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Cars Image Credit: Poll via Austin Business Journal

Published on June 11th, 2013 | by Zachary Shahan

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Tesla Sales Model Rejected In Texas Despite Citizen Support



Covering the Tesla–Texas Auto Dealership saga for awhile, I was hopeful it was going to all turn out for the best. Apparently, that wasn’t the case.

As we noted back in April, 80% of polled Texans thought that Tesla should be allowed to directly sell its vehicles to consumers.

Image Credit: Poll via Austin Business Journal

Image Credit: Poll via Austin Business Journal

Even a former Texas car dealer, Sterling McCall, wrote an op-ed in the Houston Chronicle on why he thought Tesla should be able to. As part of that, Sterling wrote:

As a 40-year franchise automobile dealer in Texas, I think it’s time we updated our laws to better embrace competition and reflect the realities of today’s marketplace.

That’s why I support legislation now being considered at the state Capitol that would allow U.S.-based manufacturers of 100 percent electric vehicles who have never been granted a franchise dealership to sell directly to Texas consumers.

It’s a change that’s needed because manufacturers like Tesla don’t fit the traditional model for a volume retail dealership, not having or needing the full and extensive range of service, parts, new and used vehicle departments.



Sterling also noted the overwhelming support for updating the model:

“It’s something the public wants. Ninety-nine percent of respondents to a Los Angeles Times online poll said that Tesla ought to be allowed to conduct direct sales of its cars. Right here in Texas, 87 percent of respondents in an Austin Business Journal online poll agree, too.”

In a similar manner to the above extended quote, Tesla itself wrote:

The Tesla sales and service model is based on direct customer relationships, without an intermediary licensed dealership. This is fundamentally different from the traditional dealership model just as an electric vehicle is fundamentally different from a gas powered car. Electric vehicles simply cannot be sold side by side with gas vehicles because they will always be a minority item in terms of sales and service volume. Existing franchise dealers have an inherent conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. Simple math shows no traditional dealer is incented to sell an electric vehicle with the same enthusiasm as the rest of their inventory.

Unfortunately, approval for the new model all had to go through the Texas legislature, which was heavily lobbied by the Texas Automobile Dealers Association to reject the proposal.

Michael Graham Richard of TreeHugger aptly notes: “That’s very sad, especially in a state that pretends to be more about free enterprise than most. Either a dealership structure adds value to the process of selling cars, in which case a company like Tesla will be disadvantaged without it and the dealerships don’t need special protection. Or they don’t add value to the process, in which case they don’t deserve special treatment…”

And, the nail in the coffin (unless Tesla makes this a national effort), is that the bill “failed to make it to the floor of the Texas House or Senate for voting before the regular session came to a close on May 27,” which won’t open again until 2015.

In other words, thanks to the Texas legislature, it’s much harder for a Texan to buy a Tesla vehicle than it could be. Why? Apparently because a number of businessmen and politicians are scared of have a more free market system in the state. Ironic.

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy for the past four years or so. Aside from his work on CleanTechnica and Planetsave, he's the Network Manager for their parent organization – Important Media – and he's the Owner/Founder of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



  • Bob_Wallace

    Tesla sticks it to Texas….

    “But how exactly does a prospective Tesla customer in Texas buy a car today? Tesla manages to sell to customers in the Lone Star State in spite of how difficult the legislature has made it; those cars are simply “sold” in California and then delivered either to a local Tesla service center or directly to the customer’s home. The customer has to do a bit of legwork with the registration, but not much more than is required for buying any other car out of state.”

    And we in California thank the Texas Legislature for giving us all that sweet tax money.

    Good article about Tesla installing chargers in Texas.

    http://arstechnica.com/gadgets/2013/09/tesla-sets-its-sights-on-texas-with-more-supercharger-station-openings/

  • Bob_Wallace

    Wondering about this Texas whacko legislature problem*….

    Is there anything that would stop Tesla from opening showrooms and service centers in Texas as long as they made no sales in the state?

    They could open a showroom in each major city and offer people cheap flight/hotel packages to New Orleans (or somewhere else) where they could purchase their car and drive it home.

    Leave the sales taxes in Louisiana. Perhaps give the financing business to Louisiana banks.

    Remember when Reagan established a luxury tax on expensive cars and yachts? Boat buyers then bought their new craft from Asia and Europe, hired a delivery crew, met the boat about two miles offshore, and imported a “used” boat. The US lost out on the taxes and the US yacht industry collapsed.

    *Wonder how many of these guys are car salesmen when the aren’t doing their legislatin’?

    • Otis11

      They already have a show room in Austin Texas – and I have seen more than one guy who buys 2-3 Teslas at a time, marks them up a bit, and sells them from his garage/driveway through ebay. Actually, last time I checked there was one in every major Texas city…

      • Bob_Wallace

        ‘ love it.

  • Bob_Wallace

    Osaka, Jun 12, 2013 (JCN Newswire via COMTEX) — Panasonic Corporation today announced that shipments of its automotive-grade lithium-ion battery cells for Tesla Motors’ premium, all-electric Model S sedan will surpass 100 million units by the end of this month.

    http://www.marketwatch.com/story/panasonic-delivers-over-100-million-lithium-ion-battery-cells-for-teslas-model-s-ev-2013-06-12

  • geir_hansen

    If I understand this correctly – electric cars are in practice outlawed in Texas?

    • Bob_Wallace

      No, Texas and a few other states have laws which prevent auto manufacturers from selling directly to customers. They must wholesale their product to dealers who then resell them.

      Why this is and why it applies to cars I do not know. Apple sells its computers in Apple stores in Texas. But Tesla cannot sell its cars in Tesla stores.

      EVs are sold in Texas. I’m pretty sure Nissan has a big presence there, but the LEAFs are sold by Nissan dealerships and those stores are not owned by Nissan, but by someone else.

      • geir_hansen

        Huh!

        This actually results in an asian car getting advantage over an american one, when the choice is electric!

        • Bob_Wallace

          No one has ever suggested that the government of our beloved state of Texas is rational or logical.

        • Otis11

          Not really… it puts Tesla at a disadvantage, but Toyota or Kia don’t have an inherent advantage over, say, Ford…

  • Aaron Russell

    Those politicians are sitting in some seriously deep pockets, disgusting

  • http://newyorkleftist.blogspot.com misha_trotsky
  • Jack Burgess

    Not only did the Texas legislature vote against a super-majority of its constituents wishes, the vote was also directly counter to their constantly touted “free-market, anti-regulation, anti-government interference” economic philosophies. I’ve never seen a more perfect example of how lobbyists have corrupted the system.

    • http://zacharyshahan.com/ Zachary Shahan

      Completely agree. It’s ridiculous. (That said, they didn’t actually vote against it — they never brought it up for a vote.)

      • Jack Burgess

        Agreed. It was easier to hide their hypocrisy that way.

  • http://twitter.com/justineetG jusin

    In general there is a very good reason why manufacturers of any kind are not allowed to be in retail/dealer business. The reason is because they can engage in anti-competitive practices since they are able to monopolize any given market given they will always have price advantage than regular retailers.

    • Bob_Wallace

      Apple

    • Jack Burgess

      This argument makes absolutely no sense. Manufacturers can charge the DEALERSHIPS whatever price they want. EVERY manufacturer has a “monopoly” over their own products. Going through inefficient, unnecessary middlemen that have to collect additional funds for lobbyist to keep their protectionist laws in place just adds additional costs to the consumers.

    • http://newyorkleftist.blogspot.com misha_trotsky

      Buying a car from the maker at a set price, without being able to shop several dealers for price, is actually socialism. Did you know Elon Musk is a Marxist? It’s true.

      Help me have Musk deported back to the communist country he comes from. Remember, electric cars are dangerous:

      www [dot] newyorkleftist [dot] blogspot [dot] com/2009/10/electric-cars-are-dangerous.html

  • John Arevalo

    Being a former Texan myself, I think Tesla should just skip on Texas. Perhaps after electric cars become more mainstream Texans will insist on having Tesla cars available to them too. I know how Texan politics runs. It’s mostly an insane bunch of puritanical liars that will impose their religious philosophies into every bit of legislature possible. Just look at what they did with history books in schools.
    Let Texans run their over-sized trucks with gas prices topping $5 or $6 a gallon. They’ll be begging for a Tesla.

    • Rod Walton

      As much as I love Texas and Texans, one can only conclude that democracy has been a failure there. What they need is an LBJ and not one is in sight.

      • Bob_Wallace

        It’s getting close to the last hurrah for the good ol’ boys. Their state is morphing from red to blue at a steady pace.

      • Mark

        true

  • Pieter Siegers

    It’s (again) all about protection of the current system, anyone can see the oil industry is right behind it.

    I hope the consumers realize the potential power they have to simply reject the current system and demand changes through social networks.

    Looking at the big support for changes in Texas that shouldn’t be so difficult to organize.

  • Ivor O’Connor

    I suspect Elon must take this to the Federal level. However doing business in Texas is kind of absurd because you never know what goofy contrarian idiocy will surface next. At this point I would be seriously thinking of taking a hit on the Space Port. It might be a little more inefficient to launch from New Mexico rather than further South in Texas. However it might be far cheaper over the long run since you can never depend on Texan law makers to not pass absurd legislation that might severly damage the business.

    • http://zacharyshahan.com/ Zachary Shahan

      1- agreed. think they should attempt a national campaign.

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