By Terrence Henry, KUT News for StateImpact Texas
AUSTIN – There have been a number of retail businesses that have opened up in Texas recently. Trader Joes, H&M, even In-N-Out Burger. But one company with the Lone Star State in its headlights has run into trouble selling its product here: Tesla Motors, which makes of luxury electric cars.
“So I’m at the Tesla showroom at the Domain in Austin. And it looks kind of like a mix between a car dealership and an Apple Store. And right in the middle of the showroom here is the Tesla S electric sedan.”
“So I’m in a pretty spacious cabin, looking at this giant flat screen the size of two iPads, which is the control center. The interesting thing is, here at this showroom, it’s not a dealership. We actually can’t go out for a test drive. And while I’m sitting in this cabin, if one of the people working here was showing me the car and I asked them how much it costs, they actually wouldn’t be allowed to tell me that either. Because of these franchise laws.”
ELON MUSK: “Going the traditional path through dealer franchise system, we’d be at he back of the bus. For us it’s a matter of life or death.”
That’s Elon Musk, co-founder and CEO of Tesla Motors. He was at the Capitol this week to ask a favor of the legislature: Let Tesla play by different rules than all the other car dealerships in the state.
MUSK: “It’d be cheaper to go the franchise route, we just don’t think the cars would get sold. There’s no example of doing it effectively from a new brand from a franchise system.”
Musk, and dozens of others, were there to support a bill by State Representative Eddie Rodriguez from Austin. It would allow Tesla to directly sell its electric cars to consumers. Currently, the law in Texas and many other states requires cars to be sold through franchise dealerships. So even though Tesla has stores here, you’d have to order a car online. Wanna test-drive one? You’ll have to fly to California.
Tesla says it’s a unique business, that shouldn’t be treated like other car manufacturers. Testifying against the bill was Carroll Smith with the National Automobile Dealers Association.
CARROLL SMITH: “They’re saying they want to play outside of the rules. There’s nothing about their model that doesn’t work in our franchise system.”
Tesla counters that if it has to use franchise dealerships it will go out of business. First, Tesla doesn’t sell a lot of cars– traditional dealerships have high volumes. Secondly, its cars don’t need a lot of service, where dealerships make a lot of their money.
Bill Donnelly is a lawyer for Tesla. He brought in a Tesla motor to the hearing to show why Tesla doesn’t make much money off service. It was about the size of a ceiling fan.
BILL DONNELLY: “There’s not much service to be done. No hoses, no belts, no oils. That’s it. That’s all that powers a Tesla.”
Auto dealers worry that if the state makes an exception for Tesla, big vehicle manufacturers will find a way to drive through the law as well. The bill is still pending in the committee. But Rodriguez will likely bring it up again soon.
EDDIE RODRIGUEZ: “On a personal note, I’d like to say I’ve driven one of these cars and it was awesome. But a little out of my price range.”
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