Texas

Energy and Environment Reporting for Texas

Why Tesla Lost the Fight to Sell Cars in Texas

The Tesla S at the company's showroom in Austin.

Photo by Olivia Gordon/StateImpact Texas

The Tesla S at the company's showroom in Austin.

It’s the shiniest electric car on the block — if your block is accustomed to cars that can cost six figures. The Tesla S, selected as Motor Trend’s Car of the Year, seems to be showing up on more and more Texas roads. The company had its first profitable quarter this year and paid off its federal loans.

But you can’t buy a Tesla in Texas from the dealership. You can’t even take it for a test drive. If you want to buy a Tesla in Texas, you have to order it online. (But once you do, you’ll find more and more Tesla charging stations to get you across the state.)

That’s because of state law (similar to those in many other states) that protects the franchise dealership system. Essentially, car manufacturers are not allowed to run and own dealerships. Tesla operates all of its own dealerships, however, and runs a different business model than traditional automakers and dealerships. It argued before the state legislature this past session that it deserved an exception to the rule: the state should allow it to have its own direct dealerships in Texas.

The legislation went nowhere, with lawmakers never even taking a vote. And a new report by the watchdog group Texans for Public Justice tells us why: it likely comes down to money.

Tesla didn’t spend enough of it, the report says, while auto dealers threw around plenty of cash to state legislators. Nearly half a million in contributions to state politicians from 2011 to 2012 came from Gulf States Toyota owner Thomas Dan Friedkin. His company’s PAC gave over $300,000. (The company is one of the largest independent Toyota distributors in the world.)

Another prominent figure in the dealership world, Red McCombs, gave over $300,000 as well. And the Texas Automobile Dealership Association, which lobbied against Tesla, gave $285,750 in contributions last year.

But Tesla, and its head, Elon Musk, didn’t spend nearly as much on contributions. Musk gave a total of $7,500, which the report notes seem to be to promote his space exploration company SpaceX, not Tesla.

In lobbying, Tesla spent up to $345,000, but auto dealers outspent them by more than double, up to $780,000 for lobbying.

“If Tesla and Elon Musk are serious about breaking Texas’ powerful car-dealer cartel they will need to drop a lot more political cash, perhaps over several sessions,” the report says. “Indeed, Musk may have better luck finding a friendly business climate in outer space.”

Comments

  • Ben

    Reports like this don’t endear me to the Texas Legislature… Obviously Money moves the Texas Legislature more than what is best for the Texas countryside and people.

    • Heidi Hansing Thiess

      Welcome to the plutocracy of Texas. The Republic is long gone.

  • bertchadwick

    Because the oil industry has the state and the auto industry by the b…s, I mean by the neck. Same as the insurance industry (health,life,property and more) they have the state (and also the country, for the matter, by the b…s, I said neck.

  • http://twitter.com/naworb Naworb McGee

    Great system we have here. Whatever group pays the most, gets their way.

    • windbourne

      welcome to the neo-con’s version of America.

    • John Smith

      One dollar, one vote. Democracy like Jesus intended.

    • Heidi Hansing Thiess

      This is called a plutocracy.

  • Patty

    I find this report inadequate. All it talks about is the money, but what are the merits of each position? This fight is going on in many states, and in Virginia the Motor Vehicle Dealer Board, which regulates dealerships, was in an uproar about Tesla’s plan, in part for consumer-protection reasons. If there are no dealerships, who provides service under the warranty? Does it end up being like RV’s, so that the buyer has to drive across several states to get service? There was some buzz about Tesla sending out service techs or telling customers how to make minor repairs themselves. Let the regulators decide if Tesla actually is a dealership and so needs warranty service centers in each state and needs to maintain regular hours. If the service tech doesn’t show up for weeks, shouldn’t Tesla be subject to the same regulations as other dealers?

    • fred

      The car dealers are concerned about consumer protection? Now that’s funny.

    • wylkell

      Dealership != service center. Tesla has service centers in a lot of cities, even where it doesn’t have “galleries” (the texas name for a place that can’t sell you a car). In Austin, it’s off of Burnet, it’s just there for warranty/service work. It separates the car selling and car owning experiences.

    • Andrew

      Well, there are 3 service centers in Texas already (Houston, Austin, Dallas) and I guarantee there would be more if Texas wasn’t posturing so anti-Tesla.

      However, Teslas (and fully electric vehicles in general) require far less maintenance than gas or diesel vehicles. No engine = no spark plugs, no radiator, no oil changes, no timing belts. No gearbox = far fewer transmission issues (electric vehicles are single-gear, no gear changes)

      • lwatcdr

        Ummm. The Tesla has a two gear transmission and a radiator to cool the motor and batteries. BTW many cars today use a timing chain which is lasts the life of the car. Yes they do tend to have less maintenance but how much less is still to be seen.

        • Andrew

          The roadster, no longer produced, originally had a two gear transmission. The Model S has a single gear.

    • WeaponZero

      To add to what others have said, on 2 separate occasions the DMV board in Virginia recommended that Tesla be granted a license in Virgina.

      Richard D. Holcomb, who is the commissioner who has been bribed by VADA overruled them and denied Tesla a license on the grounds that VADA doesn’t like it.

      Tesla wants to run its own dealerships and be subjugated to the same regulations as other Dealers.The difference is Tesla wants to run their own dealerships.

      It is not about “consumer protection”, it is about money. In a Gallup poll for ethics and honesty, consumers rate Dealers below Congressmen, Lawyers and Spammers. Dealers are rated as the least ethic job in America. (Not surprising since Dealers are granted government granted monopolies by these laws that they lobbied in) Tesla wants to change that.

  • John

    Texas government: Of the people, by the people, and for whoever spends the most money.

  • poorsideof6figures

    Maybe things will change when we get our current Gov. retired!

  • Daniel Leichtweis

    Don’t think this is just Texas, dealers all across the country are set up like this. As much as I am pro-regulation this is a clear example of it used to peoples benefit to weed out competition.

  • Ames Tiedeman

    Come with me on March 14th to the Capital and Congress Ave. Protest with me. Hold a sign with me. How can a state that champions itself as the last place in America that allows FREE MARKET CAPITALISM keep TESLA from being TESLA? How can our state legislature allow itself to be bought off by the Texas Automobile Dealers Association? We are now at risk of losing a 6,500 employee battery factory TESLA wants to build. We must pressure Rick Perry our Governor and the TEXAS State Legislature to change this draconian law!!! We must let TESLA and the PEOPLE of TEXAS prevail! WE MUST FIGHT!!! We won at San Jacinto, we must win again! Come with me!

    https://www.facebook.com/events/597487767011150/?ref_dashboard_filter=upcoming

About StateImpact

StateImpact seeks to inform and engage local communities with broadcast and online news focused on how state government decisions affect your lives.
Learn More »

Economy
Education