Bill to restrain Tesla in New York clears committee

Tesla all electric car (AP Photo/Al Behrman)
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ALBANY—A bill that would curtail the sales of Tesla cars in New York State cleared an important hurdle in the Assembly today.

The bill, which would restrict Tesla's ability to sell cars directly to consumers, moved out of the Assembly Codes Committee on Wednesday, one of several necessary steps on its way to a full vote.

The hearing room was packed with lobbyists for the state's automobile dealer associations, which have argued that Tesla skirts a state law banning automobile sales directly to consumers by selling their all-electric vehicles at mall kiosks. (Before the vote, some in the crowded conference room cracked jokes about Tesla drivers having to get out and walk after their batteries ran out.)

The bill would require companies like Tesla to create a storefront in the state, and the company faces an uphill battle to stop the measure in Albany, where automobile dealers have considerable sway.

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In 2013, dealers spent more than $225,000 in lobbying on variety of issues, including the franchise bill, while Tesla spent $100,000 on lobbying from June to December 2013, according to the most recent public records.

The legislation has attracted sponsors from both parties: Republican Deputy Majority Leader Tom Libous is sponsoring the bill in the Senate and Democratic Assemblyman David Gantt of Rochester the Assembly sponsor. 

Dealers argue that the law is necessary to protect consumers from the predatory practices of manufacturers, and to provide customer service in a competitive market.

“The franchise is very important,” said Brad McAreavy, president of the Rochester Automobile Dealers Association. “Consumers in New York should be represented.”

Diarmuid O'Connell, Tesla's vice president of corporate and business development, said the company did not intend to upend the dealer system, and said consumers benefit by having a direct relationship with their car company and should not have to pay excessive fees to a dealer.

“The dealers' primary argument that dealers provide consumer protections is wrong on the facts and wrong intuitively to most observers of this debate and especially to those who have had a bad experience in car dealerships,” he said.

The all-electric luxury vehicles sell for a fixed price around $70,000. The company expects to sell 35,000 cars this year, with plans to introduce a $35,000 version within four years, and expectations that it could soon sell 200,000 cars per year. 

The company also handles maintenance for its vehicles, which is often a source of income for traditional dealerships. 

“We believe it's not right to charge folks when the product we produce breaks down,” O'Connell said.

The dealers claim to have the support of the governor, if the bill passes the legislature.

Representatives for the dealers met with Cuomo aides in November, months after a last-minute attempt to pass the bill failed near the end of the state legislative session. Deborah Dorman, president of the Eastern New York Coalition of Auto Dealers, said Cuomo aides told the group the governor would sign the bill if it passes.

The bill has attracted the attention of environmentalists and free-market advocates, with similar legislation pending in other states.

New Jersey and Texas have barred Tesla from selling cars directly to consumers, and other states have bills in the works that would do the same.