Bill allowing Tesla to sell cars directly to Arizonans advances

2014-03-20T00:00:00Z Bill allowing Tesla to sell cars directly to Arizonans advancesBy Howard Fischer Capitol Media Services Arizona Daily Star

PHOENIX — Calling the approach and the product innovative, a Senate panel voted Wednesday to let Tesla Motors finally start selling their electric vehicles directly to Arizona consumers.

And it doesn’t hurt that the move might boost Arizona’s chances of landing a factory to manufacture batteries for the cars. The company has said its “gigafactory” might result in a $5 billion investment by 2020.

HB 2123 crafts an exemption from a 14-year-old state law that says cars and trucks can be sold in the state only by independently owned dealerships. Put simply, it requires a middleman between the manufacturer and the ultimate customer.

The 3-2 vote by the Senate Committee on Commerce, Energy and Military Affairs Committee came over the vigorous objections of Bobbi Sparrow, president of the Arizona Automobile Dealers Association. There’s a good reason for the current structure, such as having someone to argue on a customer’s behalf with the manufacturer if there is a question about whether a problem is covered by warranty, she said.

Other manufacturers also were unhappy with the legislation because they would remain stuck under the current system. That’s because HB 2123 grants the exception only to companies that manufacture only electric vehicles.

The measure now goes to the full Senate.

The Tesla exemption precludes similar treatment for products like the Nissan Leaf and the Chevy Volt, said lobbyist Mike Gardner, of the Alliance of Automobile Manufacturers.

And that, Gardner said, is unfair.

But Barry Aarons, the lobbyist for Tesla, told lawmakers that not granting the exemption forces his client to live with regulations that were meant for a different kind of car and a different way of doing business.

“Suppressing new technology by forcing adherence to an ill-fitting business model does not advance us in new technology,” he said.

Tesla cars start in the $60,000 range for a base model and can approach $95,000, not counting federal tax credits.

The company does sell cars in Arizona — sort of.

A potential buyer can kick the tires, check under the hood and slip behind the wheel at a Scottsdale showroom.

But under state law there is no opportunity for a test drive there. And the staffers there cannot take orders or even really discuss specific prices on the cars.

Instead, those wanting a Tesla either can drive to California — or put down a $2,500 refundable deposit to buy it online. HB 2123 would change that.

The vote comes as Tesla is looking for a site to build what has been called a “gigafactory” where it would manufacture all of its lithium-ion batteries.

Arizona is competing for the factory, along with Nevada, Texas and New Mexico. In fact, New Mexico Gov. Susana Martinez said she would call her state’s legislature into special session to enact incentives if that’s what it takes to bring the factory to her state.

Sen. Al Melvin, R-Tucson, questioned Aarons about how his client’s request relates to the planned plant, its $1.6 billion initial investment and the 6,500 jobs it might eventually create.

Aarons told lawmakers they should not link the company’s requested change in vehicle sales law with the factory site selection.

“Arizona is very much in the mix,” he said. “However, having said that, I don’t want anybody to think there is any kind of quid pro quo here, that if you vote for this you’re guaranteeing this, or that if you vote against this you’re guaranteeing that.”

The lure of the factory managed to get all nine members of the Arizona House delegation to send a letter Monday to Tesla CEO Elon Musk touting the benefits of setting up shop here. It cited the state’s low 4.9 percent corporate income tax rate as well as the chances of qualifying for tax credits.

It also is designed to appeal to Musk’s desire to use solar energy to power the plant, touting the 318 solar firms already here with more than 8,500 workers.

Melvin, who ultimately voted against the legislation, was not convinced that Tesla, even as a small specialty car company, deserves special treatment. He pointed out, for example, that Lamborghini manages to sell its vehicles through dealers without any problems.

Aarons responded that the existing Arizona laws “would create some discomfort”for Tesla and how it likes to sell its vehicles.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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