Legislation could open door to Tesla sales in Maryland

Let's make a deal: Tesla hopes to avoid fight with auto dealers, change law to sell electric cars in Maryland

Tucked between two clothing shops in Westfield Montgomery mall in this affluent Washington suburb is a different kind of auto showroom. Shoppers headed to Nordstrom's or J. Crew can drop in to ogle, sit in and even arrange to test-drive a Tesla, the pricey high-tech electric car that has had the motor world abuzz the past few years.

You just can't buy it. Not here, anyway. You can't even order it.

While the young "product specialists" staffing the store can go on and on about electric-vehicle technology and show the many features of the red Model S P85D on display, they can't talk turkey with potential buyers about what it would cost with various options.

That's because under Maryland law, only licensed, franchised dealers can sell new cars, trucks and vans to the public. Tesla Motors, the California-based electric car company, has no dealerships — it sells directly to consumers. Now a Montgomery County lawmaker has introduced a bill in the General Assembly that would allow the carmaker to become licensed as a dealer.

"This is about bringing a new type of business to the state of Maryland," said Del. Kirill Reznik, a Germantown Democrat who has joined the Tesla fan club. While the Tesla is a "niche car for a niche market," Reznik said, "driving it is unlike driving any other car that I've driven, and I'm a car guy."

(It can go 270 miles between charges, according to the maker's website, and accelerates from zero to 60 in 3.2 seconds.)

But to price and purchase a Tesla now, visitors to the Bethesda store must go home and order it online, or else drive a half-hour south to the next-nearest store in downtown Washington, where the carmaker can legally sell its vehicles.

That wouldn't deter William Becker of Darnestown, who stopped by on his way to exchange some shoes.

"Not if you're interested in a car like that," he said, describing it as beautiful and amazing.

Neither was the two-Mercedes owner put off by the $131,000 price. He'd learned that not from the showroom staff, but from spotting on the car's floor the sticker that federal law requires be placed in every new vehicle to be sold.

Tesla's bid to sell directly to consumers has run into fierce resistance from auto dealers in some states with laws similar to Maryland's, but it might avoid such a fight here.

A number of states have decades-old laws protecting franchised auto dealers from competition by manufacturers of the vehicles they sell. As in Maryland, laws in Arizona, Connecticut, Michigan, New Jersey and Texas bar sales of new cars except by licensed dealers.

Tesla has been challenging the restrictive laws, with mixed results. The carmaker won court cases overturning them in Massachusetts, New York and Ohio. But lawmakers in New Jersey voted last year to ban direct sales, and Michigan's legislators went a step further, barring Tesla from even having an information-only showroom or "gallery" like the one at Montgomery Mall.

"This is not a crusade against the dealer franchise system," said James C. Chen, Tesla's vice president for regulatory affairs. "We are doing what we are doing because we are introducing, for the first time in 100 years, a viable — actually, in some ways superior — technology to the incumbent internal combustion engine."

Because electric vehicles are still a relatively new technology, he said, Tesla believes it is important to educate consumers, and the best way to do that is directly.

"We strongly believe there are other areas of Maryland — Baltimore, for example — where people would welcome the opportunity to learn more about the technology but for the current status of Maryland law," Chen said.

The National Automobile Dealers Association considers direct-sales bans "a state issue," according to a spokesman, so it has no position on the Maryland law.

But the group has launched a "Get the Facts" website making the case for franchised dealers. It argues that competition among dealers drives down vehicle prices, benefiting consumers, and that dealers take their customers' side in auto recalls and warranty disputes with manufacturers.

Some state dealers groups are opting not to go to the mat over the issue. Pennsylvania's reached an accord with Tesla. Now, Maryland's dealers appear willing to do so as well.

"I think there's a way to work this out," said Peter Kitzmiller, president of the Maryland Automobile Dealers Association, which is unaffiliated with the national group.

Instead of "making this into World War III," Kitzmiller said, state dealers would be willing to create an exemption to the direct-sales ban here — as long as only Tesla can fit through.

Under the bill, to be heard Feb. 19 in the House Environment and Transportation Committee, a manufacturer or distributor could get a dealer's license if it sells only electric or "non-fossil fuel-burning" vehicles and if no other dealer in the state has a franchise to sell the vehicles.

The bill also allows for one dealership inside an enclosed shopping mall — essentially exempting the Tesla gallery in Montgomery from having to comply with state regulations that specify highway signage, parking lots and other features of car dealerships.

With that one exception, Kitzmiller said he wants to be sure any other Tesla dealerships meet all the state and local rules and regulations franchised dealers must. Chen said the carmaker has no problem with that.

The sides have yet to reach final agreement, but Reznik said he is optimistic. While Tesla is the only purely electric carmaker on the scene now, the lawmaker said he hopes changing the law will offer opportunity to others pursuing alternatives to the internal combustion engine.

"There are a lot of new ideas out there, he said. "What I would like to do is try to open up the market in Maryland and see if we can test some of these things and create a new industry, new jobs and at the same time contribute to decreasing our carbon footprint."

Until that happens, Maryland consumers can buy apparel and accessories bearing the Tesla logo, including shirts, jackets, beach towels and baby togs, at the carmaker's Montgomery Mall store.

"We can sell that all day long," said product specialist Jason Sampson, "but not the vehicle."

tim.wheeler@baltsun.com

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