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Texas and Arizona both bar Tesla from selling cars direct to customers. Both states want Tesla's gigafactory

We don’t know whether to laugh or just shake our heads at the recent turn of events to come out of Texas. If you recall, the state of Texas has some of the most strict franchise laws in the country and mandates that vehicles must be sold through dealerships. Tesla, on the other hand, was looking for an exemption, as it only sells its electric vehicles directly to customers (it sees dealerships as unnecessary middlemen).
Despite considerable protest from Tesla, Texas held its ground by barring customers from purchasing vehicles from Tesla-owned stores.
Fast forward to today -- Tesla is looking to build a new gigafactory in the Southwest to supply batteries for up to 500,000 EVs by the year 2020. The gigafactory would cost a whopping $5 billion, span as much as 1,000 acres, and employ upwards of 6,500 people. The economic benefits of such an operation would be a huge boon to any state for years to come.

Given that the gigafactory would be powered primarily by solar and wind energy, the Southwestern states of Arizona, Nevada, New Mexico, and Texas were tossed around as possible site locations. And like clockwork, politicians are already lining up to sweet-talk Tesla, including politicians from Texas.
Texas Rep. Jason Villalba (R, Dallas) is hoping that Tesla Motors CEO Elon Musk harbors no ill will towards his state. In fact, in a letter to Musk, Villalba explains that he was a vocal proponent of the Tesla-backed House Bill 3351 that would have allowed factory-owned stores in Texas.

Texas Rep. Jason Villalba (R, Dallas) [Image Source: Wikimedia Commons]
He explains that Texas is tax friendly, as it has no personal or corporate state income tax, and goes on to add:
Texas has the best climate in the country to run and grow business because of its low regulations and limited government interference. Texas is a right-to-work state with a sophisticated, technologically savvy, and plentiful labor pool — ensuring that Tesla will have access to good, well-trained employees to grow your business.
The first part of that statement is quite interesting given the current predicament Tesla finds itself in regarding selling vehicles in Texas. Given its history with the state of Texas, Tesla’s VP of business development, Diarmuid O’Connell, isn’t exactly falling for the pitch either.
“The issue of where we do business is in some ways inextricably linked to where we sell our cars,” said O’Connell in an interview with Bloomberg this month. “If Texas wants to reconsider its position on Tesla selling directly in Texas, it certainly couldn’t hurt.”
But Texas isn’t the only “anti-Tesla” state that wants in on some gigafactory action. Arizona, which also bars the direct sale of Tesla vehicles to residents, is also lobbying for the gigafactory. All nine of the state’s U.S. representatives penned a letter [PDF] to Musk (as did the mayors of Tucson and Mesa) in order to secure the gigafactory.

Tesla CEO Elon Musk and President Barack Obama [Image Source: Wikimedia Commons]
Perhaps Elon Musk was just being kind and generous by including Texas and Arizona in the original proposal for the gigafactory. Perhaps Musk is using the gigafactory as leverage in order to have anti-Tesla laws overturned in those states (this could actually happen in Arizona as a bill has just been introduced to allow Tesla to sell cars directy).
Or maybe Musk just wanted to see state politicians dance at the mere mention of billions in dollars in economic development. Regardless of his motives, we have the strong suspicion that the gigafactory will end up being built in either Nevada or New Mexico… if only for spite.

Sources: The Texas Tribune, Texas Rep. Jason Villalba, Congressman Paul Gosar [PDF], The Huffington Post

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RE: Perfect example...
By hughlle on 3/20/2014 10:41:59 AM , Rating: 5
A pretty good example of taking care of business interests before those of the people.

What's more important, some lobbying money or 6500+ new jobs and the associated taxes created by those jobs?

"Texas has the best climate in the country to run and grow business because of its low regulations"

You mean those low regulations that are blocking the company from doing business with the buyer, those low regulations which may ultimately be the reason texas DOESN'T get this business? Ha

I do hope that he gives texas the middle finger on this one :)

RE: Perfect example...
By bah12 on 3/20/2014 12:06:19 PM , Rating: 3
Although I totally hate the dealership model,and the bought and paid for politicians. To be fair doing away with the dealership model in TX would probably cost far more than 6500 jobs. Hard to tell though without more data, and clearly it is anti competitive, but if I could spec any car I wanted online and have it delivered next week. There would be loads of jobs impacted by that model. So it isn't completely fair to chastise the model, because it does create jobs just useless ones.

RE: Perfect example...
By Jeffk464 on 3/20/2014 12:18:07 PM , Rating: 3
I suppose you can create jobs by requiring all kinds of useless stuff. Think of all the jobs you could create buy requiring home owners to have their house tented once a year. Require home owners to have their house fully inspected once a year, but that's not the point.

RE: Perfect example...
By Bagom on 3/20/2014 1:23:42 PM , Rating: 5
Here is a great example set by two states. You cannot pump your own gas (NJ and OR).

RE: Perfect example...
By tayb on 3/20/2014 5:01:41 PM , Rating: 5
And yet NJ has lower gas prices than NY. It's funny how it works out sometimes.

RE: Perfect example...
By Keeir on 3/21/2014 12:14:00 PM , Rating: 3

New York has ~50 cents per gallon tax (top in the country)

New Jersey has ~15 cents per gallon tax (near the very bottom)

RE: Perfect example...
By FaaR on 3/21/2014 11:06:46 AM , Rating: 5
If your car runs on electricity, can you plug it in yourself or must someone else do that for you...? :P

Americans are so silly sometimes.

RE: Perfect example...
By overlandpark on 3/26/2014 11:03:46 PM , Rating: 2
Not all of them, just the tards that want the government to do everything for us. Most clear thinking people know that once the government tries to do something, they will screw it up every time.

RE: Perfect example...
By DT_Reader on 3/20/14, Rating: 0
RE: Perfect example...
By tayb on 3/20/2014 5:18:09 PM , Rating: 5
Disagree. Dealership model jacks up the price of the vehicle in exchange for basically nothing. I don't need a dealer to sell my used car or secure financing.

Bottom line is if the dealership model isn't going anywhere why not let auto manufacturers sell directly to consumers? Let the free market decide if dealerships provide any value to consumers. (Hint, they don't.)

Once consumers learn that with a little patience they can save a few thousand dollars the dealers will go bankrupt pretty quickly.

RE: Perfect example...
By JediJeb on 3/20/2014 5:51:51 PM , Rating: 2
Perfect example is when the Chevy Volt first came out, dealerships were charging sometimes double the MSRP just because they had the only one for sale in a region. What most people don't realize is that even the sticker on the window has a built in profit for the dealer, and it is quite a nice one at that. It just makes the average purchaser feel like they are beating the dealership when they talk them down a little from that price, all the while the dealership is still raking in the money.

My cousin worked at a Ford plant so I always knew the dealer cost of any vehicle I went to look at, it was so funny when you hit a dealer with exactly what it cost him as your starting point in price haggling.

RE: Perfect example...
By Reclaimer77 on 3/20/2014 6:06:38 PM , Rating: 1
I don't think that's a very good example. The dealer was just responding to supply and demand. To suggest a direct-sales dealer wouldn't do the same in that situation, is hard to believe.

It's not like Ford and Chevy and the rest aren't motivated to make as much profit from you as possible. Dealerships or no, that's not going to change.

RE: Perfect example...
By Keeir on 3/21/2014 12:25:19 PM , Rating: 2

But in the case of the Volt, the initial price gouging had a cost to the model and the company. A cost that the dealership was not fully exposed to... in the case of a direct-sales store, the priorities of the store are more aligned with the priorities of the larger company. Its likely in the situaiton of the Volt, a direct-sales store would have held firm to the MSRP and tried other upsale techniques.

RE: Perfect example...
By Keeir on 3/21/2014 12:22:03 PM , Rating: 2
You misunderstood his comment.

Brick and Morter car stores won't be completely disappearing anytime soon.

While many people consider cars a "commodity", most people also do not have good spacial reasoning/etc. The ability to go and see in person the car you plan to spend a huge chunk of money on will remain in demand for some time. The need to have a place where warranty work/etc is accomplished will not go away.

While a direct-sales model will reduce the number of local jobs, its not a case where all the jobs will disappear. Its likely 50-75% of the working jobs will remain (clearly number of wealthy car dealership owners will nealry disappear).

RE: Perfect example...
By Mint on 3/25/2014 3:34:18 PM , Rating: 2
I think dealership owners are the ones who will take the biggest hit, and overall employee level won't change much. They're the ones whose jobs become redundant with manufacturer owned/managed stores, and we'll probably see manufacturers add more presence in areas that aren't financially viable as independent dealers.

For EVs specifically, service revenue will of course go down. That will cost some jobs, but for the average Joe those savings will be spent elsewhere and create new ones.

RE: Perfect example...
By Philippine Mango on 3/20/2014 3:06:38 PM , Rating: 2
How exactly does having company owned dealerships cost jobs?? That doesn't make any sense since you would still need dealerships for gasoline powered vehicles. Now saying that electric vehicles will cost jobs, that's a different story.

RE: Perfect example...
By bah12 on 3/21/2014 3:32:24 PM , Rating: 2
Sorry for the late response, but essentially because you won't have 3 chevy dealers in a medium sized town.

RE: Perfect example...
By Mint on 3/25/2014 3:47:21 PM , Rating: 2
I don't see how you can make that conclusion. Companies want customers to take their cars out for a spin. If they don't replace independent dealers with manufacturer owned showrooms, they will lose sales.

Some areas may get more jobs, and some may lose them, but overall there shouldn't be a huge impact. Competition between automakers (which is vicious, IMO, given their slim profit margins) will pass on dealership owner profits to the consumer.

What's more is that dealers can band together and strike a exclusive deal with manufacturer. If they make a reasonable offer, it will be cheaper for the manufacturer to accept rather than to open thousands of showrooms to replace the dealers.

RE: Perfect example...
By Hakuryu on 3/20/2014 3:25:30 PM , Rating: 2
I'm perfectly fine with putting all those scam artists out of business. Sure there may be a few honorable car salesmen, but most are just out to get as much money as they can, customer be damned.

I remember buying my first car, looking at a used 85 Accord (in 1994). "That is the best deal we can do you for you", the dealer said repeatedly, @ $4999.

Left, was in a store, and grabbed a paper... that EXACT car at the dealership I just left was on 'sale' for $2999.

RE: Perfect example...
By maxgxl on 3/20/2014 11:11:37 PM , Rating: 4
There would be loads of jobs impacted by that model. So it isn't completely fair to chastise the model, because it does create jobs just useless ones.

The biggest mistake people make when looking at situations like this is forgetting it's a zero-sum game (the trickle down). The money that would have been extracted by the dealers can now be spent elsewhere by the consumer at their discretion, creating more jobs elsewhere, and arguably more useful jobs which give the consumer better value for money.

Sure there's some upheaval in the transition, that's the price for progress.

RE: Perfect example...
By inperfectdarkness on 3/22/2014 12:24:24 PM , Rating: 2
Jobs can neither be created or destroyed (relative to a given population size). They can only transition to another type of work.

Dealerships going out of business means:

-More jobs for mechanics who work at other venues (since there's no dealerships to service cars).

-More sales jobs at the manufacturer

-More website maintainers--working for directly for the manufacturer

etc, etc, etc. Stop crying over jobs being lost to progress. Failure to make oneself relevant to the work world has onus on the individual. Period.

RE: Perfect example...
By SAN-Man on 3/24/2014 9:35:10 AM , Rating: 2
No one says dealerships CAN'T continue to exist, many automakers are happy with this arrangement. Allowing Tesla to sell direct (and any other car dealer) doesn't mean every dealership is instantly going to close.

Tesla wants to sell direct. Other car companies do not, their core business is engineering and manufacturing and they have chosen to let the retail sales be handled by third parties.

Letting Tesla sell direct won't stop dealerships from existing or kill jobs. What an insane argument.

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