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Tesla CEO Elon Musk
This bill would allow Tesla to sell directly to customers without dealerships

Tesla CEO Elon Musk has been showing his support for an electric car sales bill in Texas, which he referred to as a "life or death" situation for companies like Tesla. 

Musk testified Tuesday for House Bill 3351, which would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. The bill was filed by Rep. Eddie Rodriguez (D-Austin). 

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

However, auto dealers don't seem very happy about this decision. Carroll Smith, a representative for the Texas Auto Dealers Association, said that the law shouldn't be changed just for the sake of one manufacturer. 

Musk is open to a dealership model at some point when sales increase, since dealerships do promote competition and keep prices down. 

Tesla currently sells about 10,000 cars in North America, where about 1,500-2,000 are sold in Texas. 

Tesla is shipping over 500 Model S EVs weekly, and recently reported that the company is now profitable thanks to the Model S exceeding sales targets. Tesla Model S sales reached 4,750, which topped the sales outlook of 4,500 posted in the February shareholder letter.
In addition, the automaker is partnering with Wells Fargo and U.S. Bank to offer customers more financing options for Tesla’s vehicles. 

Clearly, Tesla is sitting in a nice position right now, but the Texas bill could certainly help reach sales goals. 

Source: Austin Business Journal

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What free market is this?
By Florinator on 4/11/2013 1:09:59 PM , Rating: 2
It never ceases to amaze me how even states that pride themselves for being business friendly and less regulated and not unionized have silly regulations in place which are conflicting with the principles of a free market economy. I would have expected this from California, but Texas? A company can't sell its products directly to customers? WTF?

RE: What free market is this?
By DanNeely on 4/11/2013 1:13:38 PM , Rating: 3
The existing rules are business friendly. Auto dealership owners are very good friends of politicians.

RE: What free market is this?
By Ammohunt on 4/11/2013 2:17:07 PM , Rating: 2
its the auto manufacturers and unions that put this nonsense in place not the states as i understand it. They laws even worse than this.

RE: What free market is this?
By 1prophet on 4/11/2013 8:04:50 PM , Rating: 2
Exactly, the dealer franchise is one of the greatest cost savings to the manufacturer, the dealer has to pay for the facilities, pays for the staff, pays for training, pays for all the vehicles in full under a floorplan loan, pays property taxes as well as other local taxes, and to have the privilege of all this pays a franchise fee and must abide by the manufacturers rules or risk having their dealership pulled.

Why would a manufacturer even think of owning a dealership?

RE: What free market is this?
By captainBOB on 4/12/2013 6:53:40 PM , Rating: 2
Because Tesla wants to cut out the middleman, the dealership may seem cheaper on paper, in practice because of laws like this it gives the dealership tycoons a lot of bargaining power. The price can be inflated by quite a bit by the time you see the sticker on the side of the window.

Tesla wants to sell direct because there would be a conflict of interest with dealerships, the dealers want to make as much money as they can, Tesla vehicles are unproven in that regard, so they wouldn't try very hard to sell them. Putting Tesla in a catch-22 situation.

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