Tesla Motors Inc’s ongoing war with state legislatures, which are barring it from selling its cars directly to consumers, continues. This time, the battlefield is Connecticut. Senate Majority Leader Bob Duff has proposed legislation, which will make it possible for the company to sell cars directly to consumers, which is illegal there at present.
Only for Tesla?
If the proposed law is passed, then it will give the green light to certain car manufacturers, allowing them to open up to three stores in the state. Technically the law is not exclusive to Tesla, but it has been written in such a manner that very few companies will qualify.
This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery
The first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More
According to the proposed law, to sell direct, manufacturers can only make electric cars, and they won’t be allowed to have franchise agreements with any existing dealerships. This legislation has been designed specifically to benefit Tesla, and an important point worth noting is that a company spokesman named Jim Chen was present at the press conference for the unveiling of the bill.
“Because of the unique technology that goes into a car and because of their made-to-order design, our business model does depend on the ability to sell cars directly to our customers,” Chen said. “These customers can in turn take solace in Tesla’s direct accountability for every sale.”
A good point Duff made is that some tax revenue which could go into Connecticut’s coffers is instead going to nearby states, such as New York, that allow Tesla sales. There are a lot of choices available for customers, and if they do not get them in Connecticut, then they will be attracted to neighboring states offering that choice, Duff said.
Why GM is upset
It is a good thing for electric car makers that economic restrictions are loosened. If the legislation is passed, it will offer access to a wider array of cars to Connecticut buyers. However, a few automakers such as GM argue that a similar set of rules should be applicable to electric car companies and gasoline-powered car companies.
Direct car sales are banned in most states, and this does not affect just Tesla. For example, in 2001, GM launched a built-to-order, direct-to-consumer car in Brazil. The laws against which Tesla is fighting also prevent GM from bringing that product to the U.S. Therefore, it is pretty obvious that GM will get angry with the fact that Tesla has been granted permission to open stores and galleries in 26 states, including some that refused to extend the same freedom to competing manufacturers.