Battle in Texas is “Life or Death” for Tesla, Says CEO Elon Musk

4 years ago by Eric Loveday 5

Elon Musk is None Too Pleased Over the Situation in Texas

Elon Musk is None Too Pleased Over the Situation in Texas

Tesla Motors CEO Elon Musk testified Tuesday in Texas in favor of legislation that will allow Tesla to conduct direct sales and service there.

Musk Tweets Ahead of Hearing in Texas on Tuesday

Musk Tweets Ahead of Hearing in Texas on Tuesday

House Bill 3351, filed by State Representative Eddie Rodriguez (D), proposes that manufacturers and distributors of only electric-powered motor vehicles be allowed to sell directly to customers and not through dealerships.  Current Texas law does not allow for this direct-from-the-manufacturer approach, which hinders Tesla’s ability to operate there.

A portion of Musk’s testimony speaks of death for Tesla Motors.  As Musk stated:

“For us this is life or death.  If we can’t go direct we will not be able to sell cars.”

Tesla expects to sell up to 2,000 Model S electric sedan in Texas annually, but without the ability to sell directly, that number would decreased substantially.  Musk argues that even 2,000 electric vehicles per year would have no measurable impact on the 1.3 million automobiles sold annually in Texas, so what’s the big deal?

Can't Sell These in Texas

Can’t Sell These in Texas

Dealers in Texas are notoriously known for putting up a fight when challenged.  Musk even refers to some Texas dealers as “heinous.”

Carroll Smith, speaking on behalf of the Texas Auto Dealers Association (12,000 franchised dealers strong), stated:

The law should not be changed for the sake of one manufacturer.”

In terms of his “life or death” statement, Musk points to failed Fisker Automotive and Coda Automotive, both of which tried to sell vehicles through a traditional dealership approach.  It didn’t work for either of those automakers and likely wouldn’t work for Tesla either.

However, Musk says that as Tesla grows, the automaker would be willing to compromise.  He points to Michael Dell of Dell computers as a prime example.  Initially, Dell sold direct, but as the computer assembler grew and success came, it branched out to offer its products through traditional brick-and-mortar stores. Musk says a similar scenario is a possibility for Tesla.

Not Exactly With You 24/7 in Texas

Not Exactly With You 24/7 in Texas

Tesla Motors released this statement on the dealings in Texas:

“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.”

For more on how Texas law forces Tesla into a ludicrous situation in terms of selling and servicing its vehicle there, refer to this previous post.

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5 responses to "Battle in Texas is “Life or Death” for Tesla, Says CEO Elon Musk"

  1. David Murray says:

    I’m a resident of Texas. And while I can’t afford a Tesla, I certainly hope Tesla wins this battle. Lets face it. The current law is designed to protect the interests of the car dealerships, not the consumer. I believe Texas is the second largest state in the USA by population, which means we’re a pretty big area for Tesla.

    1. Josh says:

      Texas resident also, and waiting for a Gen III Tesla. I really hope they can win this battle, but the deck is certainly stacked against them.

      I have heard from Tesla that Texas is their 2nd biggest market, so it would cripple them not to be able to properly sell, deliver, and service cars here.

  2. BlindGuy says:

    If Tesla (Ellan) joined that Dealership Assoc. and opened 1 legitimate Tesla Dealership in TX that sold only Teslas; wouldn’t that satisfy the law? Would 2000 sales a year at first be enough to keep the door open? Hey, maybe they could sell only EVs including: Teslas, Leafs, and Volts etc. Tesla could still have their tech team go to the customer as they do now.…

    1. Roy_H says:

      Joining the association would not satisfy the law. The dealership has to be franchised, available to anyone with the money and interest to open up a dealership or include Teslas in their existing dealership. In any of these arrangements Tesla looses control over how its vehicles are sold.

  3. Roy_H says:

    It would be a shame if Tesla had to stop selling cars in Texas. But the “Life or Death” statement suggests that Tesla would only die if it was forced to abandon its control over sales in all of USA, not just Texas. However if this is lost in Texas, then it gives greater fuel for the Auto Dealers Association to shut down Tesla in other states.

    Difficult to believe there are 12,000 dealerships in Texas, that’s like 1 dealer for every 500 families. I guess that includes every little used car lot.