Proposal to ban Tesla's direct sales model gets tabled

A state Senate committee on Thursday effectively tabled a controversial proposal to prevent Tesla Motors Inc. from selling cars in Indiana under its current business model.

The Senate Commerce and Technology Committee voted to send House Bill 1254 to a summer study committee. The House passed the same version of the bill Feb. 2.

Sen. Jim Buck, R-Kokomo, the committee chairman, had supported a version of the bill that would have banned manufacturers from selling directly to consumers. That version of the legislation would have caused Tesla's dealer license to expire in 2018 and forced the Palo Alto, Calif.-based company to either adopt a franchise dealer model or stop selling cars in Indiana. Tesla has a 2-year-old showroom at Fashion Mall at Keystone.

Buck on Thursday opened the committee hearing by saying he has been on the receiving end of "incivility" from Tesla supporters this week, as the bill received national attention.

Buck and the bill's author, Rep. Kevin Mahan, R-Hartford City, agreed to put the issue before a study committee. ​That means the legislature won't consider a ban on direct auto sales until at least next year.

"We are trying to make what we are doing here fair to all," Buck said.

Todd Maron, the general counsel for Tesla, said in a prepared statement: "We look forward to participating in the upcoming summer study process where we will be able to fully air the issues of vehicle sales and consumer choice in an open and public forum."

General Motors, which has four facilities in Indiana, supports a ban on direct auto sales, arguing that Tesla has a unique advantage in Indiana. Existing state law prevents General Motors and other automakers from opening sales centers, such as Tesla's, that would compete with its dealerships.

General Motors issued a statement saying it will continue to work toward passage of laws banning direct sales from automakers in Indiana and other states.

"GM is very pleased that we were able to elevate the issue of disparity impacting our dealer partners in Indiana, that this received as much attention as it did, and that this issue advanced as far as it did," the statement said. "We appreciate the Indiana legislature for taking this on, debating, and helping raise the profile of this important issue, which demonstrates the inequity of different competitors having different rules in the marketplace."

General Motors' public support for the bill has opened up the Detroit automaker to unfair criticism, Buck said.

"So far in this discourse, GM has been the whipping boy," he said.

Buck and Mahan said the proposal has broad support from automakers and dealerships. The bill wasn't about shutting down Tesla, they added, but rather creating a common set of rules for all manufacturers. They expect more electric car makers to enter Indiana in the future.

"No one in this state wants to stop innovation," Buck said. "But we do want and always have tried to make a level playing field."

Mahan said he drafted his bill to protect consumers and create fair competition among automakers.

"We have heard that (the bill) is anti-free market," Mahan said. "Let's be clear: A truly free market would have no rules or regulations whatsoever."

Mahan noted his law wouldn't necessarily have shuttered Telsa's sales efforts in Indiana. Tesla would have the option to set up a franchise dealer model to continue selling cars in the state.

"That would have been their choice not to comply with the law," he said.

Call IndyStar reporter James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.