Tesla Gets Legislative Support for Sales in Arizona

Paul Ausick

Through a somewhat quirky legislative rule, a committee of the Arizona State Senate on Wednesday passed a bill that would allow electric car maker Tesla Motors Inc. (NASDAQ: TSLA) to sell its vehicles directly without having to establish a distributor network in the state. This is not the final step, but it is a first step in a state that has a law dating back to 2000 that prohibits exactly what Tesla wants to do.

With sales bans in New Jersey, Colorado, Texas and, for now Arizona, Tesla has fought for acceptance of its direct sales model. Most states long ago passed laws prohibiting car makers from selling directly to consumers, proclaiming that dealers prevent manufacturers from taking advantage of consumers and that dealers promote price competition.

Arizona and Texas are both in the running for the so-called lithium-ion battery “giga-factory” that Tesla hopes to build. Perhaps the Arizona legislature sees the irony in trying to attract a company that cannot sell its products within the state’s borders.

In any event, the legislation that the state Senate’s committee approved Wednesday was introduced as House bill 2123 in January and, according to a report in the Phoenix New Times, died after passing the House without even a vote in the Senate. The bill had “absolutely nothing to do with cars at all.”

But something called the strike-everything amendment “allows [Arizona] legislators to cross out the text of an entire bill, and replace it with new text.” A completely rewritten version of House bill 2132 is what passed the Senate committee Wednesday. What the Arizona legislature does to reconcile the two different bills that have the same number should be entertaining at least.

Tesla already operates showrooms in Arizona, but it is prohibited from giving potential buyers test drives or even from talking about price. Buyers can literally kick the tires, but that is about all. To purchase a car they must go to California or order it at Tesla’s website by ponying up a $2,500 refundable deposit.

Tesla has taken pains to stress that where it chooses to build its factory is not linked at all to the company’s ability to sell cars. A lobbyist for the company is quoted at the Arizona Daily Star:

Arizona is very much in the mix [for the giga-factory]. However, having said that, I don’t want anybody to think there is any kind of quid pro quo here, that if you vote for this you’re guaranteeing this, or that if you vote against this you’re guaranteeing that.

Arizona’s nine U.S. Representatives sent Tesla CEO Elon Musk a letter on Tuesday claiming that “Arizona presents an ideal choice for this revolutionary factory.” The state legislature may want to cover that bet with a little help of its own.