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    Monday, April 29, 2024

    Dealers take aim at bill legalizing Tesla's direct-sales model

    New London — Jeff Aiosa, whose Carriage House of New London employs some 50 people, has spent decades building a Mercedes-Benz dealership that promises to outlive him.

    He told state lawmakers this year that he owes it all to his “entrepreneurial spirit” and “a level playing field” — a franchise system that requires all car manufacturers to sell their vehicles through licensed dealers.

    Now, Aiosa and other dealers in the region and across the state fear that a bill that would enable electric-car makers to sell directly to Connecticut consumers would tip that playing field in the direction of Tesla, the high-tech manufacturer based in Palo Alto, Calif.

    It also would open the proverbial can of worms, Aiosa said during a meeting with The Day’s editorial board.

    “It’s not about Tesla; it’s about changing the law,” he said of opposition to House Bill 7097. “The threat is that if it works for Tesla, then other manufacturers will want to do the same. In China, there are 160 companies that manufacture electric vehicles.”

    The feared “dismantling” of the franchise system, Aiosa said, would eliminate intra-brand competition among dealers, leading to higher car prices, and leave dissatisfied consumers with nowhere to turn. All, he said, while producing little direct benefit to the state.

    Nevertheless, with the legislature’s June 7 adjournment just two weeks away, dealers may have reason to worry.

    In its third go-round in as many sessions, the direct-sales legislation appears to have some momentum. In March, the Transportation Committee voted 25-10 to approve House Bill 7097. The Finance, Revenue and Bonding Committee followed suit earlier this month, 25-20.

    Most members of the southeastern Connecticut delegation have supported the measure.

    Sen. Art Linares, R-Westbrook, an original author of the bill and a member of the Transportation and finance committees, has voted for it twice, as has Rep. Devin Carney, R-Old Lyme. Sen. Cathy Osten, D-Sprague, voted with the majority in the Transportation Committee, while Rep. Holly Cheeseman, R-East Lyme, voted against the bill in the finance committee.

    Dozens of the bill’s supporters rallied last week at the state Capitol after Tesla released a poll showing that 74 percent of Connecticut voters favor legalization of the company’s direct-to-consumer sales.

    Linares, a Tesla owner who bought his car in White Plains, N.Y., a state where direct sales are authorized in certain locations, said he’s optimistic that the bill will pass both the state House and Senate. He said it would not only benefit Tesla and consumers interested in the company's pricey vehicles, but also the state’s economy.

    Passage of the legislation would allow Tesla to open stores in Connecticut, generating millions of dollars in investment and creating jobs, Linares said.

    “We’ve been spending a lot recruiting businesses — here’s a company that wants to come here,” he said.

    Local dealers dispute Linares's claim that franchise car dealers in states that have authorized direct sales of Teslas have not been hurt.

    Kim Cardinal Piscatelli, vice president of Cardinal Honda in Groton, said passage of 7097 would adversely affect the 270 franchises represented by the Connecticut Automotive Retailers Association. The franchises employ 14,000 people and provide work for as many more in support businesses, she said.

    Under existing conditions, a Tesla purchased out of state and registered in Connecticut can generate some sales tax for Connecticut, though not as much as it could if it had been bought here. In the case of a Tesla purchased in New York and registered in Connecticut, for example, “If the amount of sales tax paid in New York is less than the sales tax amount charged in Connecticut, we would collect the difference,” said William Seymour, a Connecticut Department of Motor Vehicles spokesman.

    While direct-sales advocates say Connecticut is one of a handful of states that strictly prohibit direct sales, the Connecticut Automotive Retailers Association, which represents 270 franchise dealers, insists at least 23 states, including Connecticut, “prohibit or statutorily restrict” direct sales.

    Connecticut is one of six states where Tesla operates “galleries” that are being challenged in court and have been shut down by law enforcement, according to the dealers’ association.

    In July 2016, the association petitioned the Department of Motor Vehicles regarding a Tesla “gallery” in Greenwich. The association complained that Tesla was selling cars at the location without having obtained a dealer’s license. The DMV ruled in April that activities at the gallery did “constitute the selling, offering for sale, brokerage and merchandizing of motor vehicles by a manufacturer within the State of Connecticut ...” and ordered that it cease operations.

    Tesla has continued to operate the gallery pending an appeal of the DMV’s order.

    b.hallenbeck@theday.com

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