January 31, 2019

Auto franchise bill passes first committee

Andy Lyman

A bill that would allow some car manufacturers to bypass local auto dealers and sell directly to consumers in New Mexico, passed its first committee Thursday afternoon.

The Senate Public Affairs Committee approved Senate Bill 243 along party lines, with only Democratic members voting to advance the proposal.

The bill would allow companies like electric car manufacturer Tesla to open service centers and sales showrooms in the state. Current law mandates that vehicle manufacturers must sell through local, franchised dealers. The bill narrowly changes the state franchise law, and would only allow companies that do not have a franchise business model to sell in the state. Opponents of the bill who spoke during the public comment period of the hearing argued the proposal is offering a special carve out for Tesla. All of those opponents were part of the local auto dealer industry.

The hearing took only an hour with only brief comments from committee members.

Sen. Jeff Steinborn, D-Las Cruces, argued that current law is specifically protects car dealers and that the new proposal would be “pro consumer” by offering more choices.

“The current law as it stand now is, for lack of a better word, protectionist of a few companies and of a certain model of doing business,” Steinborn said.

He went on to praise local auto dealers for the jobs they provide and community investments they provide, but added that there will long be a place for local auto dealers even if Tesla enters the New Mexico business market.

“You can buy groceries online, but I still want to go to a grocery store,” Steinborn said.

Two Republicans on the committee said they were impressed by both the Tesla company and the cars it produces, but ultimately said they are worried about putting local dealerships out of business.

Sen. Candace Gould, R-Albuquerque, said she welcomes and encourages companies like Tesla to do business in New Mexico, but that she wants to protect the dealerships that have been in the state for decades.

“[Local dealers] are giving back constantly to every need in our high poverty state,” Gould said.

The public comment period was short, but supporters and opponents each drew their own lines in the sand.

New Mexico Automotive Dealers Association President Charles Henson blamed Tesla for not budging on their business model, therefore leaving customers in the lurch when they need to get their cars serviced.

“Tesla has successfully laid this on you, on us, everyone but Tesla,” Henson said. “If they followed the laws of the state of New Mexico that have been developed over decades they can have a presence in here tomorrow.”

A spokeswoman for Tesla along with a group of Tesla owners disagreed.

Brian Dear, the president of the Tesla Owners Club of New Mexico said Tesla’s business model is the way of the future.

“We have all chosen the Tesla way because we all feel it’s better and it’s a 21st century approach that’s needed in New Mexico,” Dear said.

The bill passed on a 4-3 vote and heads to the Senate Corporations and Transportation Committee next.