By on February 19, 2015

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As Tesla gears up to tackle Texas’ direct-sales ban during the state’s 2015 legislative session, dealers are begging for a shot to sell the automaker’s EVs.

The Texas Tribune reports several Texas dealerships have approached Tesla about selling its wares, claiming they would take on the risk of selling a niche premium EV if given the chance. According to Texas Automobile Dealers Association president Bill Wolters, those dealers were rebuffed:

This is such a unique situation in which Elon Musk doesn’t want to have competition from other makes.

Currently, Tesla has galleries in Austin, Dallas and Houston, where customers can see the Model S, but cannot buy the car directly from the gallery, turning to the company’s website to complete the process as a result.

While dealers believe the direct-sales ban gives consumers a chance to buy the car they want anywhere within Texas — instead of having to drive to a few select cities where automakers would focus their efforts if given the opportunity — Tesla says the ban threatens to undermine its success in the state. CEO Elon Musk adds that franchise dealers would ultimately fail in selling his company’s EVs, citing the traditional model’s main source of revenue — maintenance — as where the struggle would occur.

Meanwhile, Tesla is spending between $625,000 and $1.18 million on 21 lobbyists to persuade lawmakers in Austin to consider legislation that would allow for direct sales. No bills have come up regarding the issue thus far this session, through Rep. Eddie Rodriguez of Austin is working on a proposal that would grant the automaker and other EV-only manufacturers the right to sell directly to Texas consumers; a similar proposal by Rodriguez was rejected last year.

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54 Comments on “Tesla Pushing For Direct Sales In Texas, Dealers Wanting A Shot To Sell...”


  • avatar
    Lie2me

    Hey, snap out of it! This is Texas go get yourself an Escalade with the license plate…

    “MMMGAS”

  • avatar
    energetik9

    I don’t know about anyone else, but Tesla’s effort to break the dealership model really makes me want to root for Tesla. As a consumer all it does is create a very positive assosciation for the brand.

    • 0 avatar

      I feel the same, it does create a positive image for them.

      Also, I find it extremely ironic that a state seemingly committed to all-out freedom is amongst the most locked down, market-wise (and in other forms, but that’s a discussion for another time). Texas freedom my fanny.

    • 0 avatar
      highdesertcat

      energetik9, me too! I’m no a fan of EV-anything for myself but I can see where some people can be enamored with them IF the amount of driving they do is less than the range of the PEV they choose.

      But in Dallas, Houston or San Antonio, a driver can easily exceed 150 miles a day of in-city driving so I don’t see where limited-range PEVs would be very popular there.

      • 0 avatar
        PrincipalDan

        Yup, cars should be like laptops/tablets/desktops. Go to the website – pick the basic model, add options, order, and wait for delivery.

        Ahhhhhhhhhhhhh nirvana.

        As soon as an electric can go 400-500 miles on a charge at 80 mph running the accessory systems (like heat and AC) they’ll have my attention. Given where I live to go to a major city like Albuquerque and return is a 400 mile round trip.

  • avatar
    jaydez

    I wonder how many months, years, etc. it will take dealers to realize they are looking more and more like the bad guy as they try to fight a hugely popular brand from selling its products the way it wants to.

    • 0 avatar
      highdesertcat

      Dealers never see themselves as bad guys. Theirs is to part a customer with as much of his or her money as they can.

      Dealers are in it to win it. Dealers are in the game for padded profit. Tesla wants to eliminate that unscrupulous middleman and sell directly to Tesla’s buyer by having one fixed price for everyone. With dealers the same car can have a different price for different customers..

      I believe that a Tesla customer will have a much better buyer experience if they deal directly with Tesla.

      When I bought my daughter a 1996 Saturn we enjoyed a great buying experience. No haggling. My daughter checked-off the stuff she wanted for her Saturn, the factory built it, and the dealer delivered it. Right on schedule. Right on time.

      What’s not to love?

  • avatar
    bikegoesbaa

    “While dealers believe the direct-sales ban gives consumers a chance to buy the car they want anywhere within Texas”

    If dealers are value-added and providing something that consumers want then they will have a solid market with or without a ban on direct sales.

    It’s commendable that the auto dealers of Texas are so concerned with what the customers want. In keeping with that logic, let’s structure the laws to give the customers as many options as possible (including direct sales) and see which ones they prefer.

    • 0 avatar
      SCE to AUX

      “It’s commendable that the auto dealers of Texas are so concerned with what the customers want.”

      That’s doubtful. They’re just trying to cash in by pulling a Jedi mind trick on Elon, but he is a Jedi master himself.

      Did they really think he would fall for this overture?

    • 0 avatar
      ect

      “If dealers are value-added and providing something that consumers want then they will have a solid market with or without a ban on direct sales.”

      As Deep Throat famously said, “follow the money”. According to NADA, the average dealership earns an ROE of 32% – which is phenomenally high. In most mature industries, companies are happy to get 20%.

      In a free market, dealers would make less money. So it’s natural that they will spend heavily to keep their privileged position and protect themselves from competition. Tesla’s $1 million is probably chump change compared to what the Texas car dealers lay out to buy politicians.

  • avatar

    TESLA breaking the dealership model is similar to Apple creating the Apple store.

    Both of these companies focus on revolutionizing customer service, self-support and the purchasing experience, but this model has major cons as well.

    TESLA (Roosevelt Field) was next door to the Tourneau store and on top of Roosevelt Field mall steadily declining from what used to be a “posh” “luxurious” “upper-class” mall, the Tourneau store suffered a smash-and-grad robbery (on Youtube to see). Many upper-class buyers refused to shop at RF Mall anymore.

    That TESLA moved to Syosset and are located behind a truck stop.

    Less visibility.

    On top of that, it feels even more gimmicky and more like a “fly-by-night” operation than a true “car dealership”.

    It feels almost as if you could buy a Tesla model S right out of a vending machine – something that a car dealership completely doesn’t feel like.

    • 0 avatar
      Astigmatism

      Interesting – Roosevelt Field Mall seems like a weird place for a Tesla dealership. The last time I was there, I decided it would be the last time I ever went there, because it was overrun by 20,000 rioting tweens trying to get a peak of Justin Bieber (this is before he was known to non-tweens). Not the sort of place I’d shop for a luxury car.

      In Jersey they’re in the Short Hills Mall; I’d pretty much just assumed they’d be in Miracle Mile on Long Island. I wonder why they’re not.

  • avatar
    Pch101

    “This is such a unique situation in which Elon Musk doesn’t want to have competition from other makes.”

    This is a large part of what motivates Musk. He wants a sales staff that will focus on his product, while a dealership’s motivation is to manage inventory, no matter which company built it. Turning Tesla shoppers into used 5-series buyers does not help Tesla; I would imagine that this is the kind of problem that Fisker experienced.

    • 0 avatar
      mcs

      It also avoids situations like what I’ve seen at Kelly Nissan in Woburn MA. They like to use the Level 2 and Level 3 parking charger spaces to display non-electric used cars. If you want to charge there, you have stretch the line between the two used cars and park as close to their bumpers as possible in order to charge. It also sends the message that charging won’t be easy to potential Leaf buyers. Nissan has very little control over this idiot.

      There’s also the case of Bouchard Nissan in Lancaster MA. They’ve decided to limit Level 3 charging to customers only. Who needs a Level 3 charge when they’re near home except for rare occasions. Again, that wouldn’t happen with Tesla.

  • avatar
    jaydez

    Crowley Ford in Plainville CT has 1 charger. Right behind the charger is a sign that says “parking for service shuttle only”… The shuttle is a Flex this month and it is always parked there unless it’s out picking up or driving someone off. If you park your car next to it to charge you are blocking the service bay drop-off entrance.

  • avatar
    healthy skeptic

    Tesla should be free to sell direct anywhere in the nation, without any restrictions, period. It’s ridiculous for the law for forcibly inject a middleman into a process that neither the vendor nor the customer wants.

    I hope they take this fight federal at some point. It would have the added benefit of avoiding the outsized clout that dealers wield at the state and local level.

    • 0 avatar
      Pch101

      The feds have no jurisdiction here. Car dealers are a state and local matter.

      • 0 avatar
        mcs

        There are Federal anti-racketeering laws that potentially could be applied.

        • 0 avatar
          Pch101

          Oh, please.

          • 0 avatar
            mcs

            >> Oh, please.

            Racketeering includes interference with commerce. We have a third party demanding payment in order to allow Tesla to sell their goods…

          • 0 avatar
            Pch101

            Not quite.

            But you don’t have to believe me. If you have a friend who is an attorney, then go ask him or her why it isn’t racketeering.

            (Hint: There are state laws that regulate dealers, including licensing requirements. Dealers can only lobby; it’s the legislature that passes laws.)

      • 0 avatar
        rolosrevenge

        A Tesla comes from California, this is an interstate commerce issue over which the Feds do have jurisdiction.

        • 0 avatar
          Pch101

          You guys are really eager to climb out onto some weak limbs with this one.

          • 0 avatar
            healthy skeptic

            @Pch101

            >> The feds have no jurisdiction here. Car dealers are a state and local matter.

            What part of the Constitution says that? I must have missed the part where the Founding Fathers put in a mention of car dealers.

            Historically, car dealer laws have been a state and local matter. Thanks to the Constitution’s supremacy clause, federal law is free to supersede it at any point, for car dealers or any other subject.

            I for one favor Congress passing federal law that allow manufacturers to sell direct.

          • 0 avatar
            Pch101

            If you want to try to turn this into a constitutional debate, then you might want to start with Article 3. Most of you who post here seem to have skipped it.

            Franchising is perfectly legal. So is having states issue business licenses and passing their own laws. Most stuff in America is handled at the state level, and this is no exception.

          • 0 avatar
            healthy skeptic

            I’m not disputing that franchising is legal, nor that most stuff in America is handled on the state level. I’m simply saying that nothing bars federal law from intervening on this matter. Historical precedent and your own opinion are not legal restrictions.

            As for franchise law in general, never mind card dealers, I find it reprehensible that a franchise system can be forced onto a company when neither the company nor its customers want to use it. I think such practice should be outlawed across the nation. It would be nice if the states all forbid it themselves, but they don’t, so federal law would fix the matter.

          • 0 avatar
            Pch101

            I don’t think that having a few guys complaining on an internet forum is going to result in a massive power transfer re: automotive retailing from the state to the federal level. Nobody who matters actually wants this.

            Major automakers want to franchise, so that aspect of what you’re saying is just wrong. It was their idea in the first place.

          • 0 avatar
            healthy skeptic

            And even without protectionist laws, major OEMs are still free to franchise. I have no problem with that, *if* the OEM wants it. I’m not calling for a ban of franchising in general–far from it.

            Ideally, franchising should be a win-win-win situation. A win for the manufacturer, a win for the middleman, and a win for the customer. But what if it only benefits the middleman? And even more, what if the middleman doesn’t exist in the first place, and wants to be shoehorned in by law? That’s a parasitic business model if ever there was one. I think that’s a bad thing.

            Okay, fun arguing, but I gotta go get my day on. Maybe I’ll be back later.

  • avatar
    carguy

    If car dealers are so confident that they are adding value to the car buying process, why do they insist on legislation that makes not dealing with them illegal?

    Dealers have become little more than government mandated middlemen who rely more on lawmakers and lobbyists for their existence than actual customer demand for their services.

    • 0 avatar
      Pch101

      Car dealers are million dollar businesses that have franchise agreements with multi-billion dollar global companies.

      Car dealers may be jerks, but they are the little guy in this OEM-dealer relationship. They don’t want to be crushed; if you were a dealer with your store on the line, you’d want the same thing.

      • 0 avatar
        S2k Chris

        But the compromise is so simple and obvious that its failure to be adopted stupifies me (to some extent): only allow direct sales by car makers that do not have franchised dealers. DUH.

        • 0 avatar
          Pch101

          The dealers don’t want a slippery slope that chips away at their leverage with the major OEMs. This isn’t really about Tesla, and they gain nothing from “compromise.”

          • 0 avatar
            healthy skeptic

            It’s nice that the car dealers have their own selfish interests in mind. They certainly have a right to look out after their interests, as does everyone.

            Which does *zero* to convince me why they should be granted protectionist laws. In my eyes, if they want those laws, they’ll need to show how the laws serve a greater good. I’ve heard all their arguments, and don’t buy any of them.

          • 0 avatar
            Pch101

            I am simply explaining why they want these laws and why compromise does not serve them. You don’t have to like it.

      • 0 avatar
        carguy

        @Pch101: I don’t argue here the dealers are not the “little guy” but little or not, if they don’t add value to the process they have no right to exist. If customers really love car dealers then they will continue to buy from them – if not then they are just in the way.

        The two models are also not mutually exclusive – you can have a mix of both just like it is int he computer industry. Dell sells direct but HP doesn’t.

        • 0 avatar
          Pch101

          “if they don’t add value to the process they have no right to exist”

          Whether they add value or not for you is irrelevant to their contract and legal rights. Their “right to exist” comes from the business relationship between the franchisor and franchisee. If you dislike it, then your recourse is to shop somewhere else.

          “Dell sells direct but HP doesn’t.”

          A key difference is that HP retailers sell all kinds of stuff, while a car dealer usually dedicates a store to one given brand. One is an all-or-nothing franchise, the other is just a distribution agreement.

          • 0 avatar
            healthy skeptic

            >> If you dislike it, then your recourse is to shop somewhere else.

            But that’s the point: you have no resource under the current law. You have to buy a car from a dealer, like it or not.

            As for Dell vs. HP, another key difference is that HP didn’t get a bunch of state laws passed that ban Dell from selling direct.

          • 0 avatar
            Pch101

            You can buy a used car if it really that matters to you. But if you’re smart, it shouldn’t really matter to you at all.

            We’re back to the same old misconceptions — you guys seem to be convinced that it would be cheaper if you bought things direct. This is the reverse of how free markets work — you end up with lower prices if retailers compete against each other for your money.

            Tesla sells everything at MSRP. I’d rather haggle for a discount, thanks.

            Re: car dealers, their complete dependency on a relationship with the franchisor is absolutely different from an office supply chain that includes HP among its many offerings. The dealer has one OEM’s products to sell and understandably doesn’t want his supplier to become a competitor or to try to squeeze him out of a successful location.

      • 0 avatar
        ect

        Car dealers are far more profitable than the OEMs they represent, and far more profitable than other companies in mature industries.

        They can generate this profit because state legislators have been paid to deny a free market in new-car sales.

        Their stores are not on the line in this fight, only the excess profit (“rent” in economic terms) that their protected position allows them. This rent is paid by consumers, who deserve to be protected from this gouging.

  • avatar
    healthy skeptic

    (Meant for Pch101 reply above. Grrr, I hate when I miss the reply button on TTAC.)

    Okay, fair enough. But I don’t think anyone is disputing why the car dealers favor these laws. The whole debate is whether they’re good (or destructive) for everyone else. Meaning manufacturers, customers, the general economy, etc.

  • avatar
    ClutchCarGo

    Given the near religious fervor some well-heeled Tesla owners feel for the brand, I still think that Musk could do an end-run around the franchise laws. A true believer would offer a token amount to establish a franchise, and the franchise rules would be so restrictive yet offer so little monetary return that no normal businessman would sign on. Tesla would effectively operate the dealership yet still be in compliance with state laws.

    • 0 avatar
      joeaverage

      Could they not do something like the European car companies do (did?) where they fly in the customer to Tesla HQ, make a big fuss about the purchase and you drive the car out of the factory? Then ship it to their home state.

      I believe there are not any laws preventing me from buying a car from outside my home state???

      I love the many ways that Tesla is shaking up the archaic car industry in the USA. Amazing that I hear conservative friends complain about the “socialist Europeans” but yet, the Europeans seem to have more freedoms than the average “Land of the Free” Americans.

      Frankly – screw the dealerships. Why should the law give them the ability to screw the customer with so little recourse? I’d like to see all Euro-zone and Japanese inspected vehicles be allowed into the country and not be subject to the dealer model or NTSHA/EPA regulation. If EuroNCAP or TUV says its good – then it’s good. That i far, far mmore than my home state inspects.

      Let me order a Peugeot 106 if I want one via the web. Sales/service/parts are my problem. NOT a problem as I have maintained my own import and domestic vehicles my entire life without dealer support which has been consistently overpriced (100% plus!).

  • avatar
    Ion

    Sorry I’m going to be the lone conservative here and ask why tesla gets a free pass to break the rules and do as they please. Just Because the’re environmentally friendly doesn’t mean every state has to bow down to them.

    • 0 avatar
      Astigmatism

      If you’re really going to be a conservative, you should be asking why the government is artificially constricting the free market in the first place.

    • 0 avatar
      healthy skeptic

      @Ion

      An honest question deserves an honest answer.

      They get a pass because, unlike all the other manufacturers, they don’t have any existing franchised dealers in place to compete with. That is (supposedly) the point of those dealership protectionist laws, to protect dealers from having to compete with their own suppliers.

      Tesla isn’t breaking the rules, Rather, due to their unique situation, the rules simply don’t apply to them.

  • avatar
    TrailerTrash

    Oh God All Mighty!
    Another TESLA story!!!!
    AWESOME!

  • avatar
    shaker

    Made a deal on the Internet – looked good!

    Went to the dealer, spent 2 1/2 hours while the car was prepped –

    Then went to the “Hell Office” (where you have to refuse add-ons, extended warranties, etc by signing “opt-out” forms)

    Lost about $400 on my low-mileage trade vs KBB value

    Was presented the loan application to sign; noticed that there was a $300 “Documentation Fee” added to the loan. A notary would have charged $75 or less.

    Blinked a couple of times, signed the papers, and left in my new car

    Thinking: Nice Car – (nagging thought) “…but I could have done better on that deal…”

    • 0 avatar
      joeaverage

      Ah but we’re told that dealers represent competition and lower prices! No, no they don’t. They represent gouging and misrepresentation. Outright lies sometimes. They are but a middle man between me and the factory. I’d be MUCH happier driving our old car to the new car factory and awaiting our new car at the factory office and then driving both home and either keeping the old car or selling it myself.

      I look forward to all the ways that tesla can disrupte the “free markets” we have here in the USA. “Land of the Free” I’m repeatedly told. Sometimes that rings about as true as some of the slogans I hear about from North Korea and the old USSR. We still have the best country in history I’m sure but there is alot of BS in what we are told about our great country.

  • avatar
    ihatetrees

    It’s sad that even in rock solid red state TX, rent-seeking loser car dealers have more juice than consumers.

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