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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 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.


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