Tesla Focuses on Connecticut's Budget Woes in Latest Bid for Direct Sales

  • Carmaker makes third run at Connecticut direct sales approval
  • Republican state senator sees ‘more momentum this year’

Maybe all that’s standing between Tesla Inc. and the driveways of some of America’s wealthiest residents is a little financial disarray.

The electric-car maker is taking a third crack in as many years at getting approval to sell directly to Connecticut consumers, drumming up support for a bill legislators could vote on as early as this week. This time around, Tesla has emphasized the sorry state of Connecticut’s economy, which is plagued by bond-rating downgrades and the departure of high-paying finance jobs and companies including General Electric Co. and StubHub Inc.

Lawmakers “can vote to cede jobs to surrounding states, or choose a path that helps the state close its budget gap and build upon its history as a place for innovation and business growth,” Chief Executive Officer Elon Musk wrote in a letter published Friday in the Hartford Courant. “Please encourage your legislators to allow Tesla to create jobs and invest in a cleaner, sustainable energy future for Connecticut.”

Read Musk's letter on direct sales in Connecticut here

At stake for Musk is the ability to open stores closer to some of America’s richest households in towns including Greenwich, Darien and New Canaan. Customers who’ve purchased Teslas thus far have typically bought online and driven to neighboring New York to complete the transaction, allowing the Empire State to collect the bulk of the sales-tax revenue. Connecticut Governor Dannel Malloy now needs all the tax collections he can get, with the state staring down a $2.3 billion budget deficit.

“This is a no-brainer,” Art Linares, a Republican state senator and Model S sedan owner who’s championing the bill, said in a phone interview. “There’s a lot more momentum this year.”

Musk has disrupted the age-old model of selling cars through franchised retailers and has overcome traditional dealers in most of the battles waged over his strategy. Connecticut is one of just four left in the U.S. that still bans Tesla from selling directly to consumers. The others are Texas, Michigan and West Virginia. Tesla sued Michigan in federal court in September, saying it was unable to get a fair hearing by state officials.

Downgrades, Departures

Connecticut is reeling after S&P Global Ratings, Moody’s Investors Service and Fitch Ratings each cut their grades on the state this month, as plummeting income-tax collections expand its budget shortfall. Only Illinois and New Jersey are rated lower.

GE decided last year to relocate its corporate headquarters to Boston. StubHub is transferring a 250-person call center to Utah and insurer Aetna Inc. is considering a move to Boston, the Hartford Courant has reported.

“At a time when other companies are leaving the state, Tesla simply wants to do business in Connecticut,” the company says on an advocacy website it’s set up this year. Tesla says each of its stores creates roughly 25 new jobs.

The Connecticut bill sets no limit on the number of stores Palo Alto, California-based Tesla could open. The company has an informational gallery in Greenwich and a service center in Milford. Its supercharger station in Milford is now the largest on the East Coast.

Model 3

Musk is building up Tesla’s sales and service presence as the company prepares to launch the Model 3, which is expected to cost about half as much as the cheapest Model S sedan or Model X crossover, this summer.

“There are a lot of people who put down a deposit for a Model 3 and they don’t understand why there aren’t any stores in the state,” Linares said.

The Connecticut Automotive Retailers Association opposes the bill, arguing on its website that it would “give special treatment to an out-of-state corporation at the expense of the 270 local auto dealerships and our 14,000 hard-working employees.”

“Mr. Musk should give the franchise system a shot,” James Fleming, the association’s president, said in a phone interview. “We’d be happy to help sell Tesla cars here in Connecticut.”

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(Adds reference to Michigan lawsuit in sixth paragraph. An earlier version of this story corrected the third paragraph to say Friday.)
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