The Beltway
An occasional column by Gabe Nelson, Automotive News' D.C. correspondent, analyzing the auto industry's relationship with Washington.
GABE NELSON

2016 alert: Tesla's fight goes national

COMMENTARY
Gabe Nelson is a reporter for Automotive News and is based in Washington, D.C.
Related Stories
Related Topics

WASHINGTON -- The lights are on. The cameras are rolling. The flag pins are in place. And the topic of this unofficial Republican debate, taking place 30 months before the next presidential election, is whether Tesla Motors should be allowed to sell cars directly to the American consumer.

This used to be the stuff of smaller-scale scuffles, as Tesla fought state by state against franchise laws that restrict direct auto sales. But this month, the argument went national in a way that promises to turn Tesla into a key talking point for 2016.

It started a few weeks ago when New Jersey Gov. Chris Christie, a likely GOP presidential contender, allowed new licensing rules to take effect banning automakers from selling cars directly to customers. Tesla, which has showrooms at two New Jersey shopping malls, faces the prospect of having to cease sales in the state.

In a furious blog post, Tesla CEO Elon Musk slammed Christie for cutting a "backroom deal" on what he likened to a mafia-style protection racket. But the governor was unapologetic.

"I have no problem with Tesla selling directly to customers, except it's against the law in New Jersey," Christie was quoted as saying at a town hall meeting on March 17.

Other Republican stars seized on Christie's stand. Last week U.S. Sen. Marco Rubio of Florida threw down the gauntlet in an interview with CNBC.

Rubio: Support for Tesla's plan

"It's an established product," Rubio said of Tesla's cars. "Customers should be allowed to buy products that fit their need, especially a product that we know is safe and has consumer confidence beneath it."

Asked why Christie signed off on the Tesla ban, Rubio demurred.

"I don't know," Rubio said. "You'll have to ask him."

It sounds like a GOP debate already.

Other GOP stars are weighing in too. Texas Gov. Rick Perry, who stumbled in a primary bid in 2012, said in an interview with Fox Business News that he'd like to revisit a Texas law restricting direct sales of Tesla vehicles in the state.

"We live in a different world than we did 30 years ago, 10 years ago," Perry said last week. "I think it's time for Texas to have an open conversation about this."

As it happens, Texas is on the shortlist -- along with Arizona, New Mexico and Nevada -- for a $5 billion gigafactory for batteries that Tesla is considering building.

Perry apparently thinks flexibility on the retail model could improve Texas' chances.

And for Perry, who isn't seeking re-election this year but likely will consider another presidential run, a Tesla win would be a nice feather in his cap come debate time.

GOP fault line


But why are potential presidential candidates concerning themselves with a small-volume electric vehicle maker and how it sells its cars?

They aren't. What they're really talking about is the role of the government.

Think back to 2009, when politicians began arguing fiercely over the wisdom of saving General Motors. GM's fate was an important economic issue in its own right, but their debate was really a microcosm of a larger argument about the government's role in business and the economy.

GM served as a handy proxy for politicians to explain where they drew the line on government intervention in the economy.

While the debate over the bailout has faded, the larger debate about the government's role in society has intensified -- especially within the Republican Party.

Texas Gov. Rick Perry: "We live in a different world than we did 30 years ago, 10 years ago. I think it's time for Texas to have an open conversation about this."

The old guard of the GOP has always accepted some regulation because it gives businesses a set of predictable and reasonable rules to follow. But there is a growing libertarian faction that wants businesses to compete in a fully free market, even if that ends up hurting big, established businesses, such as car dealers.

With its innovative retail model, Tesla is prompting people to think anew about where to draw that line between good and bad regulation. And it gives politicians such as Christie, Rubio and Perry a new way to frame their political philosophies.

Of course, Tesla has had government help of its own. There was the $450 million loan from the U.S. Department of Energy, now repaid, for ramping up EV production. There is the $7,500 federal tax credit for Tesla buyers, plus the millions of dollars Tesla has made selling zero-emission vehicle credits to competitors under California law.

So supporting Tesla in the franchise fight doesn't come easy for Republicans.

Consider what the conservative Washington Post columnist Charles Lane had to say about Musk's battle with the dealer lobby: "I'm no fan of his electric-car dreams or the government subsidies that have enabled them. But in this battle, I'm rooting for him."

Perils of a national debate


Tesla's retail model landing on the national debate stage should be deeply disturbing to those dealers who are fighting the company. Until now, they had the upper hand on the issue of franchise laws because their support of local economies and Little League teams earned them strong protection in state legislatures.

But outside the statehouse, it's a different ballgame. Many Americans are suspicious of franchised dealers and their business practices. They hate the haggling. They hate the sales pressure. They hate feeling like prey in the service lane.

If this turns into a national debate about how cars are sold, customers could start to question whether the franchise system has the benefits that dealers say it does.

Publicly, dealers might say they embrace the discussion.

But when the cameras are rolling, and people like Christie, Rubio and Perry start arguing about Tesla's business model, dealers may come to regret going up against a little company that can rally such big political figures to its side.

You can reach Gabe Nelson at gnelson@crain.com.


advertising
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

Or submit an online comment below. (Terms and Conditions)


Newsletters & Alerts
Latest Headlines