JEFFERSON CITY, Mo. – Missouri lawmakers are set to begin a last-minute fight over whether electric car manufacturers like Testa Motors should be able to sell their product directly to consumers.
With only a week left in session, the Missouri Senate quietly attached language to House Bill 1124 that would effectively bar Tesla from selling directly to consumers in Missouri. Similar hurdles for the company have popped up in other states.
Supporters of the legislation believe the current franchise-based model for selling automobiles has served the state’s economy and its consumers well, and that they don’t understand why Tesla will not work within the current system.
“We’re not anti-Tesla or innovation. I have a lot of respect for the company and their innovation. Their CEO is a brilliant guy who understands business. We’re not against Tesla,” said Doug Smith, president of the Missouri Automobile Dealers Association, which is supporting the bill. His problem, he said, is the same rules are applied to other companies that are being applied to Tesla, it could “open up the market place for a flood of manufacturers — some good, some bad.”
Auto dealers make up $13.1 billion in sales each year, according to the association. That includes 20,000 employees involved in more than 400 automotive dealerships. “If this loophole isn’t fixed,” Smith said, “we’ll probably lose 100 in the next 5 to 6 years.”
“Our whole argument is to level the playing field,” he added.
That is also Tesla’s essentially argument.
Diarmuid O’Connell, vice president of corporate and business development at Tesla, said the language is “anti-free market legislation that will hurt consumers” and could force technology companies – which Tesla considers itself – from locating in Missouri. He said Tesla has opted to use the direct sales model because it allows them to directly lay out their case to consumers about a new product – the electric car – of which some are skeptical.
“It is an attempt to educate the population about the innovation of this new technology. We believe it is a necessary requirement to make electric vehicles a success,” he said.
Missouri has had its auto franchise laws in place since the 1980’s. At the time, they were established to protect small auto dealers to compete. The idea was rooted in the economic idea that more competition means lower prices.
“It promotes competition among dealers and brands, and is the most consumer friendly way for a retail customer,” Smith said. “The competition aspect is the reason we feel the Franchise Practices Act is so key to helping delver the ultimate savings to the consumer.”
O’Connell said the claim made by the auto dealers that Tesla is violating the state’s franchise law is completely unfounded, and said auto dealers are simply trying to protect the status quo from which they benefit.
Missouri’s franchise law explicitly bars manufacturers from competing directly with their franchisers. Currently, there are no Tesla franchises in Missouri. Instead, they have set up one kiosk in St. Louis and are planning to put in another later this year in Kansas City.
“The proposal as it currently stands is an effort by the auto dealers to have a distribution monopoly,” he said. “We have never competed with a franchise.”
Smith, who became president of MEDA late last year, said his organization began asking questions about Tesla’s presence in the state in October 2013. At that time, the organization reached out to the Missouri Department of Revenue inquiring about whether Tesla was acting within the Motor Vehicle Franchise Practices Act. They reached an “impasse” in late-March.
In April, Sen. Mike Kehoe, R-Jefferson City, sent the department a letter asking many of the questions that were asked by the association. He received a reply in late-April from the department saying it was their interpretation of the law that Tesla was acting legally.
It was at that point – less than three weeks before session was set to end – that the association decided to act.
“The timing is coincidental. I know it doesn’t seem that way, but the sneak attack argument we’ve heard doesn’t really hold water,” he said, in response to Tesla’s claim that the association had purposefully waited until the last week of session to seek the legislative fix.
When the language was slipped in, it was done with little fanfare or explanation. Sen. Jay Wasson, the Republican who carried the underlying bill when it was passed out of the Senate, introduced it as minor Department of Revenue changes to the state’s franchise law and said if there were any questions, they should be directed to Kehoe. There was no public input during the committee process regarding the policy shift, which is only a vote away from being placed on Democratic Gov. Jay Nixon’s desk.
“This debate should happen in full light of day,” O’Connell said.
Both sides have doubled down on their lobbying effort in the building. On Friday, Tesla hired a small lobbying army – a dozen strong, including former Missouri House Speaker Steven Tilley. The Missouri Auto Dealers Association added several lobbyists – including John Bardgett and Bill Gamble – to their team in the Capitol.
Monday afternoon, the association sent a letter to legislators in which they questioned how a similar company might be received if they were Chinese or Russian based company, not from Palo Alto, California like Tesla.
“It is interesting to think that if this was a Chinese or Russian start-up auto-manufacturer who were using this model, instead of a ‘media darling’ like Tesla, would the argument increasing a second marketplace other behalf be as passionate? If those modifications to the MVFP are not made, you will see more of this model from manufacturers near and far, and our way of business will not survive,” they wrote.
As the letter was being distributed to lawmakers, a small parade of Tesla cars made their way to the front lawn of the capitol. During their trip to Jefferson City, Tesla owners met with their lawmakers and urged them to oppose the bill.
Currently the Tesla language is only attached to House Bill 1124, but its supporters believe they might do well attaching it to other bills. House Bill 1635, which deals with motorcycle sales on Sunday in Jackson County, as well as Senate Bill 707, an ATV bill similar to House Bill 1124, also open up the same chapters of Missouri franchise law, giving supporters of the language another avenue if HB 1124 gets derailed.
A spokesman for Nixon did not say on Sunday whether the governor was supportive of the language.