Protecting Local Economy or an Attack on Innovation? Indiana’s Car Sales Bill
February 20, 2017
Filed under Opinions
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Indiana’s State Legislature is currently considering legislation that could have serious effects on the future of Tesla sales within that state. House Bill 1592 was introduced by Representative Ed Soliday (R), and alters existing regulations on the sales of electric cars. Specifically, the bill states that all electric car sales must go through a dealership or franchise. Currently, Tesla is the only electric car company to use direct sales and skip franchises or dealerships. Specifically, the bill states that an electric car company must stop selling in the state after six years from the date the sellers license is granted, or when total cars sales exceed 1,000 per year, whichever comes first.
Many who back the bill claim protection of Indiana’s economy from international competition as the reason for its introduction. However, there is currently no international competition for the electric car market in Indiana, which is likely playing on current fears of companies in India and China entering America’s market. Critics have said that the bill’s regulations fly in the face of the free market approach Indiana has recently taken to boost its economy and bring in corporate investments. Nonetheless, Soliday and the bill’s supporters stoodd by their claim that the intention is to protect consumers. Tesla is the only company with potential to be directly impacted by the bill.
It is still uncertain what the bill will look like when voted on, as its authors are in the process of rewriting it, following severe criticism. This is only the most recent exchange over Tesla’s business model, and HB 1592 isn’t the first piece of legislation to seemingly target Tesla. An earlier bill, introduced by Representative Kevin Mahan (R), reduced the period in which manufacturers’ sales licenses are valid to 30 months, which would put additional pressure on Tesla due to its direct sales approach. Additionally, Representative Mahan’s bill would require Tesla to set up dealerships and/or franchises after the 30 month period. Tesla has claimed that this piece of legislation is a result of General Motors’ undue influence on Indiana’s State House of Representatives.
The argument for HB 1592 and Mahan’s earlier legislation comes down to whether or not a buyer can test drive a car and/or talk to a knowledgeable dealer. Both Soliday and Mahan have said that they don’t want to push Tesla out of Indiana’s market, but that they want the company to use a standard franchise/dealership model. Soliday said, “This [bill] makes certain that we are only allowing this kind of sales with people who have demonstrated consumer service and accountability.”
Indiana is not the first state to consider laws to protect franchise sales of cars. Laws protecting automobile dealerships are on the books in Virginia, Texas, Maryland, and Arizona.
Much of the concern over HB 1592 is not directed at the current situation with Tesla, but at how it could discourage more innovative companies and sales approaches from entering Indiana’s market. In our global market, it is innovation that marks the difference between success and failure. For a state to introduce regulations that would undermine a fast growing company, especially regulations suspected of influence from competing companies, its legislators would have to put the interests of corporations before constituents. For a state such as Indiana, which has been actively trying to bring in investments from fast growing companies, this bill is irresponsible at best.