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Updated Mar 19, 2014 - 4:09 pm

Arizona Senate panel gives Tesla pass on dealer rules

PHOENIX — Electric car manufacturer Tesla Motors would be allowed to sell
cars in Arizona without establishing a dealer network under a bill approved by a
state Senate committee Wednesday.

House Bill 2123 is strongly opposed by traditional auto manufacturers and
dealers, who argue that Tesla wants to operate outside the normal rules that
require manufacturers to sell cars through dealers. They say allowing sales
directly from an automaker could leave consumers in the lurch if the company
goes belly-up.

“Tesla is asking for a special exemption for them to have a separate set of
rules for their electric cars,” Mike Gardner, a lobbyist for the Alliance of
Automobile Manufacturers, told the Senate Commerce, Energy and Military
Committee. “What we’re opposed to is allowing one of our competitors to go
around the dealer network and sell directly to consumers. We think we should all
be treated the same.”

But Rep. Warren Petersen, the bill’s sponsor, said dealers and manufacturers
are trying to stifle innovation.

“This is a great opportunity for us to send a message that we welcome business
and we welcome Tesla here to Arizona,” said Petersen, R-Gilbert. “We shouldn’t
deny our consumers from being able to purchase a product if they want.”

Tesla Motors Inc. has a showroom in Scottsdale but can’t sell cars there under
a 2000 law. Instead, it takes orders online.

Arizona is also one of four states vying for a new lithium-ion battery factory
that would supply the company’s Fremont, Calif., assembly plant. Others are New
Mexico, Nevada and Texas. Tesla says it will invest $2 billion in the
10-million-square-foot factory, which will cost between $4 billion and $5

Despite Arizona being in the running for the plant, lawmakers said the bill was

“I don’t want to send a message, even though this is not a quid pro quo,”
said Sen. Bob Worsley, R-Mesa. “I want the message from our state to be that we
welcome the opportunity to work with large successful companies with this size
market cap.”

A second bill approved by the committee expands a $3,000-per-worker tax credit
program for companies that add jobs by removing a requirement that the employees
be continuously employed to get the credit for three years. House Bill 2272
would allow the company to continue claiming the credit for all three years if
the worker is replaced.

The Tesla sales bill was originally about an unrelated subject, but it was
amended Wednesday by Republican Sen. John McComish, the Senate majority leader,
to take up the Tesla language. It would allow a company to sell vehicles
directly to consumers if it only makes electric vehicles and has a service
center in the state to handle repairs and warranty issues.

McComish calls it a “pre-emptive strike” against future laws that could
outlaw Tesla’s operations completely.

“What has happened … is that in some states, they are moving to outlaw that
kind of operation,” McComish said. “But I think we should be about
opportunities for innovation rather than stifling innovation.”

New Jersey, for one, recently adopted rules requiring new car dealers to obtain
franchise agreements to receive state licenses, effectively prohibiting
companies from using a direct-sales model like Tesla’s.

The committee approved the bill on a 3-2 vote and it now goes to the full
Senate after a routine review in another committee.


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