Culture

Tesla's dealership plans stalled in Texas

By Dmitry Sheynin , Jun 06, 2013 08:39 AM EDT

Tesla's plan to open company-owned dealerships in Texas has been dealt a serious setback. Two bills that would have exempted the carmaker from laws banning auto manufacturers from operating their own dealerships failed to move forward in the state legislature prior to the end of the session. The legislature will not reconvene in general session until 2015.

Currently, Tesla sales in Texas are handled directly through the company's factory in California. While the company maintains two showrooms in the Lone Star State, the employees there are not allowed to sell anything and can only provide information to customers. The company cannot legally offer test drives and if a potential customer were to ask how much a Model S would set them back, the staff member would have to decline to answer.

"Franchise laws give dealers the opportunity to have a much wider presence in the country, and they give consumers a better opportunity for purchase and service of their vehicles," said Bill Wolters, president of the Texas Automobile Dealers Association. "We're very glad that we made it through this legislative session and fought off this challenge to a set of laws that's good for our country."

The company hasn't commented on the stalled legislation, but Tesla chief Elon Musk expressed his feelings on the matter in an April letter to Forbes, where he argued that Texas residents were being "ripped off" by dealerships as a result of franchise laws.

"It is crazy that Texas, which prides itself on individual freedom, has the most restrictive laws in the country protecting the big auto dealer groups from competition," Musk wrote. "If the people of Texas knew how bad this was, they would be up in arms, because they are getting ripped off by the auto dealers as a result (not saying they are all bad - there a few good ones, but many are extremely heinous). We just need to get the word out before these guys are able to pull a fast one on us."

Texas is not the only state with laws banning carmakers from selling directly to the public. However, this isn't an issue for most auto manufacturers since they sell their vehicles primarily through independently owned dealerships.

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