretty weak to me. I would buy a blender on-line, but certainly not a car.

    I admire Musk and Tesla for their many accomplishments. They’ve come a long way. But it just seems like sometimes Musk latches on to something, and won’t leave it go. It’s his dime, but in my opinion, I’d back off of this and concentrate on developing more EV’s. This dealer/franchise battle is a big distraction with little benefit in the end.

    1. kdawg says:

      They need to get the Feds involved basically, instead of going state to state.

    2. Josh says:

      Tesla can’t execute it’s business strategy without selling direct. If they cannot achieve 25% gross margin on auto sales, they will not survive. The legal fees doesn’t touch the middle man fees Tesla would be losing by using a dealer network. I heard Fisker sold the Karmas to the dealers for ~$80k, when their sticker was $109k.

      Their business model involves making no money on service, putting the entire profit onus on new car sales.

      This is sad and strange that NC put this bill together and shocking that it moved forward unanimously.

  3. kdawg says:

    -Mr. Apodaca says the bill is to prevent “unfair competition.”-
    ————————-

    I don’t think Apodaca understands “competition”. Why all of a sudden does the Conservative/Republican/Tea-Party/Libritarian-ish state of North Carolina feel it’s OK to infringe on the rights of consumers… and increase government involvement?

    Let’s use their typical “slippery-slope” style tactics. [puts on GOP cap] If the government (said loudly) forces you to buy cars through a dealer, how long before it forces you to buy EVERYTHING through a dealer? And how long before the government gets involved with those dealers to make sure they get their piece of the pie. Heck, they could even take over all the stores and force you to buy from them! Ever hear the song, “I sold my soul to the company store”? [takes off cap]

    Seriously though, this just reeks of hypocrisy, but I guess when money is involved, all bets are off.

    1. Josh says:

      Money is definitely at play here. Does Tesla selling online somehow avoid NC sales tax? If true, You think they would have made that point as well.

      1. kdawg says:

        I was thinking the same thing about the state sales tax, but being that the car has to be registered w/the state, it would be hard to get around paying the sales tax. I wonder if Tesla could sell them through Ebay (Elon has *some* ties to PayPal LOL).

    2. zilm says:

      The key thing is that Tesla is not alone. If they let Tesla break the rules, every manufacturer will follow it. They are very afraid of it because it will destroy their business.
      Consumer? Who’s a consumer? Or that guy. Don’t care.

      1. Blane says:

        So what? What’s the point of letting sleezy car salesmen suck up dough and drive up prices? But no, a bill could be passed that says “Any car company that goes through dealers cannot sell directly to customers.” Tesla has never gone through dealers.

        This is the oil interests and their legislative pets (in combination with worried dealers) trying to destroy a green car company they see as a threat.

    3. Open-Mind says:

      Kdawg, you seem to be lumping the republican party in with the conservative/tea-party/libertarian ideologies. However, much of the republican “establishment” has long since abandoned the core tenets of those ideologies. The result is stupid “republican” laws like this one that irritate us conservatives, tea-party, and libertarian folks.

      1. James says:

        Right. I’d make a comment, but I’m afraid the IRS might be looking.

  4. Malcolm Scott says:

    If Tesla’s were made in Canada, Mexico, or even Australia (all countries with Fair Trade Agreements with the US with level playing field conditions for automotive products), would NC be permitted to take such legislative action preventing Internet based sales into the market?

    I ask as there are many support local businesses policies that have to be removed as a result of these FTAs.

  5. Nelson says:

    States are making unconstitutional laws. The Federal government cannot stand by idle while personal freedoms are abolished with State legislation. We the people of the United States of America should be free to choose how and from whom we buy cars from in every State. This issue should be addressed immediately by the Supreme Court of the United States. If the people in North Carolina care about their freedom of choice they should send a message to the State and Dealer Association by not buying or leasing any New Car in the State until this bogus legislation gets repealed.

    No Freedom, No Sale!
    No Plug, No Sale!
    NPNS!
    Volt#671

  6. Anderlan says:

    Commerce Clause of the United States Constitution, 1787. Corrupt NC mofos, have you heard of it?!?!?

  7. Rob says:

    Preventing sale over the Internet is unconstitutional. NC cannot prohibit its residents from going on the Internet and purchasing Tesla in, for example, California. That is interstate commerce and can only be regulated federally.

  8. Rob says:

    Look at the bigger picture. If Tesla can sell their electric cars directly with 20% margin, should GM and BMW be allowed to sell their electric cars directly and where will it leave the dealers?

    1. kdawg says:

      The dealers should have to compete w/internet sales. Some will see value in going to dealer some will not, just like every other product. Do you buy your computer from Best Buy and get the extended warranty, service & support from them, or do you go on Amazon?

      It’s not *fair* to say it’s not *fair* to allow competition.

      1. Rob says:

        Agreed. But right now GM is not allowed to sell its electric cars outside of a dealership network. This is not *fair* competition, at lease not in the electric vehicle market.

        1. Blane says:

          I don’t see any reason why the electric market should be treated as special as far as dealer rules go.

          1. Blane says:

            If GM wants to go 100% dealer free, I say let them try. But I think they recognize they’d lose a lot of sales. That is the tradeoff.

    2. Josh says:

      If all they care about is making sure the big boys are stuck with dealers, then just copy the Texas legislation that proposes an exception for US manufacturers that only produce all electric vehicles and sell less than 5000 per year in the state.

      The NC legislation looks more like a direct attack against Tesla.

      1. Josh says:

        *an* edit button would be nice too 😉 (sorry for the sloppy typing)

        1. Jay Cole says:

          Oh to dream, (=

          ….fixed that grammar issue for you, but good sentence structure is so overrated anyway

    3. Mark H says:

      Looking at the big picture lets you look beyond auto dealerships. The machine tool industry for instance constantly goes back and forth between selling direct or through dealerships. In this model the dealerships are forced to work even harder to satisfy the customer AND the factory. There is the flip side to this model, the dealerships could choose to service only loyal customers. Having come from the machine tool industry I personally like this model. I don’t think that it will gain much traction because it is not familiar. The internet sales on the other hand are very familiar and will most certainly be over turned.

      We are having worse issues than this here in NC. The conservative party is looking to overthrow the renewable energy credits established in 2007. Its always darkest before the dawn.

    4. Blane says:

      Why are you worried about just their electric cars being sold this way? Why not all their cars? There’s no current law that makes the rules different for electric cars, is there? And any change to the law doesn’t need to have the word electric in it for Tesla to sell directly to customers – just apply separate rules to companies that use dealers from those who don’t. If you’re not competing with your own dealers, they no longer need protection, which is what these laws were originally about.

  9. GreenDay says:

    SchmeltZ
    “I just struggle to see the wisdom in Tesla fighting this so vigorously. How much time, money, and resources have they spent on this already? How much more are they going to spend until it’s over?”

    Probably less than what NADA is spending and bribing to get these bills pushed through.

    1. Blane says:

      No, no, the original poster’s got a point. Tesla should just decide selling cars isn’t worth it in the face of state opposition and go drill for oil or something. *rolls eyes*