Print 57 comment(s) - last by senecarr.. on Apr 3 at 9:28 AM

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

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: Perfect example...
By DT_Reader on 3/20/2014 1:41:34 PM , Rating: 0
The reason Tesla wants to be allowed to operate Tesla stores is the same reason the dealership business model isn't going away: People want to walk into the showroom and drive away with a new car today. They don't want to wait a week for delivery of a car, even if it's custom built just for them. There are rare exceptions, such as the Avanti, but these are high-end vehicles like the Tesla. For Tesla to go mass-market they're going to need instant delivery of pre-made vehicles. Ford and Toyota need that, too, so Ford and Toyota dealerships aren't going away anytime soon. They may convert to factory-owned stores, but the number of people employed won't change much.

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.

"It's okay. The scenarios aren't that clear. But it's good looking. [Steve Jobs] does good design, and [the iPad] is absolutely a good example of that." -- Bill Gates on the Apple iPad

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki