Save Money in this Sunday's paper

comments

How Tesla electric cars won over N.C. lawmakers

By Julie Bykowicz and Angela Greiling Keane
Bloomberg News

WASHINGTON Tesla Motors was in trouble in North Carolina. Prohibited from opening showrooms there, it was on the way to being unable to sell cars at all when the state Senate voted unanimously to block online auto sales.

Then Tesla turned out a lobbying weapon that, in the home state of stock-car racing’s hall of fame, spoke louder than money: It parked a Model S at the Capitol and invited lawmakers and Gov. Pat McCrory to take it for a spin.

“When you accelerate it, it was the same sort of feeling I got when I test-drove a Mustang Boss back when I was probably 23 years old,” Republican House Speaker Thomas Tillis, 53, told the (Raleigh) News & Observer.

So ended the anti-Tesla legislation. Tillis’ chamber never voted on it.

Chief Executive Officer Elon Musk’s strategy of selling his $70,000-and-up electric car directly to customers through the Internet or company galleries has pitted him in at least seven states against franchised dealers who view Tesla’s marketing and sales models as threats to their existence.

Tesla delivered about 5,500 Model S in the third quarter, more than twice as many as it did in all of last year. It said it plans to deliver “slightly under 6,000” this quarter with Musk saying demand exceeds supply. Its sales depend on access to customers, which it reaches through showrooms modeled on those of tech companies.

The fight with dealers isn’t the company’s sole challenge. Tesla also faces a threat in Washington, where its Model S is under U.S. investigation after three battery fires, and three workers were injured Nov. 13 at its only assembly plant in an industrial accident.

At both the state and federal level, the Palo Alto, Calif.-based company is running a risk Microsoft faced in the 1990s, when it found itself in the midst of a government antitrust action without an experienced advocacy team to shepherd it through the system and build allies for the future.

Musk is putting his star power against one of the best connected and most experienced U.S. lobbies, which has outspent Tesla by multitudes in state capitols and often has some of their own serving as legislators.

Dealers spent $86.8 million on state election races across the U.S. between 2003, when Musk created Tesla, and last year, according to the National Institute on Money in State Politics, a nonprofit in Helena, Mont. They’ve also pumped $53.7 million into federal campaigns, the Center for Responsive Politics found.

Tesla’s investment in state and federal politics was less than $500,000, those same sources show.

“The challenge we face, of course, is that the auto dealers are very strong and very influential at the state level, among the legislatures,” Musk told shareholders in June. Dealers, he said, are “making it harder to get things done.”

.

Outside of N.C.

New York’s Assembly this year scrapped a bill that would’ve stopped Tesla sales in that state. Virginia granted Tesla one showroom license after initially turning it down amid threats from auto dealers to sue.

The showmanship that worked in North Carolina failed in Texas, where dealers spent nine times more than the company on 2012 elections and lobbying. Employees at Tesla’s Texas galleries can’t sell cars, offer test drives or discuss prices after legislation to repeal those restrictions failed to come to votes this year.

“The only people who are opposed to Tesla are the dealers,” said Massachusetts state Rep. David Linsky, a Democrat whose district includes the company’s only gallery in the state. “Every legislator has auto dealers in their district, and they’re out in force.”

Tesla’s strategy hinges on its sales model, said Colin Rusch, a senior analyst with Northland Capital Markets.

“They have direct control over their brand and their consumer relationships,” said Rusch, who’s based in New York and rates Tesla shares “buy.” “They’re able to put their products in the best light and there aren’t competing interests.”

Dealers counter their model is better for consumers, by giving them a consistent place to go for service, and for automakers, by taking sales costs off their balance sheets.

“With factory-owned stores, if the factory goes out of business, so does the store,” said Tim Jackson, chief executive officer of the Colorado Auto Dealers Association, citing the examples of General Motors Co. brands that ended when the company was restructured in bankruptcy.

“If and when Tesla falls on hard times and shuts down, all of the service centers shut down at the same time because they are all factory-owned,” he said.

Battling bills, dealers

In North Carolina, the anti-Tesla bill was sponsored by Sen. Tom Apodaca, a Hendersonville Republican and one of three lawmakers to receive the North Carolina Automobile Dealers Association top gift of $8,000 in 2012. That year, the group spent $152,000 in campaign contributions, mostly to Republicans who control both chambers of the legislature, campaign records show.

On March 14, Apodaca filed legislation to block all automakers from selling cars over the Internet. The bill sailed through committee hearings and hit the Senate floor May 13, where it passed unanimously.

Within a week, Tesla added three North Carolina lobbyists, including former Raleigh Mayor Tom Fetzer, the state Republican chairman in 2010 when the party for the first time in 100 years won control of both chambers of the state house.

The company loaned a car to Leilani Munter, a self-described “vegetarian hippie chick” who races cars on developmental circuits for the Nascar and IndyCar leagues.

She wrote a Huffington Post essay May 23 calling the state’s legislation an encroachment “on the fundamental right of every American to choose what they want to drive,” and talked up Tesla to lawmakers during a capitol visit.

The Model S, recipient of this year’s highest performance ratings from Consumer Reports and top crash-test scores from U.S. regulators, then took the starring role.

Tillis, another recipient of an $8,000 check from the dealers, gave the Model S a solid review, as did Rep. Tim Moore, R, who described himself in an interview as “a car guy.”

“There were people here who didn’t even know there was such a vehicle as this,” Moore said.

His colleagues didn’t act on the Senate bill because “we just realized we needed to have more of a conversation about what was best for consumers,” he said.

Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more



Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more


Quick Job Search
Salary Databases
CharlotteObserver.com