The Missouri state legislature has decided to scrap a bill that would have banned Tesla from doing business in the state. The main point of concern for people like Missouri representative Glen Kolkmeyer is the fact that Tesla, unlike most other car manufacturers, sells its cars directly to the public rather than through an intermediary such as a dealership. Tesla, who operate a service centre in St.Louis, say that cutting the middleman out of the equation is beneficial for both consumers and manufacturers, but this idea has come under fire in states such New Jersey, Washington, and Texas. In fact, 48 states reportedly have some form of legislation limiting factory owned dealerships in some way.
Tesla, however, is by no means alone in believing that cutting out the middlemen is a good thing, as it has garnered support for its cause from diverse sources. For example, John Diehl, a republican member of the Missouri house of representatives, was reportedly worried that the proposed bill would restrict the free market, with unintended consequences, if it were passed. Furthermore, the Federal Trade Commission, has come out strongly in favour of Tesla in its battle against the Missouri state legislature, saying that the legislation would prohibit the “normal competitive process that prevails in most other industries”. The Federal Trade Commission, as an important federal body, undoubtedly influenced the Missouri legislature in scrapping the proposed ban on Tesla, although they were by no means the only factor in the legislature’s decision.
The support that Tesla has received from sources such as the Federal Trade Commission has been balanced by the animosity of organisations such as the National Auto Dealers Association, an association which represents nearly 16 000 dealerships across the United States of America. The National Automotive Dealers Association has defended the proposed legislation by saying that cars contain materials hazardous to the health of consumers, meaning that the state is perfectly justified in standardizing the sale of cars in order to protect consumers. Furthermore, the National Automotive Dealers Association has asserted that a system of independent dealers provides more competition in the industry, resulting in lower prices and better service for consumers. Finally, Kolkmeyer has expressed concern that the failure of House Bill 1124 will open the doors for foreign car dealers to sell cars to Missouri residents over the internet, something which would almost certainly have a negative impact on local dealerships.
Tesla CEO Elon Musk called the bill a ‘sneak attack’ aimed directly at Tesla Motors, and derided it as an attempt by legislators to pass legislation without any public consent or debate. However, while Elon Musk will undoubtedly approve of the Missouri state legislature’s decision to not ban Tesla from the state, the problem has not yet disappeared for good. The bill will almost certainly be reintroduced by Glen Kolkmeyer in next year’s session, something which has been confirmed by Timothy Jones, the speaker for the Missouri House of Representatives. Therefore, although the scrapping of House Bill 1124 may be hailed by some as an end to the protection of middlemen from new competition, and a victory for free market principles, the future of Tesla Motors in Missouri remains uncertain as a new ban will be on the table in only a years time.
By Nicholas Grabe