Print 54 comment(s) - last by vitp.. on Sep 19 at 3:27 PM

Texas just shut Tesla down on the state level

Tesla CEO Elon Musk is determined to win the dealership fight by any means necessary -- even going to the feds.

A new report from Automotive News says Musk may take the dealership fight to the federal level since working at the state level hasn't been completely successful.

Here's the deal: Musk believes that auto dealerships don't do a very good job at selling specialty cars like Tesla's high-end electric vehicles (Roadster, Model S). Hence, he's looking to run his own Tesla stores around the U.S. where he believes his cars will get a fair shot at being sold. 

However, auto dealerships are fighting back. If Tesla were to succeed at opening its own dealerships, other automakers could try to do the same. The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers, and that it will continue to defend franchise and consumer laws in the states.

While Tesla has been able to fight off auto dealership assaults in some states -- like North Carolina -- it has had a more difficult time in others, like Texas. The state has laws that protect the franchise dealership system where car manufacturers are not allowed to run and own dealerships -- and Texas isn't looking to budge on that issue.

Musk has worked quite a bit to eliminate the conventional dealership model for his cars in Texas, going as far as supporting a recent Texas bill called House Bill 3351, which would allow distributors and manufacturers of electric vehicles (EVs) only to sell directly to customers without the use of dealerships. He also offered to build a second manufacturing plant in Texas, and is even trying to appeal to Texas consumers by discussing a design for an electric pickup truck that would be stronger than any current gasoline truck.

Tesla made a case before the state legislature this past session that Tesla should be one exception to the state laws, and be allowed to sell its cars to the public directly. The state legislature blew it off without even taking a vote, and that was that. According to NPR's State Impact, the reason was because Tesla failed to lobby as much as the dealership associations. Tesla spent about $345,000 in lobbying while dealerships spent about $780,000.

Texas isn't alone in attempting to keep Tesla at bay. New York, Massachusetts and others have attempted to shut down Tesla's stores as well. 

With that, Musk is looking into taking his fight to the federal level in order to bypass each state's restrictions. Musk may lobby Congress or file a federal claim saying that the state laws banning Tesla-owned dealerships are unconstitutional. 

Musk said in April that he'd be willing to make the fight a federal battle. 

"If we're seeing nonstop battles at the state level, rather than fight 20 different state battles, I'd rather fight one federal battle," said Musk.

Sources: Automotive News [1], [2]

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RE: Nope
By Solandri on 9/17/2013 3:18:14 PM , Rating: 2
Yeah, dealerships make less sense today when you could conceivably custom-order a car online and simply wait for the manufacturer to ship it to you.

They made a lot more sense back in the day. Contrary to the above posts condemning them, they were actually good for the manufacturers too. The dealership did all the local market research work to decide how many of each model car to order, and assumed the risk of cars cluttering their lots if they overestimated and didn't sell. The manufacturer could then concentrate on building cars, instead of on market research and warehouse storage.

The logical solution here is that low-volume car sales should be exempt from the dealership requirement. It makes no sense to require dealerships if your volume would only make it practical to have a dozen dealerships nationwide. Likewise, the dealerships are going to fight Musk's proposal that EVs be exempt, because they can conceive a future where EVs are the majority of car sales.

RE: Nope
By ebakke on 9/17/2013 3:37:53 PM , Rating: 3
Your solution turns a two sentence law into a two paragraph law. Which will later be amended for some other "logical reason" to include another 4 paragraphs to remedy a different unintended consequence.

The solution to this problem is not more government. Just strike the laws and let individuals freely engage in commerce with one another however they see fit!

RE: Nope
By artemicion on 9/17/2013 4:49:42 PM , Rating: 3
I find it ironic that a supposedly red state like Texas has a law in the books like this one that unnecessarily regulates businesses.

Just goes to show you that political rhetoric is mostly hogwash. Obviously, Texas republicans are more interested in pandering to their constituents (local car dealerships) instead of adhereing to their political philosophy of less government. De-regulating the industry would hurt the local car delears that vote for them and would primarily benefit out-of-state car manufacturers who can't vote for them.

RE: Nope
By ebakke on 9/17/2013 4:57:51 PM , Rating: 4
Republicans stopped caring about small government ages ago. The only difference between the GOP and the DFL today is which type of government intrusion you'll get. They both expand the size/scope of the government, and they both can't figure out how to balance a budget. The GOP wants to bring in less than they spend, and the DFL wants to spend more than they bring in.

RE: Nope
By Solandri on 9/18/2013 2:16:52 AM , Rating: 2
You're confusing Republican with Libertarian. Libertarians believe in less government regulation. Republicans (the non-Libertarian ones) believe in whatever laws give businesses in their governing region an advantage over businesses outside it. In this case, since the auto manufacturers are outside Texas while the dealers are within Texas...

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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