Why Tesla Lost the Fight to Sell Cars in Texas

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.”