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What does Tesla Motors have in common with microbreweries?

Both are forbidden by archaic laws from selling their wares direct to the public.

Electric car maker Elon Musk wants to bet big on Texas – but he’s having trouble getting his chips on the table.

Musk, a South African-born entrepreneur and the CEO, chairman and co-founder of Tesla Motors, wants to sell Tesla’s electric cars directly to Texas consumers. But to do so, the company must win an exemption from state antitrust laws that regulate the relationship between car dealers and manufacturers.

State laws prevent car manufacturers from selling directly to Texas consumers and require that manufacturers operate through a tightly regulated franchise system. Texas’ protections for car dealers are among the strongest in the country. The Texas Automobile Dealers Association says the rules protect consumers, and ensure the livelihood of Texas auto dealerships. Tesla and its supporters say the laws are an antiquated legacy, and that the ability to sell directly to customers is crucial to the company’s livelihood.

“Everyone told us when we were getting into this that we’d get our ass kicked,” Musk told reporters at a press conference on Wednesday. “Well, I guess there’s a good chance that we will get our ass kicked. But we’ll try.”

Two bills — Senate Bill 1659, by state Sen. Craig Estes, R-Wichita Falls, and House Bill 3351, by state Rep. Eddie Rodriguez, D-Austin — would carve out narrowly tailored exemptions from state franchise law for Tesla. Under the measures, American manufacturers of electric cars that have never previously had franchised dealerships could sell cars directly to customers.

But the bills’ critics, including some legislators, ask why Tesla can’t conduct business like other, established car companies.

“There’s nothing prohibiting this company, in the future, from finding a dealership to represent them,” said state Sen. Dan Patrick, R-Houston. He argued that weakening the dealer model would hurt car owners.

“I would be wary, as a consumer, of buying a car from a manufacturer that may or may not be here in six months.”

I’m just curious – has anyone ever explained to Dan Patrick how capitalism works? What he said is true of any product or service on the market. Last I checked, auto dealerships can go belly-up, too.

Currently, Tesla has “galleries” in Austin and Houston. Employees there are legally prohibited from discussing the price or any logistical aspect of acquiring the car. Consumers who want to purchase the vehicle have to order the car from Tesla’s headquarters in Palo Alto.

The cars are then delivered in a truck with no company markings, per Texas law. Once delivered, Musk said, the customers even have to unwrap their new automobiles themselves, because under the law no representatives of Tesla’s in the state are allowed to do, say or touch anything related to selling or delivering cars.

To put it bluntly, this is nuts. Laws like these, in the automotive industry and the beer-making industry, do nothing for consumers, but do ensure a tidy piece of the action for a privileged set of middlemen. I can’t imagine too many people will want to buy a car direct from a manufacturer – most of us have at best a vague idea of what we want in a car, which is why we go to dealerships and take test drives and so on – but I can’t think of any reason why someone who does know what she wants should be prevented from doing business directly with the source. If Dan Patrick or anyone else is truly concerned about the risk such customers may be exposing themselves to, they can insist on including some strong consumer protections in the law that Tesla is seeking. Ideally, the exception Tesla is seeking to carve out really ought to be a general one for all automakers, but the bills are narrowly tailored to just them because everyone is already freaking out about it. The Lege can be a very weird place sometimes. As with the microbrewers, it will take Tesla more than one session to get enough buy-in on this to get a bill passed. I hope they’re in business long enough to see it happen, if only so Dan Patrick doesn’t get to say “I told you so”. See also this Trib interview with Elon Musk, and Texas Politics has more.

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6 Comments

  1. Linkmeister says:

    One wonders if Dan Patrick the radio and TV guy has ever asked the almighty “Why do I have the same name as that idiot in Texas?”

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