A new bill in Indiana would compel Tesla to close down its operations by 2019

Published By: Eunice Gettys on January 30, 2017 07:31 am EST

In February 2016, Tesla Motors Inc (NASDAQ:TSLA) successfully fought back the scheme devised by General Motors and car dealers in Indiana to end its direct-sales method in the state. The Indiana Senate Commerce and Technology Committee moved the controversial anti-Tesla bill to a “summer study committee” and allowed the company to continue its operations for another year.

Fast-forward 11-months, Indy Star reported last week that a House Bill 1592 has been filed by Rep. Ed Soliday (R-Valparaiso) that would ban manufacturers of battery-powered vehicles from selling directly to customers. Although the bill does not mention Tesla, the California based-company sees itself in the proposed legislation and is planning to take action like last year.

The bill would affect all manufacturers that have sold vehicles in Indiana since July 2015 and never gone through franchise dealers to sell their vehicles. They would be required to stop direct sales either six years after their dealers’ license was approved or after annual sales exceed 1,000 units.

Interestingly, there is only one company that would feel the heat of this proposal – Tesla. The company was granted its dealer license in December 2013 and would require closing down its Indianapolis store in the state by 2019.

It is well known that Automobile Association of Indiana and lawmakers, as well as car manufacturers like GM and Ford, want to end Tesla’s presence in Indiana and other states as it is the only car manufacturer that uses direct sales model. They argue that Tesla’s approach to sell vehicles trespasses franchise laws and makes the playing ground unfair.

Tesla’s direct sales hurdles are not new to us but with its upcoming mass-market vehicle – the Model 3 – the matter is intensifying. The vehicle would lure hundreds of thousands of buyers per year that would not only create problems for car dealers but also GM and Ford because the Model 3 will compete directly or indirectly against some of their vehicles.

A car dealer also told Indy Star that he fears the Model 3 would create issues for middle-class buyers in case of vehicle breakdowns due to a lack of Tesla service centers in the state. The company’s first Indiana service center was scheduled to open in December in Castleton, but its launch has been reportedly pushed back by four months to April 2017.

Additionally, the car dealers fear that other manufacturers would follow in Tesla’s footsteps and harm their livelihood. The bill is set for its first hearing on February 1 in the House Roads and Transportation Committee chaired by Mr. Soliday

Tesla, in response, has created a website ‘freemarketindiana.com,’ expecting its supporters to bombard the lawmakers like they did last year.