Full Disclosure: I am a Tesla stockholder, have a reservation for upcoming Tesla Model 3, and am an Elon Musk fanboy. I have no inside knowledge of Tesla’s plans or desires in New Mexico and anything I state is speculation based on publicly available information. State laws change constantly so references to other states’ laws may be outdated.
Section 57-16-3 of the New Mexico Statutes defines what is allowed and prohibited in relation to dealer franchises and car manufacturers. Part V. states that it is unlawful for any manufacturer, distributor or representative to:
be licensed as a dealer or perform warranty or other service or own an interest, directly or indirectly, in a person licensed as a dealer or performing warranty or other service; provided that a manufacturer or distributor may own a person licensed as a dealer for a reasonable time in order to dispose of an interest acquired as a secured party or as part of a dealer development program;
This section prevents car manufactures from selling directly to consumers or servicing vehicles. Tesla is the most well know company using a direct to consumer approach for their vehicles for sales and service. In practice this law means anyone who wants to buy a Tesla must do so online and have it delivered and go to Colorado if they want a test drive. It also means if they want their Tesla serviced it must be towed or brought to Colorado.
This law puts undo hardship on New Mexicans who want to own a Tesla vehicle. It is also placing a negative perception on New Mexico, preventing the collection of GRT taxes, and we are losing out on jobs. This law should be modified to fix these issues.
Benefits of Changing the Law
As stated above, this law simply hurts New Mexicans who want to own Teslas or other vehicles by manufactures following Tesla’s direct to consumer approach. While the number of New Mexican’s that own a Tesla is small now, with the future release of the Model 3 the numbers will grow.
New Mexico and Albuquerque have invested a lot of money, time and effort into the startup, tech and entrepreneur community. The goal is to increase the amount of local startups, but there is no denying that it cannot all be done locally and we want to attract money, talent and companies to New Mexico. Tesla is a popular vehicle with the demographics we most want to attract and while this probably wouldn’t be a deciding factor is someone coming to New Mexico, it certainly could hurt those on the fence. Can you imagine considering taking a job in another state and then learning that you would have to tow your vehicle to another state if it needs service? How much better would the opportunity need to be in order to take that job?
Some states, like those on the east coast and Texas can get away with laws like this and have it notched up to politics. New Mexico doesn’t have that luxury. Laws like this reinforce existing perception of New Mexico being backwards and corrupt. Having a legislature and government that updates these laws, like with the ride sharing laws passed this year, help show that we are a state that is responsive to disruptive technologies and willing to work with companies that are changing the paradigm. This can only help attract new companies and entrepreneurs to New Mexico.
Given the labs, our history, and our environment, New Mexico should be looked at as a leader in high tech development, solar technology and renewables. I hope one day this is the prevailing perception and reputation of New Mexico. Supporting companies like Tesla will only help (especially if we are one of the earlier states and not a late follower).
More Jobs and Taxes
For several years now Tesla has had a service center marked as “coming soon” to Albuquerque. This law is obviously preventing them from building the service center and it probably won’t be long before service center is built if this law is changed. A simple law change will bring in permanent jobs at the service center and construction jobs building it. It will also increase property taxes and GRT taxes that are currently being lost to Colorado at a time when the are desperately needed.
Tesla hasn’t pressed the issue here, likely because it is a small market, but in addition to the service center one could imagine Tesla building stores in Albuquerque, Santa Fe and Las Cruces, especially with Arizona and Texas currently banning sales. If we act now, instead of losing money to Colorado, we could gaining from people coming in from Arizona and Texas.
Relations with Tesla
Tesla has looked at New Mexico in the past for their factories. Most recently with the Gigafactory, but also back in 2007 for their original factory before they eventually went with the Fremont factory.
This gives reason to believe that New Mexico will continue to be considered in the future. In addition to future battery or vehicle production, SolarCity will be combined with Tesla and may need additional factories. Elon Musk’s other company, Space X, will need construction facilities for the many components that go into building their new rockets and spaceship before final assembly in Florida. With our space history, attempts at building a space industry, and Musk’s previous interest in New Mexico it is easy to imagine New Mexico being considered for future development.
It is likely that his law will have little affect on future decisions, with those decisions being primarily financial. However, if we are one of the supportive states for Tesla it certainly can’t hurt our chances and there would be one potential hurdle off the table. Can you imagine winning a factory or other key industry over a state like Texas?
How to change to law
The simples, fairest and most effective way would be to strike part V from the law. This would allow Tesla and other companies to enter the New Mexico market.
At the very least we should strike the ‘service center’ provision to the law. Not being able to buy a vehicle in state is a one time annoyance, but not being able to service it is a consistent issue for owners.
We could also do what other states, such as Ohio, Connecticut and Maryland have done and carve out a fairly targeted exception towards Tesla. They allow electric car companies without a physical presence to open up to three dealerships (or some other number depending in the state).