• Apr 3, 2013
Elon Musk, pioneer of the Tesla Model S above, hopes to... Elon Musk, pioneer of the Tesla Model S above, hopes to bring the electric car to Texas residents. (Photo courtesy Tesla).
Tesla Motors CEO Elon Musk has turned a profit on selling luxury electric vehicles and his rocket company sent the first private payload to the International Space Station.
Those feats may seem like nothing compared to his latest venture -- taking on the often intractable Texas state legislature. Lone Star State lawmakers, backed by Texas car dealers, are fighting Musk's plan to sell electric cars from company-owned stores rather than independent dealers.

State franchise laws go a long way toward benefiting car dealers over car companies and consumers. Car dealers spend a great deal of money each year in every state backing politicians who will keep it that way. Musk is on the other side of the argument, preferring to not have any middle-men (or women) between his company and products and the customer who buys them.

Musk is backing a bill in the Texas state legislature that would change the law and allow factory-owned auto dealerships. The executive who made his fortune pioneering Paypal and then selling it to ebay often criticizes the conventions of the auto industry. Car dealers have a lower approval rating than Congress, but they also have politicians protecting their flanks in the halls of power.

See our Translogic video interview with Tesla Motors founder Elon Musk here.

Tesla currently operates in Texas, but is forced to dance around the franchise laws that prohibits the company from actually selling directly to customers in the state. Tesla has two "gallery" locations in Houston and Austin. Tesla staff, however, are prohibited from any "selling" activity. They can't give pricing information or take orders. A potential buyer in Texas must contact out-of-state company representatives to complete a sale. The buyer must also make his or her own shipping arrangements from the out-of-state dealer. Tesla also has service centers in Austin and Houston, but they aren't even allowed to evaluate vehicles for warranty repairs.

The franchise laws are written this way to prevent much bigger auto companies like General Motors, Ford and Toyota from bypassing independent dealers and moving to factory-owned stores, or from opening up factory-owned stores that would compete against independent dealers in the same communities. The Texas Automobile Dealers Association opposes any cracks in the law, even for a small company like Tesla, which sold a little more than 4,000 vehicles nationally in the first quarter, for fear that it will open the door to the larger auto companies biting into their businesses.

The Texas State Senate Committee is hearing testimony from Tesla and other interested parties on the bill today. Tesla recently scored a victory in Minnesota when the state dealers in that state dropped its pursuit of a law that would have prevented Tesla from selling cars directly to consumers. The EV company also has legislative battles to wage in Massachusetts and New York this year, two markets it views as critical to sales growth and future.



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    • 1 Second Ago
  • 10 Comments
      Ron Wizard
      • 1 Year Ago
      Funniy! The same liberal democrats that won't allow Walmart stores in there neighborhoods because of independent Mom & Pop stores being ran out of business. Now want the Texas legislature to allow Tesla to sell directly to the public and run independent auto dealers out of business. With this contradictory, hypocritical and indecisive thinking, no wonder our nation is in trouble these days. Favortism for Tesla is not a good reason for a judge to overturn state law thats been on the books for years. I hope Texas stand tough and prevail.
      thomaslamu
      • 1 Year Ago
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      Bret Frohwein
      • 1 Year Ago
      here here! About time car Dealers stop getting protection!
      mannconsultants
      • 9 Months Ago
      Is Apple allowed to sell their product in every mall in the country, directly with no middleman? Why shouldn't Tesla be allowed? Are you not allowed to make a product in this country and sell it any way you like?
      • 1 Year Ago
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      • 1 Year Ago
      You write that the Texas dealers are fighting to keep Tesla from opening stores and selling direct to customers. Is that not the very idea that the laws were suppose to protect against? The franchise laws are written this way to prevent much bigger auto companies like General Motors, Ford and Toyota from bypassing independent dealers and moving to factory-owned stores, or from opening up factory-owned stores that would compete against independent dealers in the same communities. There is a reason to want to keep independent dealers and the jobs they create.
      eddieboyeddie.gibson
      Stay company owned, once a dealer gets his hands on these cars it will ruin the vehicle like they do everything else.
      • 1 Year Ago
      I am sure the esteemed legislators in Texas and the car dealers that support them understand why they desire to protect the status quo. So Tesla should stand firm and do what is clearly successful for them. Texas residents can go outside their precious state to buy Teslas and when enough of them get fed up with the good ole boys in Austin, the laws will be changed anyway. Keep up the awesome work Mr. Musk.