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Tesla and Texas

Tesla Motors currently can’t sell its cars in Texas via its preferred model of direct sales to consumers. Its attempts to modify state laws to allow for direct sales went nowhere last session, blocked by fierce opposition from the Texas Automobile Dealers Association. They’re now looking for a place to build their new batteries. Why would they choose to do that in Texas given all that?

Now, those restrictions, which rank among the country’s strictest, could harm Texas’ chances of landing the $5 billion lithium-ion battery plant Tesla plans to construct by 2017.

In late February, the company announced that Texas was one of four states — along with Arizona, Nevada and New Mexico — in the running to house the wind- and solar-powered “gigafactory,” which Tesla says would span as many as 1,000 acres and employ about 6,500 people.


Tesla officials, however, have indicated that Texas’ tough restrictions on the company’s sales do not help the state’s case.

Alexis Georgeson, a company spokeswoman, said she could not specifically address how Tesla would weigh various factors in its selection process, but she said comments from Diarmuid O’Connell, Tesla’s vice president of business development, properly sum up Tesla’s view of Texas’ restrictions.

“The issue of where we do business is in some ways inextricably linked to where we sell our cars,” O’Connell told Bloomberg this month. “If Texas wants to reconsider its position on Tesla selling directly in Texas, it certainly couldn’t hurt.”

Texas laws prevent car manufacturers from selling directly to Texas consumers, and they require manufacturers to sell their cars through tightly regulated franchised dealers.


Tesla currently showcases vehicles at “galleries” in Austin and Houston, but state law prohibits employees from discussing the price or any logistical aspect of acquiring the car. That means prospective buyers in Texas must order the car from Tesla’s headquarters in Palo Alto, Calif. The cars are then delivered in a truck with no company markings, per Texas law, and customers even have to unwrap their new automobiles themselves, because the law prohibits Tesla’s in-state representatives from doing, saying or touching anything related to selling or delivering cars.

“It’s incredibly inconvenient,” Georgeson said. “Really what they are doing is making it tougher for customers.”

See here, here, and here for the background. I drew an analogy to microbreweries and their multi-session fight to get antiquated beer distribution laws changed. I still think that’s an apt comparison, but if it takes Tesla as long as it took the microbrewers to achieve their goal, it’ll be well past the time Tesla intends to have that factory up and running before they succeed. My guess is that they’d like some assurance of a quicker resolution before they’d be willing to commit to building here. To his credit, Rick Perry supported HB3351, the bill that would have done the overhaul Tesla wanted. Wendy Davis did not say she would support such a bill in 2015 – I seriously doubt she’d veto it if it passed on her watch – though she supported the general idea. Greg Abbott typically had nothing to say. So we’ll want to keep an eye on what individual legislators and candidates are saying. My guess is that Tesla is in for a fight that will take more than one more session to resolve. Whether that affects their decision about where to put that battery gigafactory remains to be seen.

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