The Middletown Press (Middletown, CT)
Tesla still pushing to bypass dealers
For the fourth year in a row, Tesla is seeking to skirt the established dealership system and sell its high-end electric cars directly to state drivers.
“We have seen an incredible growth rate and (Connecticut) residents continue to drive to neighboring states to buy vehicles,” Jonathan Chang, a Tesla vice president, said during a public hearing Monday before the Legislature’s Transportation Committee in Hartford.
Tesla makes a state-of-the-art electric car, with base models priced at $35,000, that’s capable of driving over 300 miles on a single charge.
But it also has a unique business model: Tesla sells its cars directly to customers, skipping the familiar dealership system, which includes a service and repair center — a major source of revenue for dealerships.
In part because there are far fewer parts to wear out on an electric car, Tesla’s stores do not offer on-site repairs. While there are some cars to view on site, customers often order cars directly from the manufacturer and wait for them to be delivered.
Tesla’s only storefront in Connecticut is located in Greenwich. Chang said that location is for marketing purposes only.
New York State has allowed Tesla to set up shop and many Connecticut residents are purchasing Tesla cars at a Mount Kisco sales center, Chang said.
He said Connecticut is losing at least $5 million a year in sales tax revenue.
“It’s a big hit for Connecticut,” Chang said. “Think of what you can do with those dollars to help offset the budget problems.”
When a Connecticut resident purchases a car in New York, for example, the buyer pays New York’s sales tax. If that car is then registered in Connecticut, the owner pays the difference between the New York tax and the Connecticut sales tax, said Ernie Bertothy, a spokesman for the state Department of Motor Vehicles.
Chang said that difference is .4 percent of the 7.5 percent New York sales tax.
Still, allowing Tesla to sell in Connecticut is not simple — the company is promising 10 locations, including one in Milford — because the existing auto dealership and franchise system is protected by laws that date back 100 years.
Wayne Weikel, director of government affairs for the American Alliance of Automobile Manufacturers, said Tesla can begin selling cars in Connecticut any time it wants.
“Tesla needs to follow the same rules as its competitors, but Tesla does not want to do that,” Weikel said. “It’s asking for special attention. Tesla is not special; they just want special treatment.”
Weikel said the fear among licensed dealers is that the Tesla exemption would open the door for up to 25 other international car makers to set up shop in the state.
Jim Fleming, president of the Connecticut Automotive Retailers Association, said Tesla would create an “unfair playing field” for state car dealers.
“This bill creates an unfair playing field for Tesla by granting them an exemption around consumer laws that dealerships follow,” Fleming said. “Any decision that supports a California company over our local jobs is not the right one.”
Chang disputed the contention that Tesla would disrupt the status quo among Connecticut car dealers. He said the franchise system is built on quick sales and service and repair of vehicles and Tesla does not operate that way.
“We do service as a nonprofit,” Chang said. “Electric vehicles have fewer parts and less maintenance to do. You have wipers and tires, but none of the heavy maintenance. It’s something the franchise dealers rely heavily on.”
Jeff Aiosa, a MercedesBenz dealer owner in New London, said franchise dealers employ thousands of people — far more than a Tesla store — and pay millions in taxes to towns and cities across the state.