Five-store Tesla compromise reached in Pennsylvania

TESLA V. DEALERS
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The pro-Tesla legislation in Pennsylvania that helped spark a confrontation between dealers and other automakers earlier this month is now halfway to passage -- but with important new limits in place on the number of stores Tesla Motors Inc. would be allowed to own and operate in the state.

The Pennsylvania Senate unanimously passed the bill Wednesday after it was amended to cap the number of factory-owned stores allowed at five. The bill, which is worded to apply only to electric vehicle maker Tesla, now moves to the Pennsylvania House for consideration.

The original bill had no cap on the number of outlets allowed, which drew the ire of the Alliance of Automobile Manufacturers, a trade association representing 12 automakers but not Tesla.

Unfair advantage?

Alliance officials had charged that the original bill, supported by the state’s dealers association, would give Tesla an unfair advantage over traditional automakers. And if dealers signed off on unrestricted direct sales for Tesla, then all automakers should be able to sell directly in Pennsylvania, alliance officials had said.

Now, with the bill amended to include a five-store cap, the legislation could “possibly” earn the alliance’s endorsement, a spokesman said.

“We support the current cap figure as it is in line with neighboring states,” Alliance spokesman Dan Gage said in an e-mail.

Recent compromises have been reached that capped the number of Tesla-owned stores to three in Ohio and to five in New York. Proposed legislation in New Jersey would limit Tesla to four factory-owned stores in that state.

‘Give and take’

John Devlin, president of the Pennsylvania Automotive Association, which represents the state’s dealers, said his organization supports the compromise passed by the Senate Wednesday.

“Legislators did a good job of giving everyone something,” Devlin wrote in an e-mail. “It always requires some give and take.”

The dealers association supported the original bill in order to clear up ambiguity over whether Tesla’s direct-sales model is legal in the state. Association leaders believe the current statute already prohibits direct factory sales, Devlin said, but Tesla was able to open a store in King of Prussia, Pa., and is planning a second location in Devon, Pa.

After seeing the tide of public and political opinion favor Tesla in other states, Pennsylvania association leaders agreed it would be best to provide an exemption for Tesla in order to preserve overall franchise protections. The proposed legislation would make the restrictions on factory-owned dealerships stronger in case another manufacturer tried to challenge it down the road.

Tipping the balance

Earlier in June, the alliance cited the Pennsylvania bill as it blasted state dealer associations for seeking legislation that it said tips the legal balance between automakers and dealers too far in favor of dealers.

Dealers say they are simply seeking a level playing field, and that new dealer franchise legislation is usually prompted by overreach and bad behavior by manufacturers.

This week’s compromise may clear up the direct-sales matter in Pennsylvania, but that broader conflict between manufacturers and dealers continues.

You can reach Amy Wilson at awilson@crain.com.


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