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Tesla, dealers remain at odds as lawmakers urge compromise

Hartford — Lawmakers recently delivered a blunt message to electric car manufacturer Tesla and Connecticut's auto dealers: get in a room and hammer out a compromise.

For the fourth year in a row, a bill allowing Tesla to bring its direct-to-consumer business model to the state cleared a General Assembly committee last week. But the bill could stall yet again unless Tesla reaches some middle ground with dealers, who have insisted the company abide by existing franchise rules that require sales through dealerships.

"If there's no deal between car dealers and Tesla, there is no bill," said state Rep. Devin Carney, R-Old Lyme, one of several lawmakers on the Transportation Committee calling for compromise.

State law bars manufacturers from holding new- or used-car dealer's licenses. The bill before the House would let makers of only electric cars sell directly to consumers, a process Connecticut's 270 new-car dealers argue could threaten thousands of dealership jobs.

Dealers claim the bill could open the floodgates for new and existing electric carmakers to roll into Connecticut and sidestep dealerships that typically employ dozens of people in a range of fields.

But Tesla argues it's being blocked from investing in a state that's strapped for cash and losing tax revenue to neighbors. The company also notes Connecticut's environmental initiatives align with the growing electric vehicle market.

On Friday, Tesla senior manager Will Nicholas said the company would never forfeit its business model.

But he said Tesla is willing to sit down with dealers and find compromises, such as capping its number of stores or requiring new and existing electric car manufacturers to seek approval from policymakers before employing a direct-sale model. Tesla says it's successfully hashed out such legislation with dealers in Maryland, Georgia, Indiana and Utah.

"We'd be willing to consider the dealers' concerns and concede certain matters that would allow us an ability to come in and do business," Nicholas said. "In an ideal world, we'd like to see Connecticut adopt laws that would allow unfettered opportunities to create jobs and address market demands. But something is better than nothing."

'Our dealers drive job growth'

A Friday evening statement from Jim Fleming, president of the Connecticut Automotive Retailers Association, made no mention of compromise. Fleming argued the bill would grant Tesla an exemption from state consumer laws that dealerships must follow.

"Any decision that supports a California company over our local jobs is not the right one," he said. "Our dealers drive job growth, pay large sums in municipal property taxes, and have been advocates for selling electric vehicles. Tesla makes big promises, but they cannot provide a fraction of what we do."

Fleming has argued that as Tesla grows or other companies take advantage of direct sales and avoid dealership overhead costs, it could present long-term problems for dealers.

Dealers also argue the direct and indirect jobs, charitable giving, community sponsorships and other local economic boosts connected to dealerships outweigh any potential benefits of direct sales.

Nicholas argued the "existential threats" hypothesized by dealers are overblown. He cited data analyzed by Acadia Center and the U.S. Department of Labor showing dealerships in Massachusetts, New York and New Jersey — states that allow direct sales — haven't seen job losses at all.

"Some of the testimony has been that Tesla doesn't employ people, that we're centralized in California and that's where we outsource everything," Nicholas said. "But I'm literally standing in Red Hook in Brooklyn, one of 100 open requisitions in New York, a place we're allowed to do it."

John Dougan, a New Hampshire Tesla owner, said in an email that "it's unfortunate that Connecticut lawmakers don't recognize all the benefits Tesla sales will bring to the state."

He noted that as he's driven through Connecticut, he's stopped at the network of several Tesla Supercharging sites throughout the state and eaten at local restaurants, spending "money I probably wouldn't have spent otherwise."

'We can't continue to be at a logjam'

Joel Valenti, a sales manager at Valenti Ford in Mystic, said he thinks Tesla makes a good product and that he fully supports "technology, growth and the newest way to do things."

But the bill isn't only about Tesla, Valenti said.

"It opens up a whole new can of worms," he said. "If you let anybody do direct sales, you don't know who's going to come in and not handle it the right way. And we do still feel like having dealerships gives people some type of competitive advantage over a monster corporation."

Fleming and dealers have argued that in warranty and lemon law disputes, dealers often side with customers in fights with manufacturers over service or recalls. Exempting electric car manufacturers from existing franchise laws could leave customers to face large companies on their own, dealers say.

Tesla dismisses that argument, saying it's committed to consumer advocacy and pointing to a track record of solid customer satisfaction surveys.

State Sen. Carlo Leone, D-Stamford, said at Thursday's Transportation Committee meeting that he was hopeful lawmakers' push for compromise would spur conversations between dealers and Tesla.

"We want to make sure both entities are still successful," he said. "We don't want to pick one over another, but we can't continue to be at a logjam."

But Carney, the state representative who has several dealerships and Tesla owners in his district, said Friday he "would not be surprised if the gridlock continues."

"A lot of legislators want Tesla to be able to be sold here, but there's a difference of opinion in what fashion," he said. "I do hear from both sides. Both groups have their own ideas of what a compromise is."

And the clock is ticking, Carney added, as this year's legislative session ends in early May.

b.kail@theday.com

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