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Saturday, December 3, 2016

North Carolina GOP Takes On Tesla By Trampling Free Market

Elon Musk

After North Carolina introduced legislation that would make it illegal to predict rising sea levels on its coast, the state’s Republicans are now moving to make in-state business difficult for an electric-car manufacturer. Tesla Motors currently sells its vehicles to North Carolina residents over the phone and Internet, but the state legislature takes issue with this and plans to make such purchases illegal.

Republican state senator Tom Apodaca has introduced a bill that would require that car manufacturers sell their cars through third-party dealerships in the state, claiming any other business model is unfair to dealers. Senate Bill 327  made it through the Senate Commerce Committee with a unanimous vote.

It is worth noting that Senator Apodaca received $8,000 in campaign contributions from the North Carolina Automobile Dealers Association (NCADA), which receives subsidies from dealership sales and clearly has a vested interest in ensuring cars are sold through dealerships instead of directly through manufacturers.

NCADA president Robert Glaser told CNBC on Wednesday, “We believe that if you’re selling cars in North Carolina, then you should be licensed to sell cars in North Carolina. And we believe in the franchise-retail system that has been in place for a hundred years. It works to protect consumers, it works to protect the customers, it works to protect our employees and our families.”

Tesla’s vice president for corporate and business development, Diarmuid O’Connell, responded to Glaser during the same interview. “I also think it’s interesting that Mr. Glaser asserts that his mission is to protect consumers. I think in this national forum it would probably be interesting for a lot of consumers to understand that that’s what the dealer model protects.” O’Connell added, “What’s happening in North Carolina is that the Dealers Association is changing the rules of the game, they’re moving the goalposts and they’re fundamentally disenfranchising North Carolina consumers from having the ability to order a car in the privacy of their own homes—they are changing the rules of the game.”

Slate reports, “In its current form, North Carolina’s bill would be the harshest of a handful of anti-Tesla regulations around the country. In Texas, the company is fighting a law under which the employees of its ‘showroom’ in Austin are not allowed to sell any vehicles, offer test drives, or even tell customers how much the car costs. But at least Texas still lets people buy the car online, which North Carolina’s law would prohibit.”

You’d think NCADA would instead move to require Tesla to participate in the franchise-retail system and reap the benefits in revenue, considering that in this year’s first-quarter sales, Tesla’s Model S vehicle was the top seller — outselling Mercedes-Benz, BMW, and Audi.

For a hybrid and electric vehicle manufacturer, Tesla has been quite successful thus far. The company received $465 million from the Obama administration’s Department of Energy for research and development.

In April, former Alaska governor and vice-presidential hopeful Sarah Palin criticized Tesla in a Facebook post, stating, “This losing tax-subsidized venture joins other past losers like the Obama-subsidized Volt that gets 40 miles per battery charge, or like the Obama-subsidized Tesla that turns into a ‘brick’ when the battery completely discharges and then costs $40,000 to repair.” Palin may be surprised to learn that Consumer Reports rated Tesla’s Model S car a 99 out of 100, writing, “So is the Tesla Model S the best car ever? We wrestled with that question long and hard. It comes close.” Tesla has been doing so well, in fact, that it is expected to pay back the loan five years earlier than initially promised.

Senate Bill 327 will be brought to a vote in North Carolina in the coming months, yet the constitutionality of the law is already being questioned. The Dormant Interstate Commerce Clause asserts that “states could not pass laws that created taxes on or restrictions to residents of other states or create benefits not available to residents of other states,” which could very well present an obstacle to state Republicans and the Dealers Association alike.

AP Photo/Paul Sakuma

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