Tesla Model S, one of few that have made it into Texas despite lawmaker and dealership obstacles.
Tesla Model S, one of few that have made it into Texas despite lawmaker and dealership obstacles.

Tesla Versus Texas

Texas is a key battle ground to thwart Tesla's 'direct-to-buyer' sales and service model

By Spencer Blohm

One would think that earning the coveted label of Motor Trend’s 2013 Car of the Year would create smooth sailing for any start-up auto manufacturer. However, most auto companies aren’t like Tesla, the Palo Alto, California based electric car maker. Not only has Tesla breathed new life into the famous luxury electric car, the company is also trying to change the basic sales model set by their dealership predecessors. Tesla hopes to sell directly to consumers through their shops (similar to how Apple sells their products), thus eliminating franchised auto dealerships and their price markups, and creating savings for their customers. When Tesla attempted to achieve exemption from franchise laws in Texas to continue direct sales earlier this year, however, the company lost to the powerful Texas Auto Dealers Association.

The issue Tesla faces in Texas is the strict legislation put in place forbidding company-owned auto dealerships. In April the bill HB 3351 appeared at the Texas House Business and Industry Committee, and if passed would have allowed Tesla to open its own dealerships. Unfortunately for Tesla and CEO Elon Musk, their opposition, TADA, has spent millions of dollars over the last few decades to ensure the current statutes banning company-owned dealerships stay in place.

As a result, the date for voting in the legislature came and went and the bill was never even brought to a vote. This has created a public relations nightmare for the state, where consumer choice has otherwise been a major boon to both consumers and the environment thanks to deregulation of the energy market and the existence of free resources like Texas Electricity Providers where people can shop around and buy energy, including renewable energy, directly from companies. As Tesla is finding out, the lobbyists and lawmakers representing the car dealerships just aren’t ready for the additional competition Tesla’s proposal would bring.

The fight between Tesla and lawmakers isn’t only happening in Texas, either. In New York state legislature the battle over Tesla picked up steam in June, with the New York State Automobile Dealers Association arguing that not only should Tesla owned dealerships be banned, but that the three existing ones in the state should be closed. Although the bills were not acted upon during the 2013 legislative session, they could be brought to a vote as early as January. Meanwhile in Colorado, the legislature has outright banned Tesla from opening any more dealerships in the state, and allows only the one dealership in Denver to remain open. In a similar move, North Carolina has banned Tesla from selling their cars in the state through any other means besides a franchised dealership.

Right now it’s difficult to predict the big picture outcome and what exactly this resistance means for Tesla. Despite turning a profit for the first time during the third quarter of this year, the company has been plagued by reports of car fires and battery shortages, providing the opposition with further ammunition in their fight against the company. Musk has declared he’s willing to take the fight to the federal level, stating that, “Rather than fight 20 different state battles, I’d rather fight one federal battle.”

Tesla is still pushing forward despite all the legislative and manufacturing issues. They are planning to introduce an electric utility vehicle to their lineup next year, and in August expanded their sales to Europe. Already the Tesla Model S is the best selling car in Norway and is expected to reach annual sales of 10,000 cars in Germany by 2015, where they plan to have half the country equipped with charging stations by March.

What Tesla is ensuring, though, is that the automobile industry will be forced to change and react to the push for direct sales and electric vehicles. Many car manufacturers are already introducing electric models, but now that Tesla has been able to turn a profit, it means more companies will risk entering the EV market. In addition, Tesla has provoked new questioning of the whole concept of franchise models across many industries. If Tesla is finally able to sell directly to consumers, other manufacturers will likely want to do the same. It’s impossible to tell where all discussion and arguments will ultimately lead, but it’s already clear that if nothing else the availability and popularity of EVs is spreading.

Times Article Viewed: 6837
Published: 02-Dec-2013


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