Houston Chronicle

Tesla trying again to change Texas rules

It seeks to sell cars directly to drivers, a business model that Texas prohibits

- By Katherine Blunt

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.”

 ?? Hearst Connecticu­t Media ?? Tesla is backing two bills introduced in the Legislatur­e.
Hearst Connecticu­t Media Tesla is backing two bills introduced in the Legislatur­e.
 ?? SeongJoon Cho / Bloomberg ?? Tesla vehicles are at a charging station. Texas drivers aren’t barred from buying Teslas, but they’re subject to some limits when
SeongJoon Cho / Bloomberg Tesla vehicles are at a charging station. Texas drivers aren’t barred from buying Teslas, but they’re subject to some limits when

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