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Ohio bill lets Tesla sell direct-to-consumers, create more jobs, more investment


Elon Musk is no Steve Jobs. But Tesla Motors, Musk's 21st century all-electric premium car company whose cars are as cool to drive as they are to look at, has similar spirit, style and drive to Apple, Jobs' integrated computer company that started in a garage and dented the universe with so many devices born from the intersection of technology and culture that it's now the world's most valuable company.

If a bill recently approved by the Ohio Senate makes it into law, Tesla Motors will be able to sell its all-electric cars direct-to-consumers in a compromise deal with the Ohio Auto Dealership Association.

But as Jobs learned over his storied career, not everyone recognizes a genius or a futuristic company model when they see one or have one in their midst. Ohio, a state that's played such a big role in the evolution of the automobile and where a auto-parts manufacturers continue to play a big role in the changing shape of cars, has a chance to buck what some say is an obsolete business model for selling cars by embracing a new model where consumers buy their car online after strolling through a showroom that's maybe more of a classroom than old showrooms.

A bill that moved out of an Ohio Senate committee Tuesday on its way to the floor for a vote, protected the status quo model for selling cars to consumers through dealers licensed by the state's powerful automobile dealers association, but not before Tesla was given a chance to continue selling their all-electric vehicles directly to consumers by grandfathering its two existing locations and offering hope for a third one.

Senate Bill 260 will, if passed in its current form, prohibit the Registrar of Motor Vehicles from issuing a motor vehicle dealer's license or motor vehicle leasing dealer's license to a motor vehicle manufacturer for the retail sale or lease of new or used motor vehicles. Manufacturers, do not generally sell or lease vehicles at retail. In fact, there is only one motor vehicle manufacturer who currently sells vehicles directly to consumers in Ohio. The bill's prohibition does not apply to companies, like Tesla, that have already been granted a license before the bill's effective date. State researchers said the bill should not have a significant effect on the number of licenses issued, so it will not have a fiscal effect on the State Bureau of Motor Vehicles Fund, which dealer licensing fees go.

Tesla's vice president of business development said the amendment was a good compromise for the auto dealers and Tesla. Diarmuid O'Connell from Tesla said the company's stores are key to educating consumers about electric automobile technology and building a mass market for electric vehicles, according to a published report.

"We want Ohio to be part of that revolution," O'Connell told one reporter. "So the ability to continue to grow here incrementally is a good thing."

Alexis Georgeson, a Tesla communications professional based in Palo Alto, California, told CGE that Tesla currently uses over a dozen different Ohio suppliers in the production of its Model S, spending millions of dollars annually in the state in the process.

Georgeson was unable to identify Tesla's suppliers in Ohio, but she noted that in 2013 Ohio companies supplied more than $10 million in parts and components to build Model S vehicles in the United States. That number, she said, is expected to double this year.

"Between our service centers and two stores in Columbus and Cincinnati, Tesla employees more than 30 Ohioans," she said via email. "Every location opened adds an initial $7-10 million in direct economic activity to the state. If Senate Bill 260 is passed, Tesla will be banned from creating additional jobs, opening new locations and bringing substantial economic investment to Ohio."

Tesla currently operates galleries in Texas, Arizona, Maryland, and Virginia, meaning it cannot conduct sales (discuss price, test drive, or take orders) at these locations. Georgeson said there are many states in which the innovative car manufacturer does have sales licenses and can conduct manufacturer direct-to-consumer sales. The list of states in which we have a retail presence, she reported, can be found here. : All the locations listed as “stores” are places where we hold a sales license and may conduct direct-to-consumer sales unless listed as a "gallery".

Ohio franchise law prohibits manufacturers from obtaining dealer licenses, but Tesla does not operate franchise dealerships.

The confrontation between Tesla Motors and The Ohio Automobile Dealers Association was an example of how an entrenched lobby can close the door on new companies with new products and news ways of selling them. OADA said the Bureau of Motor Vehicles made an error when it granted Tesla its two licenses, and subsequently sought a bill that would put the kibosh on other car manufacturers from avoiding auto dealerships to sell cars. It's reported that General Motors backed the proposal.

The revised bill allows Tesla to continue operations in Ohio at up to three locations unless the company is sold or acquired or starts producing motor vehicles other than all-electric cars.

As the bill's sponsor, Sen. Tom Patton from northeast Ohio said the bill protects more than 60,000 Ohioans employed by auto dealerships from competition from their manufacturers while allowing Tesla to grow in Ohio. "If it turns out this is a good business model for the consumers, we can revisit it," Patton said to a northern Ohio newspaper.

Tesla’s goal is to accelerate the world’s transition to electric mobility with a full range of increasingly affordable electric cars, its website proclaims. Tesla has delivered more than 2,000 Roadsters, the world’s first electric sports car, to customers world-wide. Model S, the first premium sedan, built from the ground up as an electric vehicle, began deliveries in June 2012.

Earlier this month, New Jersey became the latest state to ban Tesla's direct sales model, following similar action by Arizona and Texas.

The president of the Ohio Senate said the bill is expected to be voted on by the full Senate soon.

Musk named the company after Nikola Tesla, an inventor, electrical engineer, mechanical engineer, physicist, and futurist best known for his contributions to the design of the modern alternating current electricity supply system.

The news article Ohio bill lets Tesla sell direct-to-consumers, create more jobs, more investment appeared first on Columbus Government Examiner.

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