AUTO DEALERS FIGHTING TESLA PITCH TO SELL CARS DIRECTLY TO CUSTOMERS

The long-running fight in the General Assembly between luxury upstart Tesla and the state's auto dealerships is back again, with the electric carmaker saying Connecticut is closing the door to innovation and new technology. 

But the state's auto dealerships — which employ 14,000 people and account for $11.4 billion in sales from Connecticut's auto showrooms — say Tesla is welcome to open an auto dealership if it wants to compete. They argue that Tesla's business model of selling directly to consumers would kill jobs and weaken consumer protections.

Lawmakers are considering legislation that would allow a car manufacturer, in this case, Tesla Inc., to sell directly to consumers and circumvent dealers. The measure, which has failed in the past, was approved this year by two legislative committees, though has not yet been voted on by the House or Senate.

Chip Gengras, president of Gengras dealerships in East Hartford, Meriden and West Springfield, Mass., downplayed Tesla's reputation for innovation. Lawmakers backing the carmaker see it as "shiny and new and they don't understand it," he said.

Tesla's supporters say the state's efforts to promote startup companies, spur business expansion and otherwise rev Connecticut's slow-growth economy are being undermined by politics and protectionist rules. Under state law carmakers generally, may not be issued a dealer's license.

"The state should be encouraging innovation instead of putting roadblocks in the way," said Avi Kaner, a Westport selectman who recently participated in a local Tesla presentation.

Tesla wants to sell cars using its business model, insisting that direct sales benefit consumers. It touts its business model for promoting straightforward pricing and employing workers who are trained at factories where the cars are built.

Dealers argue that the franchise model protects consumers in potential disputes with manufacturers over car repairs. Changing the law to allow direct sales by manufacturers could blur differences between dealers and manufacturers, the dealers say.

Possible legal action adds to the political fight. The Department of Motor Vehicles says Tesla has sold cars at a Greenwich gallery without a new-car dealer's license as required by law. The department has put off enforcement of its decision while Tesla prepares a legal challenge.

Diarmuid O'Connell, vice president for business development at the Pal Alto, Calif.-based Tesla, said cars are not being sold in Greenwich. Employees instead provide information about Tesla products and customers head to out-of-state Tesla sites to buy a car, he said.

James Fleming, president of the Connecticut Automotive Retailers Association, which is leading the effort against Tesla, said the legislation is so broad it could apply to scores of manufacturers, including in Asia. Dealers could be forced to lay off employees to "compete with multinationals," he said.

Joining the opposition over fears of job losses are business groups such as the Middlesex County Chamber of Commerce and Connecticut River Valley Chamber of Commerce.

The MetroHartford Alliance, the Hartford region's chamber of commerce, also opposes the measure. In testimony to the General Assembly it said Tesla would offer "minimum local economic commitment."

Several environmental groups back the legislation, citing Tesla's zero-emissions cars.

Thomas Madden, Stamford's economic development director, said businesses opposing the legislation are not helping Connecticut.

"The continued blockage of allowing Tesla vehicles to be sold in the state says to the tech community that Connecticut is not serious about attracting forward-thinking high-tech companies to the state," he said at a legislative hearing in February.

Madden turned car dealers' arguments about jobs against them. Denying Tesla sales opportunities in Connecticut forces consumers to spend their money elsewhere, "costing the state jobs and revenue," he said.

Tesla has formed a first-ever political action committee to allow it to spend money to persuade lawmakers to back the legislation. "Don't let Connecticut fall behind" is Tesla's message in a flyer mailed to residents being urged to contact their senators.

Tesla and its supporters say the company's other businesses — solar panels, battery storage and supercharger stations in Darien, Greenwich, Milford and West Hartford — present opportunities for Connecticut beyond car sales.

Rep. Jonathan Steinberg, D-Westport, said at a rally at the Capitol organized Tuesday by Tesla that sales of its cars are a "huge opportunity Connecticut is missing out on."

"There's huge demand for Teslas. Those sales are going to Massachusetts," he said.

Connecticut and its lucrative markets are worth the fight for Tesla. In addition to its affluent consumers, the state's emphasis on zero emissions — 203 electric vehicle charging stations operate in Connecticut — are attractive to Tesla and its customers, O'Connell said.

"We wouldn't have invested in the effort to essentially break this monopoly if it wasn't important," he said.

Known for its high-end electric vehicles, Tesla is set to manufacture its Model 3, priced at $35,000 before incentives. The carmaker is in a "critical period of heavy investment spending without a revenue benefit" until the Model 3 reaches volume production later this year, said Kevin P. Tynan, a senior analyst at Bloomberg Intelligence.

To end the stalemate, car dealers have offered to sell Tesla cars, Fleming said. "This could be a great innovative system here in Connecticut," he said.

Tesla rejects that proposal as an unacceptable breach of its business model. "That's not a compromise, that's a capitulation," O'Connell said.

He vowed Tesla will not give up if it again loses in the legislative session that ends June 7.

"We're going to come back year after year until we obtain the right to serve Connecticut consumers in the way they want," O'Connell said.