This State Grapples with Tesla Direct Sales—and the Elon Musk Factor

• Legislation supporting direct sales is introduced in Connecticut but generally fails, often described as a “Tesla bill,” though other manufacturers (Lucid and Rivian, to name two) would presumably benefit as well.

• But a Tesla store opened in the state in 2023, located at the Mohegan Sun casino in Uncasville. Tesla buyers there pay state sales tax, the same as they would if they made a purchase at a regular car dealer.

• Direct sales laws are vociferously opposed by car dealers and their lobbying associations on the state and federal level. But the dealers argue that, nonetheless, they’re doing their bit for electrification.

It’s an annual ritual in Connecticut: Legislators introduce bills to allow direct sales of electric vehicles in the state, and every year the bill dies. The tradition goes way back.

According to a report from the state Office of Legislative Research, “The proposal has been voted on by a full chamber (the House) only once (2015), although [it] has made it out of committee most years since 2015.”

The legislation is generally described as a “Tesla bill,” though other manufacturers (Lucid and Rivian, to name two) would presumably benefit as well. Frustrated, Tesla has pursued an alternative strategy in Connecticut, New Mexico and New York—with the consent of the tribes, Tesla has located its sales showrooms on Native American land, beyond the state’s jurisdiction.

“It appears that state car dealer licensing laws do not apply on tribal land,” said that Connecticut legislative report.

New Mexico was first, with a Tesla store opening at the Nambé Pueblo in 2021, and it was followed by a second at the Pueblo of Santa Ana (opened in June 2023). In Connecticut, the store opened in 2023 and is located at the Mohegan Sun casino in Uncasville. Tesla buyers there pay state sales tax, the same as they would if they made a purchase at a regular car dealer.

“We’re always looking for good partners that enhance our brand,” said Jeff Hamilton, president and general manager of Mohegan Sun. “We started talking to Tesla three or four years ago. There’s a lot of brand alignment—protection of the environment is important to us.”

Hamilton said that by the end of the summer Mohegan Sun will have up to 100 charging stations in its four parking garages, giving it one of the larger concentrations in the state.

“The store is getting a lot of traffic, and Tesla says it’s happy with the sales,” Hamilton said. “Our customers love the store.” A second store from Rivian, Lucid or another EV brand is not an option. “We wouldn’t want to add a competitor,” Hamilton said. The Tesla retail location is a storefront in the shopping concourse. Tesla did not return messages left there.

The Oneida Indian Nation is working with Tesla to host a store off the New York State Thruway that will open next year. According to a statement, “With the ability to purchase and receive service for EVs on Oneida homelands in the heart of upstate, the Nation’s new initiative will dramatically expand access for more than six million upstate New Yorkers—one third of the state’s population.”

It's actually unclear if a direct sales bill could pass in the state legislature today. One reason: Elon Musk, Tesla’s CEO. “Since Elon Musk started to align himself with extreme authoritarian values, some Democrats who were for direct sales have dropped off,” said State Representative Aimee Berger-Girvalo (D-Ridgefield). “There’s less support because association with Elon is a huge non-starter for many Democrats. I know I don’t want to give a penny to Elon Musk.”

The vice chairman of the Transportation Committee, Kathy Kennedy (R-Milford, Orange), said a vote on direct sales remains a “tough call on my Republican minority side. There’s still opposition.” Berger-Girvalo also said the move to Mohegan Sun was “a shrewd business move, and a clever work-around. It’s good for the tribes, too. I’m surprised by how surprised we all were by it.”

A 2021 poll by the Electric Vehicle Club of Connecticut showed that 83% of residents supported such sales, and only 17% opposed. “I think that direct sale is pro-consumer, accelerates EV adoption, creates EV-related jobs, and consumers clearly want it,” said Barry Kresch, president of the club.

It’s unclear what a 2024 poll would show. Kresch, a Tesla owner, added, “Elon Musk’s erratic behavior and Twitter trolling isn’t helping his and our cause, but I’d say most of the legacy OEMs have a fair weather commitment to transitioning to EVs. GM has done more flip-flops than any politician.”

Direct sales laws are vociferously opposed by car dealers and their lobbying associations on the state and federal level. But the dealers argue that, nonetheless, they’re doing their bit for electrification.

“Franchised dealers have invested $6 billion in EV inventory as of 2024, and in fact have purchased more EVs to date than anyone else,” said the National Automobile Dealers Association. “The share of electric vehicles sold by franchised dealers is far outpacing the share sold by any other sales method, including direct manufacturer sales.”

But the dealers remain pretty skeptical about EVs. “The charging infrastructure is not ready, the current incentives are not sufficient, and high EV prices will price out millions of consumers—particularly low-income Americans—from the new car market,” said Gary Gilchrist, NADA’s 2024 chairman.

There’s no question that dealers are a powerful force. “The dealers have been successful largely because of their political clout in local elections, where they make significant campaign contributions,” said the libertarian Cato Institute. “Consumer protection and public safety have nothing to do with those restrictions; they are protectionism for car dealers, pure and simple.”

The history is interesting. Dealers in the 1930s and ‘40s claimed with some justification that automakers were too powerful, forcing them to accept unwanted cars and able to terminate the relationship without cause.

While dealers were only modestly successful on the federal level, they succeeded spectacularly with protections in the states. The provisions that prohibit manufacturers from selling their cars directly to consumers were a major factor in shaping the industry as we know it—and made many dealer groups spectacularly rich.

Despite the dealers, Tesla and its allies have won victories in state legislatures. The map of states allowing or prohibiting direct sales is constantly in flux, but a recent count finds 21 states (plus Washington, DC) allowing direct sales, 18 prohibiting it, and 11 with limited access. The provisions vary considerably by state.

A solid line of red states from Texas up to North Dakota is in the “no” column. But the direct sales issue is by no means strictly partisan: States that allow such sales, at least in part, include conservative-leaning Florida, Mississippi, Missouri, Utah, Wyoming, Alaska, and Idaho.

In Connecticut, the opposition is declining to stand up and be counted on this hot-button issue. Without a vote, lawmakers can avoid a possible demerit from green groups like the Connecticut League of Conservation Voters.

“I introduced a bill in 2023 but it never came up for a vote,” said Keith Denning (D-Wilton), who’s retiring. “If state residents knew about bills being killed in back-door dealings, they’d be a bit more upset about it... I’m totally disgusted about this, and it’s a reason I’m not running for re-election. I’m appalled a democracy is run this way.”

Said Jennifer Leeper (D-Fairfield): “It makes no sense that we don’t allow Tesla to sell directly. There’s no evidence that doing so would negatively affect the existing dealers. One way that this works during short sessions is members threaten to filibuster and run out the clock if certain bills are brought up.”

Until the Mohegan Sun store opened, Connecticut residents had to pick up their Teslas across state lines in New York or Massachusetts. The state sales tax revenue is returned to Connecticut in those cases, but full dealerships bring many other economic benefits to their local communities.

State Senator Tony Hwang (R-Fairfield County) is the ranking member of the Transportation Committee in the Democrat-controlled body. His opposition to direct sales is widely known, but he declined to talk to Autoweek about it. Asked about the most recent bill at a legislative forum, he said, “It just never came up for a vote.”

The state’s version of NADA, the Connecticut Automotive Retailers Association (CARA), sided with the Department of Motor Vehicles in a bitter battle against Tesla’s location of a small showroom on the main shopping street in upscale Greenwich, with opponents claiming the automaker was conducting sales from the location. Tesla claimed at the time that CARA sent in “secret shoppers” to probe for sales intention.

Jeff Aiosa, owner of Mercedes-Benz of New London and a CARA executive board member, said Tesla’s outlet at Mohegan Sun is “an end-run around our franchise laws—and a back-door way of selling direct.”

Aiosa said Tesla’s location resembles online direct sales more than it does a brick-and-mortar dealership. “Consumers see the value, now more than ever, of our brick-and-mortar stores,” he said. “We are very philanthropic and give back to our communities.”

A Superior Court ruling went against Tesla’s Greenwich storefront, but the automaker appealed the case to the state Supreme Court. Tesla closed the storefront in 2019 and then withdrew its Supreme Court appeal. Since 2020, Tesla has a service center and a gallery where cars can be leased (but not directly purchased) in Milford, Connecticut.

In the end, Tesla’s Connecticut fortunes are probably not hurting all that much because of the ongoing direct sales ban. Consumers can now lease or buy Teslas in the state and take delivery of them in Connecticut, albeit perhaps not in the most convenient places. The biggest store gap nationally is in broad sections in the middle of the country.

Other EV makers, although not as closely involved in the fight as Tesla, are following the direct sales proceedings. A spokesman for Lucid said, “For years, Lucid has attempted to work in good faith to ensure all consumers have the vehicle choices they demand and deserve. Our company is committed to accelerating humanity's transition to sustainable transportation, and we will continue to exercise all available options, including litigation, to ensure drivers in every state have the opportunity to experience one of the world’s most compelling, energy efficient, and sustainable vehicles.”

In 2022, Lucid took legal action against the Texas DMV, claiming the state’s ban on direct sales is “irrational in the extreme: It hurts competition, reduces consumer choice, and drives up costs and inconvenience, with no countervailing benefit whatsoever.”

Do you support dealers who insist on a brick-and-mortar showroom model, or do you favor direct online sales? Please comment below.