Pennsylvania lawmakers OK Tesla direct sales expansion
A Tesla Model S automobile, manufactured by Tesla Motors Inc., stands connected to an electrical charger on May 30, 2014, during an auto trade fair in Leipzig, Germany. On July 2, 2014, Tesla gained the right to expand its direct sales in Pennsylvania. Credit: Bloomberg News / Krisztian Bocsi
Tesla Motors Inc., which has battled U.S. auto dealer groups over its direct sales of electric cars through company-owned stores, has received approval from lawmakers in Pennsylvania to expand retail operations there.
The Pennsylvania House Wednesday passed legislation, approved by the Senate last week, that lets the Palo Alto, California-based carmaker increase the number of stores in Pennsylvania and add more service centers, the company said in an emailed statement.
The legislation, which allows as many as five stores in the state, passed 197-2 in the House and still must be signed by Gov. Tom Corbett, a Republican, to become law.
“We hope the process in Pennsylvania serves as an example for how productive cooperation can lead to a win for all parties involved, dealers and legislators included,” Diarmuid O’Connell, Tesla’s vice president for business development, said in the statement.
Unlike previous fights, the Pennsylvania deal arose from cooperation with an industry group, the Pennsylvania Automotive Association, he said.
“It seems state legislatures are feeling pressure to change state laws,” said Ben Kallo, an equity analyst with Robert W. Baird & Co. in San Francisco who rates Tesla at outperform. “Pressure is coming from their constituents of all political parties rather than special interest groups.”
The legislation is the latest win for the automaker led by Elon Musk, who has avoided selling his $71,000 Model S sedans through traditional car dealerships. Last month, the New Jersey Assembly approved a bill that creates a loophole for direct sales of zero-emission autos, and New York Gov. Andrew Cuomo signed a similar measure into law. The company this year also won an exemption to an Ohio statute banning direct auto sales and avoided a similar ban in Missouri.
The company’s ability to avoid being shut out of U.S. states with strict franchise dealer rules shows Musk is “disrupting” the conventional auto sales model, said Karl Brauer, a senior analyst with Kelley Blue Book.
“Tesla is seen as a kind of new, hip, up-and-coming company in the auto business,” Brauer said in a phone interview. “Some of the initial reactions against them by dealers in other states may have backfired a bit on the dealers — making them seem a little too tied to the past.”
Tesla now operates a Pennsylvania store in King of Prussia and service centers in Devon and Norristown, and plans to open a store in Devon soon, according to its website.
While Tesla would prefer no cap on the number of stores it can open in Pennsylvania, “I regard this as the glass is half full,” O’Connell said in a phone interview.
