Auto dealers push legislation to keep Tesla Motors out of Ohio
COLUMBUS, Ohio -- Sunjay Kumar bought his new car without running his fingers over the wheel or taking it out for a spin.
He picked the colors for his Tesla Motors Model S electric car while browsing a showroom in New Jersey, while visiting family, then ordered the car online direct from Tesla. The first time he felt his foot on the pedal was when he picked up the car in Columbus to drive home to Avon.
"The fact you can do everything on your computer -- it's so much easier," Kumar said. "You really can't negotiate anything, so it takes the headache out of that."
Tesla's direct sales model means the price is the same for every buyer and customers don't need to shop around for the best deal. Kumar said the experience can't even compare to buying a car from a dealership lot and he'll never buy another car that way.
That's what Ohio auto dealers are afraid of.
At their request, Ohio lawmakers are trying to put the brakes on Tesla Motors' business in the state. Auto dealers argue the Ohio Bureau of Motor Vehicles violated a rule requiring a dealership to have a contract with a car manufacturer when it allowed Tesla to sell cars in Ohio. Senate Bill 260 would explicitly prohibit the BMV from issuing dealer licenses to manufacturers.
California-based Tesla has two Ohio showrooms where potential buyers can view and test the luxury cars, but then buy them online or over the phone. A third showroom in Northeast Ohio has been on hold while the company fights challenges to its sales model.
The cars have received rave reviews from auto industry watchers and cost upwards of $70,000.
Ohio Automobile Dealers Association President Tim Doran told lawmakers last week the bill makes things fair and competitive with the 830 dealers in the state and prevents other manufacturers from selling as Tesla does.
"We think everybody ought to be held to he same standard," Doran said. "We thought that was the policy that was agreed to for more than a couple decades and the BMV, frankly, out of the blue, went 180 degrees out of their policy -- that's why we're here."
Doran said Ohio dealers have made great investments in brick-and-mortar showrooms and employ more than 50,000 people. Doran said dealers are strong advocates for consumers and the current system ensures competitive pricing and vehicle servicing for consumers.
James Chen, vice president of regulatory affairs for Tesla Motors, said auto dealers' fears are unfounded. Chen said Tesla sold about 300 cars in Ohio in 2013 -- barely a dent in total auto sales -- and the company is making about 20,000 vehicles a year compared to 15 to 17 million gas-powered vehicles.
Chen said dealers have no incentive to sell electric cars because the pros of the technology are the cons of traditional gas-powered vehicles, which make up the bulk of their sales. Chen said Ohio franchise laws protect competition among dealers but exclude manufacturers like Tesla that don't offer franchises.
"They want to protect their monopoly," Chen said in an interview. "If there's one crack in the door -- the argument they've put forth is other manufacturers could do the same thing."
The organization contributed more than $100,000 to Ohio state lawmakers in 2013, according to state campaign finance records.
Bill sponsor Sen. Tom Patton, R-Strongsville, was unavailable for an interview about his legislation. His aide, who testified on the bill in his behalf, told Northeast Ohio Media Group on Friday he was "not authorized" to speak about the bill.
The bill is the latest attempt by Ohio dealers to shut out Tesla. Similar legislation almost made it into other bills last year. Lawmakers in the Ohio House concluded the issue needed further study.
Central Ohio dealers and the association sued Tesla and the Ohio Bureau of Motor Vehicles in late 2013 over the license issued to Tesla to sell vehicles. A Franklin County Common Pleas Court judge dismissed the case in January because the dealers did not have legal standing to sue.
Similar legislation has prevented Tesla from selling cars in Arizona and Texas. Tesla has two showrooms in Texas, but employees there are prohibited from talking about how to purchase the vehicles or offering test-drives. Cars are delivered by a third-party vehicle without the Tesla name.
Tesla-owner Kumar hopes lawmakers will let the company continue to sell cars in Ohio. He is already planning to purchase the new Tesla SUV.
"It's the coolest toy a guy or gal could own," Kumar said. "[Auto dealers] should be a little bit worried, but we have a little ways to go." Jackie Borchardt.Cleveland.com