Arizona law puts brakes on Tesla car sales - Your West Valley News: Topstory

Arizona law puts brakes on Tesla car sales

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Posted: Monday, June 24, 2013 4:15 pm

Want one of those new Tesla all-electric cars that Consumer Reports has been raving about?

If you’re an Arizona resident, you’re going to have to jump through some extra hoops, all because of a state law designed to protect car dealers.

Yes, you can go take a look at the cars, which start at $70,000, at what the company calls its “gallery” at Scottsdale Fashion Square mall. You can kick the tires, sit behind the wheel and ask questions.

But you can’t buy one there. And you can’t take it for a test drive.

In fact, the employees in Arizona really can’t even talk much about price.

Instead, you have to either drive to California or decide you like it so much that you’re willing to place an order online — with a $2,500 refundable deposit.

It’s not by choice, explains company spokeswoman Shanna Hendriks.

“In order to sell cars in Arizona, you need to have a dealer’s license,” she said. And Tesla does have some dealerships elsewhere. But not here.

“A manufacturer cannot be a dealer in this state,” said Bobbi Sparrow, president of the Arizona Automobile Dealers Association. Arizona law prohibits manufacturers from selling directly to Arizona consumers.

And that, she said, is by intent.

“We put that in law in 2000,” Sparrow said.

One purpose, she said, is ensuring that buyers have dealerships available should a vehicle be recalled or need service. And Sparrow said since most areas have multiple dealerships, that ensures competition for customers which, in turn, keeps prices down.

“If you’re the manufacturer, you have one set of pricing,” she said, with no incentive to knock down prices.

Sparrow acknowledged the law is also there to protect dealers who have invested money in setting up a franchise for a specific manufacturer. Allowing a manufacturer to sell directly to consumers, Sparrow said, would allow them to financially squeeze out the dealers, leaving them with buildings, car lots — and nothing to sell.

She said most other states have similar laws.

“They’re trying to buck the system,” Sparrow complained.

So far, Tesla has gotten around the laws in Arizona and most other states because the transaction technically occurs in its home state of California. That has led legislators in places like North Carolina to propose tightening their dealership laws.

Hendriks said Tesla is fighting new legislation, and, in some states, challenging their existing laws.

“It’s a huge hindrance to customers who want to buy our vehicles,” she said.

Hendriks said Tesla is managing to work within the existing Arizona laws to sell vehicles to Arizona residents despite the hurdles created by the franchise law.

“It’s a great market for us,” she said, though Tesla would not disclose specific Arizona sales.

The publicly traded company’s most recent quarterly report showed $555.2 million in sales.

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1 comment:

  • BenBethel posted at 10:09 am on Tue, Jun 25, 2013.

    BenBethel Posts: 1

    This would be a really, really bad move for auto manufacturers as well as for consumers - even for dealers: 1) most auto manufacturers are following Tesla's lead and are planning on opening stores in high-traffic malls to show off their vehicles... better to have 50,000 "browsers" walk past your store and your cars each day than just a few reluctant buyers, who hate the experience of going to a dealership... 2) what Tesla is doing now is the same thing other auto manufacturers and dealers have been doing for YEARS - placing vehicles for display in malls, at events, in front of baseball stadiums and football stadiums, in airport terminals, at golf events, etc., etc.... 3) selling direct to the consumer shaves about 12-17% off of the price of any new car, which means thousands of dollars that can now be spent at local businesses, local retailers, local restaurants and local bars, and on local events/concerts/sporting events, etc.... 4) dealerships should be in favor of this, again because if they open up inside a smaller, cheaper mall store, they'll sell more vehicles (it's all about traffic counts, and how many people walk by a mall store vs drive into a dealership daily), can offer better pricing, and can close their dealerships, stop holding so much inventory, and sell that land for high-density apartment/retail/commercial developments.... 5) then "authorized repair centers" could get more business, supporting the small local neighborhood businesses that they are. There's no reason the current anti-competitive laws of selling cars still remains... it hurts the consumer, it hurts the auto-manufacturer, and hurts our economy... plain and simple. Tesla has it right, they're winning lawsuits in most states, and the "Reagan Law" protecting dealerships (signed by Reagan to protect a California dealership who gave him a car when nobody else would approve him for a loan) makes no sense and harms the many to protect the few. If this continues, Tesla has a workaround plan, and that workaround will damage other dealerships and manufacturers beyond belief.... they'll just have all of their cars driven a hundred or so miles and throw the vehicles on Ebay Motors and Craigslist as "barely used demo vehicles". Keep in mind that you're dealing with the founder of Ebay here... no stranger to laws on how vehicles are sold around the country....


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