Texas Slightly Opens The Door To Tesla Operations In The Lone Star State

5 years ago by Jay Cole 6

Texas House Business and Industry Committee Forwarded HB 3551 To The Full House Tuesday

Texas House Business and Industry Committee Forwarded HB 3551 To The Full House Tuesday

Tesla has been fighting some high profile battles across the country to get their boutique dealer stores into high traffic areas.  And other than in Virginia, they have had quite a bit of success battling opposing state dealership associations.

In Texas however, existing franchise laws prohibit Tesla from even getting their foot in the door; so the California EV maker is taking the fight straight to the Texas legislature to change those laws.

Tesla maintains they should gain a special exemption because A) they are an electric vehicle maker and B) they have had no previous dealings in the state, hence no franchisees would be affected.

Even Though Odds Of Winning Are Slin, Tesla CEO Elon Musk Promises To Fight On In The State

Even Though Odds Of Winning Are Slin, Tesla CEO Elon Musk Promises To Fight On In The State

And to say winning this battle would be extremely tough, would be an understatement.

Now, despite the Texas Automotive Dealer Association working against any Tesla exemption, the House Business and Industry Committee has forwarded bill 3551 to the full House.  This bill would potentially let Tesla sell and service cars directly to Texas residents.

…with some key changes.

According to the Texas Tribune, the original House Bill 3351, has been replaced by a committee substitute that throws the Texas Dealership Association a guarantee of sorts, provided (big if) Tesla manages to get new legislation through.

Under the new proposed changes, if Tesla sells more than 5,000 cars in any calendar year inside Texas, it will immediately become subject to existing franchise regulations and must start to franchise its operations if it wishes to continue operations in Texas.

For now, or in the near future, Tesla does not expect to sell anywhere near that amount of Model S sedans anywhere in the United States (other than California of course), so Diarmuid O’Connell, who is the VP of business development for Tesla, understandably has no problem with this arrangement, saying “This would give us the space we need to introduce our technology in the state.”

One Of The First Tesla Model S Sedans Is Delivered In Texas By A Third Party Outfit.  Of Note:  Tesla Is Not Allowed To Deliver These Cars Themselves On AnyTruck With Company Markings, Nor Are They Permitted To Unwrap Or Touch The Car While In The Act Of Selling Or Delivering The Vehicle

One Of The First Tesla Model S Sedans Is Delivered In Texas By A Third Party Outfit. Of Note: Tesla Is Not Allowed To Deliver These Cars Themselves On Any Vehicle With Company Markings, Nor Are They Permitted To Unwrap Or Touch The Car While In The Act Of Selling Or Delivering The Vehicle

Currently, Tesla has boutiques in both Houston and Austin.   However, the company is legally prohibited from discussing the price, servicing or acquistion on the Model S.

Even Tesla CEO, Elon Musk himself, is not very optimistic that this modified bill will ultimately be successful this session, but he is willing to continue to fight almost indefinitely for the right to sell electric cars in Texas:

“The consensus among the auto industry is that we’re not going to succeed,” he said to the Texas Tribune, “but if we don’t succeed this session, we’ll come back again.”  Earlier the CEO noted, “…for us, this is life or death, if we can’t go direct, we will not be able to sell cars.”

Hat tip to Josh B for the timely heads-up on this one

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6 responses to "Texas Slightly Opens The Door To Tesla Operations In The Lone Star State"

  1. Schmeltz says:

    Maybe I’m missing something everytime I read these articles, but what would be the harm in putting a traditional, franchised, full-service Tesla dealership in the great, state of Texas should the legislation not pass? I understand these are all-electric cars and don’t require an oil change but wouldn’t other items on the car require service or repairs occasionally? What about brakes? What about an electronic glitch? If I was a potential customer, you better believe I would want a knowledgeable mechanic available at a dealership to fix anything and everything that may go wrong with the car. A person behind a desk with a blue tooth and an ipad won’t be of much help if I hit an armadillo North of Austin. Can someone help me understand the wisdom in expending so much resources and energy fighting this?

    Again, maybe I’m missing the big picture here.

    1. David Murray says:

      Tesla already has “service centers” in Texas that can do maintenance or repair the vehicles.

    2. Anthony says:

      1) Its unlikely one could build a full dealership franchise on Tesla models alone. This would require you to co-brand the dealership with other brands (e.g. Wilkins Hyundai-Subaru). This dilutes the brand.

      2) Once you have Teslas next to gasoline cars, how do you explain the difference between the two? Do you have incentive to sell one kind of car over the other? Will the Tesla models be neglected? Are they stereotyped to the “green” buyers and everyone else is steered towards traditional autos?

      3) How knowledgeable (or not) are the people selling the cars? When I went and bought my Volt, I knew more than the salesman and just about everyone between buying the car, financing, etc. That’s the experience at the dealership when you mix electric and gas cars.

      There are more than this surely, but those are the three reasons that stick out in my mind.

    3. Anthony says:

      Also, to put this in another context…

      What if Apple were prevented by law from opening and operating their Apple Stores? What if they were required to have Best Buy or Fry’s sell and service them. How big is the gap between what Best Buy offers in terms of product knowledge and service vs what Apple offers?

  2. GeorgeS says:

    Are those really black wheels? Looks pretty sharp.

    Actually not being able to discuss price, servicing and acquisition isn’t so bad. Look it up on the internet when you get home. Meanwhile the boutique staff needs to focus 100% on being able to answer tech questions about the car. How refreshing!! Usually a sales person in a traditional dealership doesn’t have a clue.

  3. Nelson says:

    If Tesla does have to go the Franchise route, make it so if someone wants to “BUY” into the Franchise they need to abide by the rules.
    1. Cannot ever sell the car over MSRP.
    2. Cannot own dealerships that sell other manufactures cars (exclusivity).
    3. Employees need to be trained, at dealership expense, and Tesla certified.
    4. Franchised Dealerships need to purchase all promotional paraphernalia from Tesla (McDonald clause)
    5. Dealership must be constructed and modeled based on current Tesla requirements.
    6. ……………
    7. ……………………
    You get the picture.

    NPNS!
    Volt#671