Tesla trying again to change Texas rules
It seeks to sell cars directly to drivers, a business model that Texas prohibits
Tesla Motors again is backing bills to overhaul regulations that currently prevent it from selling its vehicles throughout Texas.
Tesla Motors, stymied twice in the Texas Legislature in recent sessions, is championing a more sweeping approach to dismantling regulations that prevent it from selling its electric vehicles throughout the state.
The company is backing a pair of bills introduced in the state House and Senate earlier this month that would allow automakers to sell vehicles directly to drivers, a business model long prohibited in Texas. For years, consumers have had to purchase cars and trucks through franchised dealerships.
The bills mark the third attempt in as many legislative sessions to relax the regulations, this time with a broader proposal that would permit all types of manufacturers to engage in direct auto sales. Past bills have proposed narrower exemptions for electric- and battery-powered vehicles and manufacturers with limited operations in the state.
“I’m not a fan of carve-outs,” said state Rep. Jason Isaac,
R-Dripping Springs, who introduced the current bill in the House. “This, to me, is a free-market approach.”
His bill hasn’t yet moved to committee. The companion bill, filed by state Sen. Bob Hall, R-Edgewood, was referred Tuesday to Senate business and commerce committee.
The proposals are in for another legislative battle. Dealerships across Texas have consistently fought changes to the state franchise laws that grant them exclusive rights to supply vehicles to drivers.
The state’s auto retail sector, which includes more than 1,300 franchised dealerships in 284 cities and towns, is well-represented in Austin. Major groups and companies, including the Texas Automobile Dealers Association and Houston-based Gulf States Toyota, have contributed millions of dollars to lawmakers during past campaign cycles.
Wyatt Wainwright, president of the Houston Automobile Dealers Association, has joined many local dealers at the Capitol to meet with legislators and explain their opposition to the bills. Dealerships, he said, battle for consumers with low prices and deals and provide access to services such as maintenance and financing.
“The franchise system creates competition, and that’s what saves consumers money,” he said.
The state auto dealers group is again arguing that Tesla could set up a dealership network in Texas, as other manufacturers do.
Little incentive?
But Diarmuid O’Connell, Tesla’s vice president of development, said traditional dealerships have little incentive to sell high-tech cars that aren’t as familiar to drivers. Companies that don’t produce large numbers of vehicles also are more likely to benefit from cutting out the middleman and setting their own retail prices, he said.
Tesla, which has also ramped up spending in Austin since first approaching the Legislature in 2013, maintains that consumers should be allowed to choose their means of purchasing vehicles, whether from manufacturers or traditional dealerships. O’Connell noted that few other retail sectors are similarly regulated.
“Consumers should have a right to transact with the companies they please,” he said. “It shouldn’t be dictated by the government.”
Texas drivers aren’t barred from buying Teslas, but they’re subject to some restrictions when ordering them. As it stands, the company is allowed to display its vehicles only at “galleries,” such as the one it operates at the Galleria.
Because these are not considered dealerships by law, associates there aren’t allowed to provide information about pricing and purchasing. The company also faces some limitations in its ability to deliver and service vehicles ordered by Texas customers.
Republican traction
This year, the proposals to roll back those restrictions have found greater traction among Texas Republicans, who outlined their support for direct-toconsumer sales in their 2016 party platform. On Wednesday, several grass-roots conservatives groups submitted a letter to Gov. Greg Abbott and other lawmakers echoing that sentiment.
O’Connell declined to weigh in on whether he anticipates the measure to pass this session. But he said he considers success “inevitable” at some point.
“There’s sort of a groundswell here,” he said.
Parallel debates have played out in Michigan, West Virginia and Connecticut, which also prohibit Tesla from selling directly to consumers. The company has similarly challenged the regulations in those states.
To Isaac, the significance of the bills introduced in Texas transcends any one manufacturer. Opening the market, he argued, could provide a greater foothold for tech-driven companies with smaller market share, such as automated vehicle makers.
“We’re undergoing a transformation in how our transportation system works,” he said. “If our current model stays in place, we will stifle technological development.”