Tesla wins fight with GM in Indiana, but there's more to come

February 29, 2016

Last year, a heated debate over civil rights thrust Indiana into the bright, unflattering glare of the media spotlight. The issue still lingers, but a new controversy could be taking its place--one involving Tesla Motors and General Motors

Unlike some other states, Indiana allows Tesla to sell its all-electric vehicles directly to consumers through company-owned showrooms. State Representative Kevin Mahan introduced a bill to curtail that practice, limiting direct-sales licenses for automakers to a period of 30 months. After such licenses expired, there'd be no possibility of renewal. 

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Mahan's bill passed the Indiana House by a significant margin, and for a while, Tesla's future in Indiana looked grim. If the bill passed the Senate, and if Governor Pence signed it, Tesla would have to shut down its Indiana showrooms by the end of July. 

Luckily for Tesla, a Senate committee kicked the bill to "summer study", effectively tabling it for the remainder of the session. In a statement, Tesla said, "We look forward to participating in the upcoming summer study process where we will be able to fully air the issues of vehicle sales and consumer choice in an open and public forum."

DAVID VS. GOLIATH?

One company that was less-than-pleased by the committee's decision was General Motors. (FWIW, Tesla believes that GM actually authored Mahan's bill.) 

Given GM's own efforts to create something like direct sales, you might think that GM would applaud Tesla's efforts to undo franchise laws. But apparently, GM is more concerned about Tesla's growing popularity and the promise of its likely inexpensive Model 3, which could eat into sales of GM's own electric vehicles like the Chevrolet Bolt. In other words, GM appears to have come around to the idea of Tesla as a competitor. 

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After the bill was tabled, GM said, in so many words, "This ain't over":

"GM is very pleased that we were able to elevate the issue of disparity impacting our dealer partners in Indiana, that this received as much attention as it did, and that this issue advanced as far as it did. We appreciate the Indiana legislature for taking this on, debating, and helping raise the profile of this important issue, which demonstrates the inequity of different competitors having different rules in the marketplace."

HOW WILL IT END?

Tesla has won the battle in Indiana, but its prospects for winning the war are much hazier. Mahan's bill easily passed the House, and given GM's influence in Indiana, it would be surprising if the Senate acted all that differently. 

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If this were a different state or a different year, Tesla might have a chance of gaining support from incoming legislators after the election cycle wraps up. But by all accounts, the balance of power in Indiana isn't likely to change much. 

The best Tesla may be able to do is to stall Mahan's bill indefinitely--or, barring that, amend it so that it creates opportunities for Tesla to operate limited numbers of outlets in the state, as we've seen in Maryland and elsewhere. It's unlikely that GM and others (including the Indiana auto dealer lobby) would support such a compromise when they have Tesla over a barrel, but nothing's over 'til it's over.

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