As Predicted, Tesla Loses Legislative Battle In Texas

As we learned speaking to the president of the Texas Auto Dealers Association (TADA) on May 20, news now making the rounds that Tesla lost its legislation battle over its maverick retail model was practically a foregone conclusion.

All along Tesla’s chances, we were told and as the old saying goes, as good as a snowball’s chance on a hot summer day in Texas.

In its efforts to reinvent how automobiles are made, what powers them, and how they are sold and serviced, Tesla has adamantly refused to submit to laws mandating a third party middleman – franchised dealerships.

Its rationale has included that traditional dealers have an inherent conflict of interest, and properly representing the value proposition of a Model S would undermine dealers’ core business. Informally, Tesla’s CEO Elon Musk sent an internal e-mail saying consumers were being ripped off by dealers, and now was a time to get payback in Texas.

The rationale Musk gave to Texas legislators and others about conflict of interest does not as much address the fact that a Tesla-only franchised dealership would be legal under Texas law, and Musk was expressly asked to consider the possibility.

Just as any exclusive maker like Ferrari may sell its cars through a Ferrari-only dealership that is dependent on a good relationship with the factory in Maranello, so could Tesla set something like this up too, if it wanted.

Tesla however wants sole control of its retail stores in high-rent districts, and TADA President Bill Wolters said he faced a stone wall in the face of Musk.

Wolters said he appealed to Musk when he went to Palo Alto to talk on the subject months ago. He said he told Musk the TADA wanted to help Tesla succeed within laws, and Musk could appoint all of a Tesla-only franchise’s leadership, and maintain much control, but Tesla wants 100-percent control.

Tesla thought it would be better to change Texas laws, said Wolters, laws that were water-tight and gave Musk no room to “wiggle through.” Present Texas law prevents Tesla’s people from discussing sales and other normal functions of explaining Model S cars in its two stores in Austin and Houston because they are operating without a license.

The bills Tesla endorsed however – and for which Musk went in April to the state capital in Austin to personally lobby – were already dead in committee prior to the May 27 ending of the current legislative session, as we explained May 21.

“Tesla has until Monday, May 27 for a sliver of a hope that some amendment could be approved to give breathing room to Tesla’s two retail locations in Austin and Houston presently hog-tied, Texas style,” we wrote the week prior to the end of the legislative session.

Stories now making the rounds are being written after Automotive News and others followed up, noting Tesla cannot likely hope to change legislation to allow its retail stores operating without franchise license against Texas law until 2015.

“The Texas state legislature meets every two years, so if Tesla is not successful,” we wrote in May. “It could be two more years before it gets another chance,” we added, while quoting Wolters who said a slim-to-none chance for Tesla could open before that.

“The governor can call a special session of the legislature at any time but it is unlikely that Tesla’s legislation would be considered in a special session,” said Wolters.

What Tesla will do next remains to be seen. It has said Texas would be considered as a second manufacturing base, and has attempted to offer that carrot to Texas lawmakers and others in appeal to see things differently. The market in Texas was otherwise viewed as second in importance only to California.

Tesla has now won some battles, including in Massachusetts, Minnesota, and New York, and has lost or is losing other battles, including in Virginia and North Carolina.

Musk has said Tesla would consider attempting a national level lawsuit accusing unconstitutionality because of violations toward rights of interstate commerce. The intent would be to render illegal various state laws opposing Tesla’s intent.

Wolters said the validity of state franchise laws has been tested already however, and he was one of those who testified before the Federal Trade Commission 10 years ago.

Unknown at present is what Tesla’s next move might be having been thwarted again. Musk had said he was told he’d lose before he went to Austin, but had been determined to try, saying Tesla is in the moral right on this issue, while dealers say they are.

Tesla did not answer requests for comment, but we’ll keep you posted on what else we learn.