House Bill 2123 is strongly opposed by traditional auto manufacturers and dealers, who argue that Tesla wants to operate outside the normal rules that require manufacturers to sell cars through dealers. They say allowing sales directly from an automaker could leave consumers in the lurch if the company goes belly-up.
"Tesla is asking for a special exemption for them to have a separate set of rules for their electric cars," Mike Gardner, a lobbyist for the Alliance of Automobile Manufacturers, told the Senate Commerce, Energy and Military Committee. "What we're opposed to is allowing one of our competitors to go around the dealer network and sell directly to consumers. We think we should all be treated the same."
But Rep. Warren Petersen, the bill's sponsor, said dealers and manufacturers are trying to stifle innovation.
"This is a great opportunity for us to send a message that we welcome business and we welcome Tesla here to Arizona," said Petersen, R-Gilbert. "We shouldn't deny our consumers from being able to purchase a product if they want."
Tesla Motors Inc. has a showroom in Scottsdale but can't sell cars there under a 2000 law. Instead, it takes orders online.
Arizona is also one of four states vying for a new lithium-ion battery factory that would supply the company's Fremont, Calif.
Despite Arizona being in the running for the plant, lawmakers said the bill was unrelated.
"I don't want to send a message, even though this is not a quid pro quo," said Sen. Bob Worsley, R-Mesa. "I want the message from our state to be that we welcome the opportunity to work with large successful companies with this size market cap."
A second bill approved by the committee expands a $3,000-per-worker tax credit program for companies that add jobs by removing a requirement that the employees be continuously employed to get the credit for three years. House Bill 2272 would allow the company to continue claiming the credit for all three years if the worker is replaced.
The Tesla sales bill was originally about an unrelated subject, but it was amended Wednesday by Republican Sen. John McComish, the Senate majority leader, to take up the Tesla language. It would allow a company to sell vehicles directly to consumers if it only makes electric vehicles and has a service center in the state to handle repairs and warranty issues.
McComish calls it a "pre-emptive strike" against future laws that could outlaw Tesla's operations completely.
"What has happened ... is that in some states, they are moving to outlaw that kind of operation," McComish said. "But I think we should be about opportunities for innovation rather than stifling innovation."
New Jersey, for one, recently adopted rules requiring new car dealers to obtain franchise agreements to receive state licenses, effectively prohibiting companies from using a direct-sales model like Tesla's.
The committee approved the bill on a 3-2 vote and it now goes to the full Senate after a routine review in another committee.