Tesla in Texas: direct sales and a new electric truck plant?

Not content to change the way automobiles are powered, Tesla Motors is now at the center of a battle that could change the way they are sold. CEO Elon Musk testified Tuesday in Texas in favor of pending legislation that would allow the company to sell cars directly to customers in the state.

Current Texas law requires cars to be sold only through licensed dealers. Although Tesla has “galleries” (don’t call them stores) in Austin and Houston, all sales, service and repair work must be routed through Tesla headquarters in California – Texas sales reps aren’t even allowed to give price quotes or take orders.

Musk made a compelling case for Tesla’s dealer-free sales strategy back in October, saying, “Existing franchise dealers have a fundamental 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.”

The bill now under consideration in Texas (Senate 1659/House 3351) would carve out an exception to the existing law solely for electric vehicles. Typically, Mr Musk had plenty to say in support of the bill, not only in his testimony at Tuesday’s hearing, but in tweets and a salty memo to employees that described some auto dealers as “heinous.” Model S owners lined their vehicles up in front of the capitol to show their support.

“It is crazy that Texas, which prides itself on individual freedom, has the most restrictive laws in the country protecting the big auto dealer groups from competition,” said Musk. He also predicted dire consequences for Tesla in Texas, where the company hopes to sell up to 2,000 Model S sedans per year. “For us this is life or death. If we can’t go direct we will not be able to sell cars.”

Needless to say, the Texas Auto Dealers Association, which has some 12,000 members, did not agree, saying, “The best way for any manufacturer to retail their vehicles is through great dealers. They’re the ones who know how to retail, who know how to satisfy the customers, and they’re the ones who should be selling the product. The law should not be changed for the sake of one manufacturer.”

Tesla has won similar legislative battles against dealer groups in Minnesota and Massachusetts.

In the latest wrinkle, Musk told Automotive News that Tesla might consider building a second manufacturing plant in Texas in the future, perhaps to build an electric truck. “When we do establish a manufacturing plant outside of California, Texas would be a leading candidate for that.”

Would this happen even if the Texas legislature decides against Tesla? We’re not sure, but everyone knows how Texans love their trucks. “I have this idea for a really advanced electric truck that has the performance of a sports car but actually more towing power and more carrying capacity than a gasoline or diesel truck of comparable size. That could be really cool, and I think that would probably make sense to do that at a new plant,” said Musk.

 

Image: Ray Bodden
Sources: InsideEVsAutomotive News, Tesla