Tesla pushes bill to bypass Ariz. car dealers

Tesla Motors wants to sell its showy electric cars directly to its customers, without the aid of a dealer.

But that would upend the decades-old system that prohibits manufacturers from competing with dealerships through direct sales.

On Wednesday, Tesla formally began its push to change the way new cars are sold in Arizona as a divided House Commerce committee sided with the company and voted 5-3 to support House Bill 2216, which would allow direct sales.

The debate, which transcends party lines, pits new technology and free markets against an established industry with deep pockets and large payrolls.

Although the bill is similar to one that stalled in the Senate a year ago, Tesla hopes a new governor and Legislature are more open to a new approach to vehicle sales.

Standing in the way are the state's car dealers, a group that directly employs about 24,000 Arizonans and accounts for $2 billion in sales taxes, a crucial element of the state's revenues. They see Tesla as seeking an exception that would allow it to establish monopoly powers that threaten the state's broader economy.

During a hearing Wednesday, three of the committee's five Republicans voted to send the bill to the House as a whole. Two of the panel's three Democrats did so. The bill is sponsored by Rep. Warren Petersen, R-Gilbert, and Rep. Darin Mitchell, R-Litchfield Park.

Among those who voted against the bill was Rep. Jay Lawrence, R-Scottsdale, whose district includes Tesla's store at Scottsdale Fashion Square Mall.

He said the auto dealers involve many jobs, but also play a large role in charitable activities around the state.

"I would like to think I'm a free-market guy," Lawrence said after the hearing. "There are points at which you must say, I believe in the status quo, particularly with the auto dealers. The auto dealers are such an important part of the community."

For Tesla owners like Mark Rohde, the issue is one of personal convenience.

"As a consumer, I don't need a dealer to take care of me. I don't need a middle man," the 64-year-old north Scottsdale resident said. "If you believe in free-market economies, then you better get behind free-market economies."

Rohde, who is driving his second Tesla, bought his vehicles online.

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The state's car dealers have tried to make plain their importance to the state's economy since the beginning of the legislative session last month. The industry contributed $23 billion to the state's economy in 2013, according to an analysis by Timothy Hogan, a professor emeritus with the W.P. Carey School of Business at Arizona State University.

Additionally, the dealers say they help ensure the availability of independent maintenance and repair services that aren't operated by the manufacturer. That helps prevent anti-competitive monopolies, the industry says.

Tesla sells about a car a day in Arizona, said David Leibowitz, a lobbyist working for Tesla. That hardly makes the company a threat to dealers, he said.

The fight over direct sales is not unique to Arizona. Similar laws and legislative skirmishes have played out in recent years in New Jersey, Michigan and Texas. The battle flared in Arizona last year as the state was in the running for Tesla's $4 billion "gigafactory." The company eventually settled on a site in Reno.

Supporters of the bill point to recent remarks by Gov. Doug Ducey as signaling a receptiveness to new technology in commerce and pulling away governmental barriers. Last week, the Ducey administration dropped enforcement efforts against ride-sharing companies.

"Companies like Uber and Lyft are innovative, entrepreneurial technologies, and I want to see those companies thrive," Ducey told reporters last week. "They also create jobs. That's something we want to see more of, not less."

And on Monday, he hailed Apple's decision to locate a $2 billion digital command center in Mesa, saying it was a statement about Arizona's business environment and its appeal to tech firms.

"Whether it's Apple or a newcomer that's just starting, or whether it's a company like the story last week with Uber and Lyft that's got unnecessary regulation on them, we are going to clear the pathway to be the most entrepreneurial, most innovative state in the country."

Even so, Ducey has close ties to car dealers. Tucson car dealer Jim Click put at least $100,000 into independent expenditures supporting Ducey's candidacy last year. Click was a member of Ducey's five-person inauguration committee.