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California Proposition to encourage all states to allow Tesla direct sales

California Proposition to encourage all states to allow Tesla direct sales

Those states that don’t allow direct sales of Tesla vehicles hurts the California economy and is a restraint of trade. While I don’t expect the federal government to ever do anything to fix it, perhaps a different tact is to make it more expensive to sell products from a state that don’t allow reciprocal sales like direct Tesla sales. An outright vehicle ban would be difficult to get passed, even though that’s exactly what these other states like Michigan do. I suggest a 5-10% tax on all goods sold in California that are manufactured in a state that restricts sales of California goods.

California has a proposition system where the voters can make law. You need to obtain about 500,000 signatures to get a proposition in front of voters, but I think if properly framed, that may not be that hard. Part of the trick is how the collected funds are allocated. A direct approach is to provide those funds to consumers – for example a reduction in vehicle fees. Giving voters money always helps.

A more devious approach is using the money collected for children’s cancer research done in California. I’m sure there are other great suggestions on how the money could be used. The idea is to make it very painful to go against the proposition. Are you for this proposition that allows reciprocal sales between states or are you for killing kids. I purposely left out funding EV rebates or anything that would directly benefit Tesla.

Part of a successful proposition is the headline like. “Curing children’s cancer”. Now the proposition system has its own complex requirements, so that may not work. A more direct title would be “California Fair Trade Act”.

Anyway, this is just some rough ideas. I’m sure there are legal complexities to follow federal laws. If limited to vehicles, some states like Connecticut, Virginia and Arizona may not have any vehicle production. The proposition needs to be framed in a way that encourages those states to change their ways or have products produced in those state and sold to Californians taxed in California so they are at a competitive disadvantage.

The language must be clear that a California business entities must be free to sell directly to customers in another state, operate stores and provide service. No specific sales model such as a franchise is required by California manufacturers unless there are prior franchise contracts with the manufacturer.

Any law experts care to weigh in? Is this even legal to do? You want a proposition than doesn’t run into legal challenges.

carlgo2 | June 28, 2017

States cannot use tariffs against other states. Imagine the mess of tariffs that would result. It would bring interstate commerce to a halt. Either the Supreme Court will have to eventually rule against the dealer groups or the glut of Teslas all over the place will just wear down the opposition.

Mike83 | June 28, 2017

I don't visit or buy anything made in an anti-Tesla state and will continue to do so. My money goes to States that favor American made products like Tesla. Shame on those states.
If someone comes up with a bill, plan or something else you got my vote.

SO | June 28, 2017

As a Michigander, you got my vote!!!!

TeslaTap.com | June 28, 2017

@carlgo - I suspect you're right. Perhaps the nuclear option - vehicles cannot be sold in California unless the manufacturer allows direct purchase from the manufacturer. The dealer groups would freakout and spend millions to defeat it, but at least the money comes into California for advertising to defeat the proposition. Feels fair, but no way could it succeed.

There must be some other way for California to apply significant pressure to states that don't allow Tesla sales.

SO | June 28, 2017

Considering that Tesla gets parts from over 50 different suppliers and Michigan STILL blocks Tesla, there is some major influence by the dealerships.

We need to have more people in Michigan contact their reps and put pressure on them. Sadly, there are only about 750 owners in Michigan at the moment. Perhaps the Model 3 will change that.

SO | June 28, 2017

I should clarify - over 50 different suppliers in Michigan.

Should_I | June 28, 2017

First, I think the no direct sales rule is bad, and stands to prop up the awful dealerships.

That said, you are being absurd, Tesla stops themselves from selling in states by not allowing franchise dealerships.
Those states are simply sticking to crappy old rules that had nothing to do with interstate commerce, and you are proposing actual illegal regulation of interstate commerce.
How foaming at the mouth livid would you be if coal producing states began taxing California good because California is not coal friendly?.

Wildly ignorant ideas like this and I feel ignorant is being far too generous are why the founding fathers set us up as a representative democracy rather than pure democracy, though these days it isn't working any better than pure democracy would.....

SO | June 28, 2017

@should_i - 1. Good grief. You could have just said "not a good idea" and give your reasons why.

2. The "representative democracy" has not fixed the problem in Michigan and so far, no signs of doing so in the future. The "representatives " in this state are representing the money sources.

3. As far as your coal example, that would just speed up the renewable option even quicker.

4. Not much different than a tariff between countries. Republicans tout states rights. Well if a state wants to do this, so be it.

5. This has a 0.0001% chance of even happening. Just kind of fun to talk about it. So relax.

NKYTA | June 28, 2017

"Tesla stops themselves from selling in states by not allowing franchise dealerships."

Um, no. They sell online. A couple of states make it harder, but it isn't any big deal.

It is a republic, not a democracy. Sigh.

"How foaming at the mouth livid would you be if coal producing states began taxing California good because California is not coal friendly?."

I don't buy the idea that states need to tax other states. Aren't we a United States? That said, aside from stealing a lot of the water and energy from Nevada, what do we need the other states for? :-/

--- Totally tongue in check with some real facts to think about.

@Should_I, name one good thing about dealerships that would improve my sales and ownership of a Tesla Model S, if such a thing ever happened...?

Should_I | June 28, 2017

Read what the OP wrote then what I wrote.

Many of you are Tesla worshipers, NOT fans, you can not be honest, reasonable or thoughtful where Tesla is involved.

Far as dealerships, I said dealers are awful and that the no direct sales laws are there to prop them up. I also said the representative democracy isn't working well, though I think we are better off with this than pure democracy, with pure democracy voting for handouts would only get worse and drive us to bankruptcy faster.

rxlawdude | June 28, 2017

A California statute would not be constitutional if it restrains interstate commerce. This would do so, and thus won't fly.

SO | June 28, 2017

I read both. My point is you could have responded without adding the responses like "Wildly ignorant ideas like this and I feel ignorant is being far too generous...".

At least TeslaTap proposed an idea to resolve an issue. How about you propose a better one?

SO | June 28, 2017

@should_i - notice rxlawdude's response?

Tactful without personal attacks stating ignorance. Something we should all strive to do.

SamO | June 28, 2017

Michigan's ban is already an unconstitutional restraint of interstate commerce.

Here's my response from 2014:

SamO | 19 mars 2014
What the state of TX and NJ have done is violate the "dormant commerce clause" by favoring local businesses over interstate business.

Justice O'Connor has written that: "The central rationale for the rule against discrimination is to prohibit state or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent."

The Court has defined "protectionist" state legislation as "regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors." New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 273–74(1988).

Elon Musk and Tesla Motors could file suit in federal court for violation of the commerce clause, equal protection etc. They have hinted that they intend to go that route. I'm just surprised they waited as long as they have so far.

@triss1

The difference between a drug company selling directly and having a intermediary is that drug companies are not forbidden from opening pharmacies. Like in Tx and NJ.

TX and NJ are, however, favoring their local business over an out of state one. Without a single rational basis. No hearings or facts have been presented to show Tesla Motors cannot effectively sell and service their own cars. To use legal language : not a scintilla of evidence for the effectiveness of the dealership model has EVER been presented.

Legal SLAM DUNK for Tesla.

https://forums.tesla.com/fr_CH/forum/forums/any-business-law-experts-boa...

SamO | June 28, 2017

And here are the Federal Trade Commission (FTC) and Department of Justice (DOJ) weighing in:

"In a letter commenting on the Michigan proposal, FTC staff supports the movement to allow for direct sales to consumers—not only Tesla or Elio, but for any company that decides to use that business model to distribute its products. Blanket prohibitions on direct manufacturer sales to consumers are an anomaly within the larger economy. Most manufacturers and suppliers in other industries make decisions about how to design their distribution systems based on their own business considerations, responding to consumer demand. Many manufacturers choose some combination of direct sales and sales through independent retailers. Typically, no government intervention is needed to augment or alter these competitive dynamics—the market polices inefficient, unresponsive, or otherwise inadequate distribution practices on its own. If the government does intervene, it should adopt restrictions that are clearly linked to specific policy objectives that the legislature believes warrant deviation from the beneficial pressures of competition, and should be no broader than necessary to achieve those objectives."

https://www.ftc.gov/news-events/blogs/competition-matters/2015/05/direct...

"State franchise laws prohibit auto manufacturers from making sales directly to consumers. This paper advocates eliminating state bans on direct manufacturer sales in order to provide automakers with an opportunity to reduce inventories and distribution costs by better matching production with consumer preferences."

https://www.justice.gov/atr/economic-effects-state-bans-direct-manufactu...

TeslaTap.com | June 29, 2017

I really wish the FTC would enforce their mandate, but considering it didn't happen under Obama, I see zero chance under Trump.

While seems like a slam-dunk for the courts, it seems more of a crap shoot to me. And with clever delaying tactics, the dealer lobby can make it take many years before it even gets to the Supreme court.

I'm looking for ways that are under our control (i.e. California) that might actually wake these other states up. They feel free to restrict the sales of California made products, it seems we should offer some reciprocal concept. Yes, it is silly that we have to have this conversation.

Notice I didn't say ban products, but just put an additional small tax products from states that restrict sales of products from California. The tax would disappear immediately when the other state opens their borders to unrestricted California products like Tesla vehicles. That's why I call it a Fair Trade Act. Ok, I also realize it has zero chance of happening, but maybe a better idea can bubble out of the discussion.

SamO | June 29, 2017

Tesla has a very strong case and it is progressing perfectly in Michigan. The judge has ordered discovery into how the local manufacturers are preventing California producer Tesla from selling their cars. I think it will be illuminating.

If Tesla wins in Michigan then the case is non-binding precedent when they sue Texas.

But Tesla would rather lead a horse to water than have to fire a warning shot.

Yes this takes time, which is why I recommended suing in 2014 ;-)

brando | June 29, 2017

WHAT CALIFORNIA SHOULD DO

Allow out of state buyers to come to Tesla factory to pick up their Tesla and NOT have to pay California sales taxes.
Help tourism and Tesla at the same time.

down side? Tesla factory tours every day would be full?

carlgo2 | June 29, 2017

@brando: this is a great idea. Not only would they get the car, but there could be perks to encourage the buyer to spend extended time in the state as well. Coupons or something. Unlimited free charging for two weeks, not counting against the limits.

Or set up one "dealer" in CA and all out of state buyers would go through that! Just to piss off the Michigan dealers...

Factory tours could be on trolly trains zipping around with a canned narrative. Fake coal powered just for laughs.

TeslaTap.com | June 29, 2017

@brando - "Allow out of state buyers to come to Tesla factory and NOT have to pay California sales taxes."

The CA legislature last year had such a bill to fix this. It died - not sure why. I suspect the dealer associations, but really don't know.

rxlawdude | June 29, 2017

The bottom line is no state may constitutionally impose tariffs upon other states, especially over a spat about a consumer product. So some other way to cajole would be the way to go.

If Tesla wants to franchise ONE Michigan "dealer" (nudge nudge, wink wink), the problem is solved. Amazing what one can do with shell corporations. :-)

Homebrook | June 29, 2017

I deplore that so many, like the OP, do not know or understand the Constitution. I guess it is to be expected since it seems our public school system seems to have an overt purpose of graduating students in this state. With so many who fail to appreciate the rationale and purpose of our system of government we are doomed as a country.

rxlawdude | June 29, 2017

Oy vey. Whenever I see someone blaming the public school system (and note that these are locally controlled, so "school system" is highly dependent on where you're talking about), it's generally someone that is generally anti-government.

I will point out that the worst public schools are in the Reddest states and leave it at that for one to figure if public school problems are monolithic, or limited to areas with, um, less IQ on the School Boards.

Homebrook | June 29, 2017

@rxlawdude There are none so blind as those that will not see. The worst schools are all in large cities, all governed for generations by liberals. You are deluding yourself. But I understand.
I am not anti-government, only against a government out-of-control and exceeding its legitimate role, which is what the OP is advocating.

bigd | June 29, 2017

Of course a simpleton said "worst public schools are in the Reddest states" . But if you research it (just a little) you realize that they may be in "red states" but they are controlled by democrats. For example, you have a state like Missouri. Even though MO. is a "red" state, St. Louis, MO is very much blue. It is also a cesspool :-)
https://www.neighborhoodscout.com/blog/top-100-worst-schools

rxlawdude | June 29, 2017

@bigd, I can always rely on your latent racism to pop up for the world to see. Don't even try to back out of your dog whistle statement above. Spending per pupil is undeniably less in the Red states.

@Homebrook, you're not quite as racist as the little D. And how many Red cities can you list with public schools that meet your high standards? Examples, please.

bigd | June 29, 2017

"latent racism" A liberal moron wants to use the race card. Are we surprised. I stand by my statement and it is backed up by facts (something liberal morons don't understand :-).

milesbb | June 29, 2017

It has been suggested before that Tesla Open a sales and service just across the river from Detroit in Windsor Canada. Very convenient for folks in the Detroit area. Michigan jobs lost to Canada. Seems like a reasonable response to Michigan laws.

brando | June 30, 2017

Get California to change the law and not charge sales tax for out of state buyers.
simple

TeslaTap.com | June 30, 2017

@brando - While many of us would love to do that, it doesn't solve the issue of other states banning the sale and service of Teslas.

@Homebrook "I deplore that so many, like the OP, do not know or understand the Constitution."

Actually, I have a reasonable understanding, but must be honest that I haven't memorized it or even read in in the last 40+ years. That said, some states seem to already be violating the constitution by blocking interstate commerce of Tesla vehicle sales. Since these states have lawmakers that perhaps were bought off by the dealer association, I'm looking for another way to perhaps fix the error of their ways. Since the federal government is unwilling or unable to enforce the laws, perhaps two wrong laws (in different states) might make a right without federal involvement. Ideally it should all go to the Supreme court, but I don't expect that to happen for many years if ever.

TeslaTap.com | June 30, 2017

@Homebrook - With your constitutional expertise - what do you suggest be done to fix states that do not allow Tesla sales? The entire purpose of this thread was to get the discussion going in the hopes of some clever good ideas might appear.

Homebrook | June 30, 2017

@rxlawdude There aren't any red cities, at least I don't know of any. As a rule most conservatives like to have more control over their lives than can be had in a city.

Homebrook | June 30, 2017

@TeslaTap As I've said before in other discussions I believe the best approach is to give them enough rope to hang themselves. Tesla is winning the argument. States preventing Tesla direct sales will change when their populations demand it. That's what freedom is. Forcing change only postpones change.
There is a saying, "A man convinced against his will is of the same opinion still."
Let Tesla make it's convincing case then change will happen as people and states make the change for their own reasons in their own time.

SO | July 1, 2017

@homebrook - it has been about 3 years since our "wonderful" governor in Michigan signed the strengthened laws against direct sales. At the time, he stated that they will have to review it in the future. Three years later....no change.

I spoke to several reps and senators in Lansing. They pretty much all privately side with Tesla but publicly many do not due to the unions and dealerships they represent. My senator stated that honestly, Tesla isn't even on their radar for the foreseeable future to fix.

Now, there is a lawsuit going on in Michigan to try and correct this. But if this fails...then what do you propose?