Tesla sends CEO to Texas to defend direct-to-customer electric vehicle sales
Tesla is no stranger to strong resistance, shall we say, from auto dealers to its unusual method of selling the all-electric Model S in certain parts of the US. A lawsuit by the Massachusetts State Automobile Dealers Association was thrown out late last year, but it was later appealed. Tesla has also been sued in New York. The company has staunchly defended its right to sell cars via its company-owned stores – or, at least, to use the stores as a way to direct potential customers to its website to order a vehicle – but it’s facing its biggest hurdle yet in Texas. The size of the problem is so Texas-sized that CEO Elon Musk spoke at the state capitol in Austin yesterday.
“Franchise dealers have an inherent conflict of interest between selling gasoline cars and electric cars.”
At issue is House Bill 3351, which was filed by State Representative Eddie Rodriguez (D), that would allow electric vehicle companies to sell their wares directly to the public and not have to go through a dealer. Musk said the issue was a matter of “life or death” for Tesla, according to the Austin Business Journal. Tesla says the testimony at a hearing on the bill was “overwhelming … in favor of Tesla.”
Musk’s point is that selling an electric vehicle is different than selling a traditional gas-powered car, and that direct sales are “the best chance a new electric car company has of succeeding.” The company’s official statement continues:
Electric vehicles simply cannot be sold side by side with gas vehicles because they will always be a minority item in terms of sales and service volume. Existing franchise dealers 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. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. Simple math shows no traditional dealer is incented to sell an electric vehicle with the same enthusiasm as the rest of their inventory.
The way things stand in Texas now, the Tesla stores – excuse us, galleries – cannot offer test drives, cannot discuss the price of the car (or any financing terms) and cannot refer potential customers to out-of-state stores to actually order their cars. Tesla employees can’t be on hand when its cars are delivered in Texas and registering a new Model S sounds like a frustrating experience, if Tesla’s description is accurate, with the sales tax not being rolled into the financing payments. Oh, and there’s even a special subsidiary, Tesla Motors TX, with service centers in Austin and Houston that, “cannot advertise that they do warranty repairs nor can they discuss any additional repair needs or concerns with the customer. Tesla Motors TX then bills Texas Motors, Inc. for the work. If customers have additional warranty concerns, Tesla Motors TX cannot discuss them with the customer – the customer would need to call Tesla Motors, Inc. back and go through the process again.” Despite all the hassles, Tesla has delivered more than 400 Model S and Roadster EVs in Texas, “with more arriving every week.”
Tesla has put up an informational page as well as Musk’s blog post on the issue, if you’d like to read more. For an interesting look at why car dealerships exist the way they do in the US today, listen to this Planet Money story.