Tesla Motors Lobbies Texas Legislature To Allow Direct Sales

By · April 10, 2013

Tesla Model S

Tesla store in Austin, Texas.

Should automakers be allowed to sell cars directly to the public? Or should they be forced to sell cars only like traditional dealerships? This question is at the crux of legislation proposed in the Texas Legislature (HB 3351/SB 1659) which would carve out a narrow exception allowing Tesla Motors to sell its Model S all-electric sedan directly to the public. This morning Elon Musk, Tesla's chief executive, held a press conference in Austin, following a legislative hearing on Tuesday, making the case that electric car sales are inherently different than gasoline car transactions.

The case Musk makes is that electric cars cannot be sold side-by-side with gasoline cars because of the relative sales volume. Existing car dealerships have "an inherent conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars." Why? It's because the bread-and-butter of car dealerships are gasoline car sales, and service, making the dealerships unable to "explain the advantages of going electric without simultaneously undermining their traditional business."

In most U.S. states Tesla has been successful in setting up education centers, sales and service operations. Some exceptions came in Massachusetts and Minnesota, but those cases are in the process of being resolved. Speaking at the press conference today, Musk described Texas law as the most restrictive in the U.S. for selling cars.

Double Sales By Selling Direct

“The bills in question, House Bill 3351/Senate Bill 1659, filed by Sen. Craig Estes (R-Wichita Falls) and Rep. Eddie Rodriguez (D-Austin), would permit U.S.-based manufacturers of 100% electric- or battery-powered vehicles to sell directly to Texas consumers. It’s a very limited classification of exception to current laws and does not harm any existing dealer franchise.”

Official Tesla Statement

Musk specifically called out the fate of Coda Automotive and Fisker Automotive as examples. Both companies are in deep financial trouble, with Fisker reportedly preparing to file bankruptcy any day. Both EV companies sold cars through traditional automobile dealerships. By contrast, Tesla is selling directly to customers through company-owned sales channels, with much better success. (Of course, a Model S and a Coda sedan are very different vehicles.)

Texas is an important market for Tesla Motors. Musk disclosed that, so far, Texas has represented less than 10 percent of Tesla's sales, while Texas itself represents 10 percent of the total U.S. vehicle market. Musk suggested that if the proposed law were passed, and Tesla were free to sell directly in Texas, that sales in the Lone Star state would double.

“Our goal is to bring electric vehicles to the mass market by telling our story, educating the public about electric vehicles, and delivering the best car in the world,” said Musk. “The ability to sell cars through Tesla-owned stores is important for sustainable transportation and is the best chance a new electric car company has of succeeding." Musk believes that direct sales of EVs would not conflict or change the dealer model for gasoline-powered cars.

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