New York Auto Dealers Try To Make Registering Tesla Stores Illegal: BREAKING

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Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

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Well, this is a new tactic we haven't seen before in the fight between franchised auto dealers and Tesla Motors, the Silicon Valley electric-car startup.

A pair of bills in the New York State Legislature, backed by New York state auto dealers, would make it illegal to license or renew licenses for Tesla stores within the state.

The bills, submitted now pending in the last days before the Legislature adjourns for the summer, would make it impossible for any state resident to buy a vehicle not sold by an independently-owned third party.

Which is to say, a car dealer.

UPDATE: As Bloomberg reported late Friday night, the bill was set aside in the New York State Assembly, which will not reconvene until January. It adjourned its session without acting on the measure.

UPDATE: At 3:17 pm on Friday, Tesla CEO Elon Musk tweeted, "NY Assembly passing bill to shut down Tesla, but Senate holding the line. Appreciate senators resisting influence of auto dealer lobby."

Only one qualifies

The only manufacturer that now sells cars directly to consumers, rather than through franchised dealers, is Tesla Motors [NSDQ:TSLA].

Rather than selling to dealers, who then sell to consumers, the company operates Tesla Stores--showrooms, essentially--where customers can ask questions and take test drives before buying their car online from Tesla itself at a set price.

The bills--A07844 in the Assembly and S05725--amend the state's vehicle and traffic law, "in relation to automobile manufacturers and unfair practices by franchisors."

And it prohibits the state from issuing or renewing the registration of any car dealer in which a carmaker holds a controlling interest--unless that certificate was issued before July 1, 2006.

In other words, the bill has been narrowly crafted to prohibit renewal only of Tesla's stores. The bill does appear to allow temporary registration of such stores for no longer than one year.

UPDATE: As well as forbidding the state to renew licenses of existing Tesla sites, the bill also makes it illegal to license any future store or dealership owned by a manufacturer.

That goes beyond similar efforts, such as the March 2010 bill in Colorado that prohibited future Tesla-owned sites--but did not seek to shut down the state's pre-existing Tesla Store.

It also appears to make it illegal for the state to register new Tesla vehicles not sold by franchised dealers--which, of course, Tesla doesn't have.

Sample letters

A sample letter available on the New York State Automobile Dealers Association website notes that the identical bills are "consensus" bills.

They have been, it says, "agreed upon by the Alliance of Automotive Manufacturers, the Global Alliance of Manufacturers, and all of the New York State Dealer Associations."

The letter--to be sent to senators or assemblymembers--urges the elected officials to cosponsor the bill in their house.

It says the bills "clarifies existing provisions of the franchise law to ensure fair dealings between dealers and franchisors."

They will also "level the playing field and help franchised dealers improve on those sales and job numbers in New York."

Finally, the bills "will also update the Act to address new circumstances."

NYSADA's website also has a downloadable copy of what appears to be an earlier markup of the bill text.

Stealth bills

The stealth nature of the bills may be demonstrated by the fact that neither bill is listed on the NYSADA "Legislative Efforts" page as bills it supports (or, for that matter, opposes).

Early this afternoon, Tesla CEO Elon Musk tweeted--twice--that New York residents should call their state senators.

Bottom-ranked for openness

The New York State Legislature has been rated among the lowest of all 50 states by good-government groups on issues as diverse as transparency, gerrymandering, and achievement.

It customarily passes a rush of bills on its last day (and fails to take action on many more).

Many of those bills have never been read by the elected officials voting on them, and were agreed to in closed-door meetings among the governor, the assembly speaker, and the leader of the state senate.

In April, a New York state court ruled that auto dealers could not prove they had been injured by Tesla's operations in the state, and dismissed their lawsuit.

EDITOR'S NOTE: This story has been updated numerous times as we received further details on the legislation.

UPDATE: Tesla Motors issued a formal statement on the matter Friday at 2 pm Eastern. We have reprinted the statement in full on the next page.

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Comments (71)
  1. Can't Tesla call this a monopoly and sue?

  2. Um, a monopoly applies to one company. Thus the reference to "mono". Further, the government can't be sued for restricting trade. They are the government and unless it is unconstitutional, they can pretty much do as they please.

  3. My mistake thanks for the correction.

  4. NY State could be sued in federal court for interfering with interstate commerce clause. Given electric cars are not "Mallum per se" and are
    allowed to be sold by individuals between the states or possessed, i think the NY Regs would have a hard time holding up in court under a "Rational Review". Tesla doesn't want to litigate this because it could be 2 years

  5. Holy Crap!

  6. this would also bar registration of home built cars, imports, etc...

    It also seems to be a serious impingement on interstate commerce.

  7. @Pat: Just to clarify, the article has been updated a couple of times.

    The bills in question prohibit registration (or relicensing) of Tesla Stores and other facilities if they're owned by the carmaker, but not the cars themselves. Our first version of the story erred in that respect.

  8. Does "other facilities" include maintenance facilities, SuperCharger or Tesla Stations (battery swap sites)? Does it effect getting tempory local permit to participate in parade, or a public event (e.g. car-show) too?

    Almost sounds like a ban on interstate commerace to NY state residents that have an existing product, or happen to purchased a legal product elsewhere.

    Also wonder how this proposed legislation effects NY states vehicle emission laws (addopted CARB, Part 177) that require New York state to offer same fleet of vehicles as approved by California Air Resourse Board as meeting Part 177 Emissions? By not allowing a vehicle the agreement is broken an auto manufactures can't take credit or transfer transfer zero emission credits

  9. still seems weird. They might be able to do this, but, it's an interference with contracts.

  10. if they do this, i'd make an ad campaign of it.
    "This car is so good, the competition passed a law against it.
    So look for this car, anywhere free markets are respected"

  11. Wow...the war on Tesla hardens. Again: it's not as if cardealers have anything to gain here; there are no franchised Tesla dealer that stand to loose anything and as far as getting a piece of the Tesla pie is concerned: that piece is going to be far less than 1% of the total US car market for many years to come.

    So IMO this is about diminishing Tesla's chances of success by undermining this important pillar under its marketing strategy by forces who actually do stand to loose something by Tesla's activities. Competitors in the car industry? Oil companies not too happy with the concept of "free for life" long distance travel? Take your pick.

  12. I think it's about stopping all the other manufacturers from being able to sell directly to consumers like Tesla does. I see this backfiring though and getting the franchise laws struck down on a federal level if they aren't careful.

  13. All the other manufacturers already have franchised dealerships which are "protected" by these franchise laws so they are no longer in a position to do what Tesla is doing.

  14. Yeah, but I'm guessing they are worried that if Tesla is allowed to work around the franchise laws then other manufacturers might be able to get around them as well.

  15. This is bloody ridiculous. I'm reading this from the Netherlands, Europe. Seriously, I can't hardly realize that the USA looks so ridiculously doing this. On the one hand I have big confidence in Elon Musk and Tesla, SpaceX, Solar City. But these things.. My god. Somethimes I feel ashamed for mankind.

    Is this the oil companies, goverment, car companies or WHATEVER trying to block development of mankind in all sorts of idiot ways?!?!?!

    SIGH, this makes me mad...!

  16. I am ashamed to agree our legal system is considered a joke by the rest of the world. Here you can sue a restaurant chain because the coffee you got was too hot.

  17. This reminds me of the NPR article on Cars direct that makes it very hard to change how car shopping and purchasing is done.

  18. The auto franchise system in the U.S. is an archaic standard that was implemented when consumers were fearful of the auto companies having too much influence. It is time to lose the laws that protect and require franchises.

  19. Why is it that we shouldn't be concerned about automaker influence, again? New CAFE regulations are always watered down by automakers. The Chicken Tax still exists. The EPA's fuel economy testing system is a joke. The US government dropped billions of dollars to save two automakers less than 5 years ago.

    Are we living in the same United States? It seems to me that auto companies have a tremendous amount of influence. If we let them own every dealership in America, that influence quintuples.

  20. Compare the monopoly in the U.S. a hand full of car makers had 50 years ago to the competitive worldwide market today. It's a totally different auto world.

    BTW, preserving the dealer sales model does nothing to address any of your complaints.

    Elon Musk understands that to compete against traditional gasoline cars he has to control the sales process as well as interaction and service to the customer. It will be a shame if these dealer laws stand in the way because it will significantly damage Tesla who is still evolving to be competitive.

  21. I'm starting to think that Americans should take a long hard look at how their democracy is working, rather not working!

  22. @James - isn't it clear that we have the best democracy that money can buy?

  23. I usually refer to it as a Corporatacracy.

  24. I'm disgusted. New York's image has been severely tarnished, and along with it the image of the 'Land of the Free'.

  25. This legislation seems focused on allowing a "Cartel" to practice Mob-like manipulation of government for the benefit of a single organized group.

    There must be other NY state laws, or federal laws that consider such organizations and actions illegal? What about the elected officials that propose or try to pass such legislation… can it be considered a breach of ethics?

    Very scary that special interest groups like NADA can get away with pushing this type of legislation in the United States of America. Time to speak up against the United Corruption of America.

  26. Could Tesla call a dealer, ask how much money they need to pad the deal to make this work, i.e. how much the dealers would need to sell Tesla exclusively, then, tweet to the US, "This is how much more the Model S will cost in NYC, move to Jersey or call your congressman!"

  27. The problem is that the dealer won't sell the cars, they'll just say "you don't want an electric car, too much hassle, have you considered this lovely V8?". It is that lack of ability at selling electric cars (and the damage to their reputation) that is the reason that Tesla wants to sell directly, not the extra money that they might have to charge.

  28. I partly agree, I called for exclusivity to nix any chance of pushing the V8 otherwise, you're completely right, they'll use it as a halo car to get people in. However, dealers do get most of their cash from servicing and that's pretty much off the table with Tesla. I think that the US public should see, transparently, how much the dealers add to the total cost of car ownership.

  29. Dealers don't add to the cost of anything, at least not if there's more than one dealer in your area representing the brand you want to buy.

    Consumers mistakenly believe that company-owned dealerships would be a good thing, but what they're forgetting is that corporate-owned dealers won't try to undercut one another to make a deal. Independent dealers, on the other hand, can be played against one another for the best purchase price...and the best trade-in value...and the best finance rate. Etc.

    Independent dealers are GOOD for consumers. Corporate dealers are BAD for consumers. Can't understand why this isn't obvious to everyone.

  30. "Can't understand why this isn't obvious to everyone." Maybe it's because we all have so much experience with independent dealers. So who are we going to believe - you or our lying eyes?

  31. It probably isn't obvious because its wrong. Adding a middle man to any transaction raises costs, period. All you are talking about is minimizing that middle man cost, while utterly ignoring that there would still be healthy competition amongst car manufacturers regardless. You are also assuming people are buying a particular car with a set of colors and options that is available via multiple dealers. That's not remotely standard. Dealers/agents/middlemen of all types are slowly being eliminated by a more intelligent and empowered consumer class. Deal with it.

  32. Competition: Indeed, I see the risk there but, I see the fight moving up a rung to the manufacturer, Tesla v. BMW v. Audi, etc. On a lower overall cost base I'm thinking the bottom would line would ultimately move down.

    I've no problem with the idea of a dealer network per se, they put food on the table all through my childhood but, I just don't see how it works to our advantage today. Pushy sales people that won't talk pricing over the phone who are just looking for conquest sales aside, dealers clearly want to add value but, they've become so far out of step with Auto2.0 that it's time we shook things up.

    Food for thought: the awesome deal I got on i-MiEV & Focus were manufacturer deals, not dealer margin.

  33. There are more comments in this thread
  34. It's much more than price. Elon knows that to compete against petrol autos he needs to control the entire sales and ownership experience. And he wants to move on a dime. This has become very clear after buying a Volt. After going to three dealers it was clear that they don't know how to sell it. Besides, they have decades of experience and tooling selling and service gasoline autos.

    Go-to-marketing is critical to Tesla's ability to be competitive, and ultimately it's ability to thrive. And its the freedom to invent a better product/solution that has made America great. Let Tesla and the dealers compete, not hide behind protectionism.

  35. Elon Musk urges New York state residents to contact their state senator, asking them to oppose S05725 that would ban Tesla from operating in New York. Here's how to get the contact info:

  36. Ridiculous. Hope it doesn't pass.

  37. The dealers are quickly showing the country how all consumers already feel about them - shady and scumbags.

  38. So true. All this does is reinforce perception.

  39. Good reporting, John. Thank you.

  40. I actually needed more information about the original intent of the franchise protecting legislation to understand this news. That's a problem with advocacy or specialty reporting, it sometimes misses both sides, or full context.

  41. People of New York,
    Please consider voting out of office the sponsors of these bills:
    Zeldin, Carlucci, Gantt, Heastie, Jaffee, McDonald, Abinanti, DenDekker, Mayer

    People of America,
    The excuse that the NADA lobbyists are using is that these laws keep competition fair between auto dealers and protect you, the consumer from being taken advantage of. Don't let them get away with this big fat lie.

  42. I'm most curious how this would affect VW/Audi, as I believe they just opened a factory store in Manhattan. I thought it was interesting how the legislation grandfathers in the current factory-owned stores in Manhattan from Ford, BMW, Mercedes-Benz, and I think Ferrari, by making it effective after July 1, 2006.

    I doubt Cuomo would sign it, but if he does, I think the legal fight would actually end up in Tesla's favor. This is an outright restraint of trade and there is no compelling interest of the people in this legislation. If Tesla successfully fights it, it would create a great precedent.

    Otherwise, I'm happy to be Tesla's dealer in NY. I'll take 51% and Elon can have 49%.

  43. Of course, one other solution is for Tesla to get a bill passed that defines "motor vehicles" as those with an internal combustion engine only.

  44. Funny, but... consider its full name, "Tesla MOTORS."

  45. In the State of New York are all manufacturers required to sell through a third party or can they sell direct to customers?

    (Kind of a silly question. Obviously you can go into a bakery and buy a loaf of bread fresh out of their oven. You can go to a tailor and have him make you a suit.)

    On what basis could a law be upheld that required intermediate sellers for some goods and not for others?

    How would a law like this survive a court challenge?

  46. "agreed upon by the the Global Alliance" this is only hapening in america so what global alliance are they talking about?

  47. @Kalle: The "Global Alliance of Manufacturers" wording I quoted likely refers to one of the two following groups:
    - Alliance of Automobile Manufactrers /
    - Global Automakers /

  48. What "global alliance?" The global alliance of everyone who depends on the petroleum industry and the internal combustion engine all over the world, who are going to do everything imaginable to stop Elon Musk and the electric car! It's getting too serious for them.

  49. I'm from Europe as well and for me it feels like this is against all principles the USA stand for, like free trade and democracy. How can the people of New York allow that a special interest group pushes government to limit free trade and the choice consumers have? This happened in Eastern Europe before 1989, but here we are talking about New York in 2013!

  50. And I'm afraid it is only the first state, then ... the big spread. Poor America!

  51. America is the new Europe.

  52. You will buy your $80K+ car from a high school drop out who knows or cares little about the car you want and you will like it!

    And when they screw up the paper work and make you come back to re-sign the contract you will pretend to like it!

    Then when they break your car when they are servicing it because they don't know the car very well and now need to keep it for days you will not get very mad!

    You have paid a dealership markup for this. And you will like it.

  53. Jeff, perfect!

    Only this week, I took my Focus in for a software update, as they started work, the telematics failed, the car disappeared off my web page… it never came back.

    Sure they've updated the software but broken something else but you know what was the first thing that sprung to mind? "Oh dear, never mind, it's not like the update was done by the manufacturer."

  54. The war against EV's goes on unabated. The EV was first killed 100 years ago, and then again in the 1990s, and the war goes on. Because they know the facts: that the EV would kill the internal combustion automobile and all whose empires depend on it. The enemies are vast and powerful and have no intention of rolling over and playing dead.

  55. If I were Elon Musk, I'd fear for my life! The powers arrayed against make the Mafia + Al Qaeda boy scouts by comparison. Anyone who thinks that the $1 TRILLION dollar a year oil and internal combustion automobile industry are going to roll over, has another think coming. The EV is the most dangerous and disruptive force in the world to challenge to powers that be. And they will not take it lying down.

  56. Austin is the only forward thinking place in TX

  57. Dealers exist for one reason. To support service departments.

    EVs are a dire threat to dealerships and their service departments. This is protectionism. They don't mind selling cars made entirely in another country and sending most of the money overseas. But when an American company starts selling direct to consumers, they take issue. Huh. Seems dealers have a lot to worry about - that is for common consumers finding out what they are all about.

  58. "Dealers exist for one reason. To support service departments"

    I've had acquaintances who work in the auto business tell me the same thing. EV's threaten their business model.

  59. Another good idea from Tesla: eliminating intermediates and thus reducing the final price. Batteries swaping is the other good idea!

  60. Were do I sign. This is UN American!!! These groups need to be stopped!

  61. Ive heard of Canadian lumber being rejected by American lumber lobby and of American pork being rejected by the Canadian pork co-op because it undercut Canadian farmers. But American auto lobby trying to break an American automotive manufacturer. American car dealership lobby trying to destroy American jobs in America??
    That doesn't make sense at any level. The auto dealer lobby and NY politicians are making secret concordats just like the one in Germany between the Italians, the pope and the catholic leader of the protestant parliament. That created WW2.
    Doesn't it seem that freedom (America the free, remember) to buy American made products is what American economy is based on?? Has wall street changed something and not told anyone?

  62. NY legislators shall buy lots of Tesla shares before not passing the law - this will make them win, the consumers will win, the people of America will win and the planet Earth will win.

  63. The oil and internal combustion industries are out to crush Tesla! That's all there is to it. Musk is a massive danger to them all.

  64. That is why the traditional automakers when they make an EV make a glorified golf cart that is weird looking and low on driving range. They do not want to make a good EV they want it to fail and then they can say. "Well we tried to make EV's but no one wanted them because they were/are inferior to gasoline powered cars"
    Support Tesla the only maker of great electric cars. I would like to see Nissan come up with a larger battery pack in it's Leaf. It has been 2 and 1/2 years and they only upgraded the interior and put in level 2 charging. Lets see if Nissan is as committed to the electric car as they say they are.

  65. Exactly right. The big manufacturers have no desire to see EV's actually take off. They were forced into building some because of the bailouts, Obama, and the hue and cry about "global warming." If they were serious, they would be building charging stations and battery swapping stations without Elon Musk. But now ,Musk is scaring them a bit. The campaign to drive him off the road is on. The fun had just begun.

  66. Actually, this is great news. It indicates that electrics are seriously being considered as a threat to the corporate establishment. Naturally, they use thug-like tactics to try to beat the movement down.

  67. Please consider signing the petition to show support for Tesla. You can sign the petition here:

  68. Here's the full link:

  69. Just another example of politics stunting innovation and progress.

  70. Here is a petition that would make it leagal for tesla to sell in all 50 states

  71. Collusion and pinko protectionism on behalf of the Oil companies through their consumer product sellers.

    Pathetic and ironically against "the spirit of capitalism and the American way"

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