Tesla Eyes Texas For Direct Online Sales But Needs Looser Law
AUSTIN, Texas (CBS/AP) -- Tesla passed on Texas as the site of its new $5 billion battery factory, but the company still hopes to sell its electric cars directly to Texans over the Internet, instead of through dealerships, and it is dangling the carrot of future investment projects as an incentive.
The automaker doesn't use outside salesmen or franchised dealers to sell its cars because it says they have too much invested in promoting traditional, gasoline-powered vehicles. The practice is prohibited in Texas and at least somewhat restricted by many other states' laws on new vehicle sales.
Proposals to allow direct car sales in Texas stalled during the 2013 legislative session, but the Pala Alto, California-based automaker appears poised to rev up efforts to revive the issue as lawmakers head back to work next month.
"We're not asking to blow up the franchise dealer system," said Diarmuid O'Connell, Tesla's vice president for business development. "We are looking for a narrow and reasonable window to be able to promote this new technology ourselves."
No one has pre-filed a bill promoting direct sales yet, and few in the Legislature have publicly supported the idea. But outgoing Gov. Rick Perry in March called the state's laws "antiquated" and said it was time for "Texas to have an open conversation about this."
Of course, Perry said that when Texas was still one of four states in the running to get Tesla's new battery factory, which eventually went to Nevada. Perry prides himself on being able to woo job creators, and at the height of his Tesla charm offense during a June visit to California, he even drove the company's Model S around Sacramento.
An op-ed signed by four economics and law professors from Texas universities appeared this week in the Austin American Statesman, and a longer letter signed by those four and eight other academics was sent to every member of the Legislature. They urged lawmakers to "modernize" vehicle distribution rules and scrap existing regulation that hurts competition via "protectionism for auto dealers."
Calls seeking comment from spokesmen for Gov.-elect Greg Abbott and Dan Patrick, who will oversee the Texas Senate when he becomes lieutenant governor in January, were not returned.
Texas Automobile Dealers Association lobbyist Robert Brazie said he believes bills promoting direct car sales will likely be filed before the end of the 2015 legislative session, but that he expects them to garner little support. He said an offer of future Tesla investments would carry little weight in the state, because "when they had a chance to come to Texas, they didn't."
Brazie added that Tesla explained its choosing Nevada by pointing to "geography, cost and speed of development," reasons that had "nothing to do" with either state's car sales laws.
O'Connell admits that getting the law changed won't be easy.
"Does the fact that we didn't site the factory there complicate things? Absolutely," O'Connell said. "But we're going to be doing a number of big battery factories in the coming years and we're going to need new vehicle factories as well, and there's a certain logic to doing those in Texas."
He didn't elaborate, but added that the state may not be so attractive if current sales regulations stand.
"If we're banned in Texas, why are we investing billions of dollars here?," O'Connell asked.
In October, Michigan became the fifth state to effectively ban Tesla's direct-sales model, along with Texas, New Jersey, Arizona and Maryland. But O'Connell said the company has successfully worked with courts and Legislatures in other states to stop more-restrictive sales rules from taking effect elsewhere.
Texas, though, is a game changer. Brazie said the state should notch more than 1.5 million new car deliveries this year — accounting for nearly 10 percent of all sales nationwide. The only larger market in America is Tesla's home state of California.
Tesla already operates "galleries," in Dallas, Austin and Houston, but can't sell cars or even offer consumers test drives or pricing information there. O'Connell said that if the state's laws were changed, Tesla would like to open what it calls stores, its answer to traditional dealerships, in those three cities plus San Antonio to start, but how many it would eventually expand statewide is an open question.
"We don't want to blanket the state," he said.
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