On Monday March 2, the Utah House failed to pass HB 394, which would have amended the New Vehicle Franchise Act to allow online sales by car manufacturers. Under current law, manufacturers are not allowed to engage in direct sales and instead have to go through a third party franchise dealership.
This is bad news for Tesla Motors and any Utah residents who want to purchase a Tesla. The company does not use dealerships to sell their award winning line of fully electric luxury cars. Instead, they use an online sales model and ship their cars directly to buyers. Tesla planned on opening a showroom in Salt Lake Ctiy where prospective customers could test drive cars before making their final purchase.
But all that has been put on hold since the Utah Attorney General’s office denied Tesla a license to sell in the state. Now, with the failure of HB 394 to pass the House, it looks as though purchasing a new Tesla in Utah will remain illegal for the time being.
For a state that has tried to build a reputation as a pro-business environment, Utah is still plagued by nonsensical laws such as the New Vehicle Franchise Act. But when examined more closely, it becomes apparent that many of these seemingly illogical laws were in fact created with a specific purpose—the protection of existing businesses from new and often more innovative competition. I refer to this corporatist-legislative complex as “crony capitalism” as it stifles economic progress.
Don’t take this to mean that I am arguing for elimination of all regulation. Only the unrepentant libertarian would reject the notion that government has done much to make America a safe, healthy, and technologically advanced nation. But when we allow industries to push laws that smother competition by barring the entry of new companies into a market, then regulation begins to promote monopoly.
Representative Kim Coleman (R-West Valley) sponsored HB 394 believing that Utah would lose both jobs and tax revenue if Tesla sales continued to be banned in the State. “Someone who wants to buy a Tesla will buy a Tesla,” Coleman said. “They’ll just buy it in another state… We’ve created a black market for Teslas.”
“It (HB 394) really is one of several bills that seek to resolve the issues related to the ability and desire for new companies to do things differently… technology has enabled us to think out of the box, disrupting traditional logistics, applying innovation, improving price and consumer experiences.”
Then Coleman goes on to explain how auto retailers have used their influence to stifle retail models that don’t use third party franchises: “As the number of franchisers grew in the state, their presence in the community and impact on the economy led them to gain strong political influence. This influence was then used to create an extensive set of laws called the ‘New Auto Dealer Franchise’ that limits in great detail what a manufacturer can do to a franchise… but this act never saw the Internet coming.”
Unfortunately for us consumers, although we have the Internet we will not be able to use it to purchase a Tesla in Utah in the foreseeable future. This is because car dealerships don’t want us to purchase online. Just as Netflix killed Blockbuster, Tesla’s direct sales model might kill the car dealership—but that doesn’t mean it should be illegal.
I understand that auto retailers feel threatened by a company that wants to bypass dealerships and sell directly to customers. But innovation should not be dismissed solely on the grounds that other, outdated models might be threatened. When businesses are allowed to exert undue political influence on the creation of regulation, bad policy emerges in the form of laws like the New Vehicle Franchise Act.
If we’re lucky, maybe next year it will be legal to buy a new Tesla in Utah.
Marcos Camargo grew up in the rural heartland of Oregon. In 2003 he moved to Utah to find his place in the world and fell in love with the deserts of America’s arid country. An avid student of history and politics, he has a great interest in Western and Native American history and culture. He spends his free time exploring the wilderness of the Southwest.