Will Tables Be Turned If Tesla Puts Its Gigafactory In Texas?

It’s been said “you can catch more flies with honey than vinegar,” and could a new take on that in Texas be Tesla can catch more legislators’ ears with a Gigafactory?

That possibility was one angle discussed in a piece by the San Antonio Express-News which confirmed the city is one of the potential candidates posturing and preening themselves as attractive now in the eyes of Tesla Motors.

While leaving many questions open, Tesla has said the four states it is considering are Nevada, Arizona, New Mexico, and Texas.

According to David Marquez, economic development director for Bexar County, Texas – the county in which San Antonio resides – locals are looking now to ingratiate themselves to Tesla which is otherwise barred from selling and servicing its vehicles under Texas laws.

“Everyone’s gunning for them, and it will become a little bit of a beauty pageant,” he said. “Everyone’s scrubbing their databases to check for contacts they have, (and) it’s most important that you know somebody who knows somebody.

“I’ve got my staff researching to try to see what’s in the pipeline,” he added. “But every other major city and economic development group in Texas is doing the same thing.”

'The Domain' Tesla gallery in Austin.

‘The Domain’ in Austin. Tesla’s ‘galleries’ operate under restrictions in Texas.

The San Antonio news report says Texas Governor Rick Perry is leading the negotiations on behalf of the state with Tesla for a $5 billion factory that could bring 6,500 jobs, with groundbreaking as soon as this year.

“They made it clear to us they want to go through state-level entities, then screen down to the local level,” said Mario Hernandez, president of the San Antonio Economic Development Foundation often governor’s office. “The governor has signed a nondisclosure agreement [with Tesla], so the information they revealed is very limited at this point.

“We are in direct contact with the governor’s office, and at this point they are on the lead.”

But what about the sticky issue of Tesla being forbidden to operate according to its business model of choice?

This remained true after May last year when the Texas Auto Dealer Association (TADA) led a successful campaign against Tesla which petitioned the state legislature to make a hole in the laws allowing Tesla through.

The TADA said it had a raft of reasons why it is taking the stance it is, and it has said that no one but HybridCars.com gave it full representation for what are actually complex issues – but the court of public opinion is still less than convinced.

That brouhaha has simmered down but it remains a sore point for Tesla, and a problem it essentially needs to rectify one way or another.

In speaking to an analyst for Kelley Blue Book on the subject, the San Antonio reporter Neal Morton aired the notion that Tesla could in time exert far more clout in a way that legislators understand – by talking about their constituents’ dollars and jobs.

If Tesla were to set up shop in San Antonio – proximal also to Toyota and Tesla’s potential SpaceX venture in Brownsville – and then Texas laws were such that cars sold poorly in state, how would that go down politically?

“I hadn’t considered that angle, but it does make a lot of sense,” said Kelley analyst Alec Gutierrez apparently in response to a leading question by the reporter. “If you talk about building a factory, bringing jobs, supporting the [Texas] economy, I can see that as a rather bold play by Elon Musk.

“If he’s running into hurdles trying to sell his cars there, what better way to circumvent that than bringing jobs?”

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Not reported by the San Antonio news piece, but worth noting also, is that last spring Tesla CEO Elon Musk had offered to build a second automotive assembly plant in Texas, possibly as soon as the next few years.

That was held out as a carrot and Tesla has been reported as saying it sees centrally located Texas as a hub second only in importance to California.

Texas also fits the bill for renewable energy and a business-friendly climate in most respects.

It is also smack in the middle of oil country, and if Tesla were to place the world’s largest plant dedicated to overturning the petroleum paradigm deep in the heart of Texas, that too could have myriad symbolic and real implications.

But the TADA is sticking to its guns, and said in a statement it would welcome anyone offering job creation in Texas “as long as they play by the rules.”

The rules include car sellers must submit to franchising.

elon-musk-time

The TADA figures its members invest over $10 billion in Texas as it is, “so legislators will not be easily tricked into abandoning a system that has worked so well for consumers for years to allow a direct sales approach.”

EV fans are quick also to accuse dealers of attempting to maintain a unethical, and self-centered economic hegemony.

The TADA is well aware of the bitterness felt by some against it, but has insisted while its members do stand to gain, this is not its sole rationale. Rather, it’s a complex balance of control against concerns over other OEMs that stand to use the Tesla case example as a wedge to erode economic safeguards.

The TADA argues also at stake – even if it is not widely reported – is consumers’ welfare, local small economies, even safety concerns.

Last fall HybridCars.com spoke with TADA President Bill Wolters in follow-up to a long article written last year outlining auto dealer associations’ stance.

He said he had personally been willing to help Tesla craft its strategy so that it could still operate essentially the same as it has. These include:

• A mall-based showroom

• Off-site service

• Technical advisors rather than salesmen

• One set price

• Control of the number of outlets and dealership process

• Ownership if there is an investor of Tesla’s choosing who has a buy-out provision.

These can all be done within the confines of existing Texas state franchise law, but the media has typically not reported the full extent of Texas’ arguments.

Last fall we offered Tesla an opportunity to comment on the above bullet points that were the subject of a Tesla versus Texas debate that was never published, but Tesla declined.

Tesla is following its own path, and if its Gigafactory is constructed in Texas, it may get its way. Or, if it settles elsewhere, it will have less potential leverage and have to figure something else out when the Texas state legislature reconvenes after a two-year period in 2015.

San Antonio Express-News