REUTERS/Mark Blinch

North Carolina could ban Tesla from selling its cars if a bill designed to eliminate "unfair competition" becomes law.

The proposed rule, unanimously approved by the state's Senate Commerce Committee last week, would make it illegal for any automaker to bypass dealerships and sell cars directly to consumers.

As Will Oremus at Slate points out, Tesla is the only American automaker whose business model is based on selling cars directly to consumers.

The bill is sponsored by Republican Sen. Tom Apodaco, and supported by the NC Automobile Dealers Association, according to Raleigh's News & Observer.

Tesla's Argument

In an October blog post, Tesla CEO Elon Musk laid out his reasoning for skirting the dealer model and putting the time and money into building a network of Tesla stores.

By the time most customers go to a local dealer, he wrote, they have made up their mind to buy the same kind of car they had before. If Tesla could only sell cars in dealerships, it would lose the chance to educate consumers about its new kind of car.

On top of that, Musk argued, since dealers sell primarily gasoline-powered cars, they have a reason not to push Teslas:

Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business.

An Ongoing Fight

The North Carolina bill is the latest salvo in a fight that has been going on for a long time. By October 2012, Tesla was facing lawsuits in New York, Massachusetts, Illinois, and Oregon, accused of violating state laws that protect dealerships.

Tesla has made progress. In January, a judge threw out the Massachusetts suit, according to The Car Connection. A New York judge did the same in April. A bill in Minnesota to ban Tesla stores was defeated in March.

Last month, Musk took the offensive, traveling to Texas to lobby for a bill that would allow it to sells cars directly to buyers.

Tesla did not immediately respond to a request for comment from Business Insider, and Musk has been surprisingly quiet on Twitter.

Vice President of Corporate and Business Development Diarmuid O'Connell told Slate "he’s hopeful that the state legislature will amend the bill so that it doesn’t prohibit Tesla from doing business there."

Since the bill would impact only Tesla (all the large automakers already sell cars through dealers), it's unlikely the bill will have such an amendment.

Here's the strong language and free market argument Musk used to rally supporters in Texas, revealed in an April 2 email obtained by Forbes:

It is crazy that Texas, which prides itself on individual freedom, has the most restrictive laws in the country protecting the big auto dealer groups from competition. If the people of Texas knew how bad this was, they would be up in arms, because they are getting ripped off by the auto dealers as a result (not saying they are all bad – there a few good ones, but many are extremely heinous). We just need to get the word out before these guys are able to pull a fast one on us

For everyone in Texas that ever got screwed by an auto dealer, this is your opportunity for payback.

Now that the North Carolina bill has been approved by the Senate Commerce Committee, it will have to pass the full Senate, then the full House, and be signed into law by the governor.





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