Corporate Decision Kills Effort To Change Connecticut’s Automotive Franchise Laws
By Jack Kramer
HARTFORD, CT — The battle between electric car maker Tesla and Connecticut’s auto dealerships came to an abrupt halt following Tesla’s Feb. 28 announcement that it was changing its strategy in favor of an online-only sales model.
In late February, Tesla announced that it was abandoning its push to sell directly to consumers through brick-and-mortar retail locations.
Legislators in Connecticut who have been supportive of Tesla’s agenda for years aren’t at all happy that they were given no advance notice of the sudden decision to abandon its push for direct sales through stores.
“We had a long, drawn out public hearing in late February and 72 hours later we find out that their business model has completely changed,” Rep. Roland Lemar, D-New Haven, said Thursday.
“(Transportation) Committee members were frustrated,” Lemar, who is co-chair of the committee, said. Lemar said the bill won’t be raised again, “unless we hear from someone at Tesla that something changes down the road.”
Lemar, who was a proponent of allowing Tesla to open stores in Connecticut, added: “We’ve been talking to Tesla for a long time — years, and we never heard a single word of a change in its strategy to sell cars. After having this happen, and being given no notice, committee members were almost unanimous that there was no space to move this forward.”
Lemar said that after Tesla CEO Elon Musk made his announcement, he had a conversation with Albert Gore, a policy and business development manager at Tesla.
“He was apologetic,” Lemar said, but Lemar added that Gore, too, was caught flat-footed by the change in corporate direction.
After years of battling state legislatures in Connecticut and elsewhere in order to sell vehicles directly to consumers, Tesla recently said it would close all but a “small number” of its existing company-owned stores to save money.
Musk said the company will only sell cars online “to enable us to lower all vehicle prices by about 6 percent on average.” That means most Tesla dealerships across the United States will be closing over the next few months, Musk said.
Musk said an unknown number of Tesla stores in “high-traffic locations” will stay open, but will no longer sell cars. Instead, they will become galleries where prospective customers can get a closer look at the vehicles. Service centers, Musk said, won’t be impacted.
A Tesla spokesperson reached in California Thursday would not directly address Lemar’s criticism of Tesla blindsiding Connecticut lawmakers.
Instead the spokesperson who declined to be identified said: “Regarding ongoing efforts to obtain sales licenses in Connecticut, Tesla’s move to online sales does not change our support for the principle that manufacturers of electric vehicles who have chosen not to franchise should not be required by states to sell through franchised dealers.”
The spokesperson said an increasing number of Tesla customers were shopping — and buying — the cars online, so the shift in business model simply made sense.
In Connecticut, Tesla and the Connecticut Automotive Retailers Association were unable to reach an agreement that would allow the company to sell directly to consumers. Both sides had left it up to lawmakers to decide whether the dealer franchise laws should apply to companies like Tesla.
Last year’s bill made it through two committees before it was tabled in April. Lawmakers asked Tesla to broker a deal with the car dealers, but the two sides were never able to reach an agreement.
At the Transportation Committee public hearing in February, proponents said that electric vehicles are good for the environment; opponents, mainly car dealers, said that selling cars without paying a franchise price gave Tesla an unfair advantage.
Tesla owners in Connecticut generally travel to New York or Massachusetts to purchase their vehicles. The closest sales location is in Mount Kisco, New York, which is only 17 miles from Greenwich.
There is a Tesla service center in Milford if repairs are needed, but no cars can be sold there.
Tesla maintains 102 stores across 23 states, including Washington, D.C., with the majority clustered in California and Florida, according to the most recent list published on its website.
It’s unclear whether Tesla will abandon its appeal of a decision by a Connecticut judge, which agreed with the Department of Motor Vehicles that the company was violating state law by “selling” out of its Greenwich gallery without a license.
Tesla had appealed the decision to the Connecticut Supreme Court, but asked the high court for an extension of time to file its documents.