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A new Tesla dealership that was scheduled for its grand opening last week is in limbo after the attorney general's office denied Tesla a license and the Utah House on Monday defeated an effort to change the law.
"Certainly it puts a damper on our plans," said Jim Chen, vice president of regulatory affairs for Tesla Motors. "At the end of this day, it's not good. We'll look at what the impacts are. It does raise impediments to us wanting to invest in Utah."
HB394, sponsored by Rep. Kim Coleman, R-West Jordan, would have changed the current law which prohibits manufacturers from owning a dealership in the state. Currently they have to go through third-party franchisees.
Tesla engages in direct, online sales, but sought to open a showroom in South Salt Lake where customers could test-drive the cars.
Coleman said if the House didn't change the law, the state would lose out on the tax revenue and the jobs that would come with the Tesla dealership the first of its kind in the state and would drive consumers elsewhere.
"Someone who wants to buy a Tesla will buy a Tesla, they'll just buy it in another state. … It should not be illegal to purchase a Tesla automobile in Utah," Coleman said. "We've created a black market for Teslas."
The bill would have created a new class of "online dealer," which would cover Tesla's online-sales model, allowing manufacturers of cars to sell them in the state without going through a third-party dealer. Currently such direct sales are not allowed.
Many of the laws that apply to existing dealerships like the lemon law and required bonds would have still applied.
Rep. Richard Cunningham, R-South Jordan, said the bill was tailor-made for Tesla and would "back over" the existing dealerships who have invested millions in their businesses.
"I believe this is happening too fast," he said. "This bill came out of nowhere because a business came into town and put up a business and now needs to be in business and now we're running into direct competition with our other … dealers who are out there."
The rejection of HB394 on a 32-41 vote appears to leave the Tesla showroom which already has gleaming new cars in place in a state of limbo.
"We are looking at all our other options," Chen said.
House Majority Whip Francis Gibson, R-Mapleton, took a shot at the auto dealers who fought to scuttle the Tesla bill, suggesting they'd enjoyed preferential treatment by state laws which prevent competing dealers from opening within 15 miles and force businesses to close on Sundays for years.
"Is it possible that the golden freeway the Legislature created for these businesses now has a pothole?" Gibson asked. "We're not protecting them. We're allowing for something new and unique to come in."
Coleman said the bill was a compromise between Tesla and the auto dealers, but acknowledged the manufacturers didn't participate in the talks and were not supportive of the measure.
Several lawmakers suggested the bill was coming out too late in the session and suggested that Coleman come back to the Legislature with a solution next year.