By John Rogers
Tesla Inc., the Silicon Valley-based electric car maker owned by Elon Musk, invested over $3 million in a Salt Lake City showroom in 2015, fully intending to begin selling its vehicles to Utah customers. Thus began a three-year battle during which the company was forced to turn its new facility on State Street into a display gallery and service center two weeks before opening due to a Utah law that prohibited auto manufacturers from selling directly to consumers.
All that changed as HB369 sailed through both the House and Senate during the just-completed legislative session on Capitol Hill. Gov. Gary Herbert is expected to sign the bill into law. The bill allows auto makers to own and operate car dealerships in the state — something that was specifically prohibited under the previous state law. The bill had almost unanimous support in both chambers.
HB369 was sponsored by Rep. Rep. Kim Coleman, R-West Jordan, who has led the battle for two years to allow a Tesla dealership in the state, which she touts as free-market and job-creating. “We have some companies right now that are innovative and that we would like to have as part of Utah’s business portfolio,” she said when introducing the bill.
Tesla, through a subsidiary created to sell cars in Utah called Tesla UT, had its attempts to bring a retail dealership to Salt Lake City repeatedly denied by the Utah attorney general’s office. Employees at the State Street facility could show Tesla products to customers but were barred from discussing pricing or giving test drives. The company obtained a used-car dealership license and sued the state for the right to sell new vehicles. The fight eventually ended up at the Utah Supreme Court, which voted 5-0 against the car company early last year.
Explaining the court’s ruling, Justice Thomas Lee wrote, “We interpret the statutes to prohibit a motor vehicle manufacturer from owning part of any separate entity that sells the manufacturer’s new motor vehicles in this state.”
The ruling meant that the only way Tesla could sell new cars in Utah was through independent dealers or over the Internet. But Tesla pushed the battle and brought in its big guns — including corporate executives from its Palo Alto, California, headquarters — to lobby for Coleman’s bill. The company placed lobbyists in the halls of the Capitol and offered test drives of its Model S and Model X vehicles to legislators. Passage went smoothly, with a single dissenting vote in the Senate and none in the House.
Tesla was pleased with the bill's passage but said that it will wait for the governors signature to announce its plans for the future of the Salt Lake City dealership. In a statement, the company told automotive news website Electrek, “The legislation passed today will allow consumers the right to buy new Tesla cars and energy products directly in the state of Utah. We are appreciative of Rep. Coleman and Sen. (Curt) Bramble’s (R-Provo) leadership in crafting legislation that both Tesla and the Utah Automobile Dealer Association could support. This is proof that allowing Tesla to sell its products directly does not conflict with the business of existing dealerships. We look forward to growing our presence and adding good jobs in the years ahead.”
Tesla said it will continue to fight laws in other states similar to the old Utah law. States, including Texas, New York and Michigan, still have laws that prohibit auto manufacturers from selling directly to consumers.