Off the Kuff Rotating Header Image

Tesla makes its pitch

It’s a start.

At a packed committee hearing Monday evening, advocates for Tesla Motors told a panel of Texas House members that it was time to bring state car sales laws into the 21st century and allow the company to sell its luxury electric vehicles in Texas.

“The future is here,” said state Rep. Eddie Rodriguez, D-Austin, author of a bill that would allow Tesla to operate up to 12 stores in Texas. “The way in which we buy and sell goods is changing and we must adapt.”

The California-based company builds cars and sells them directly to consumers, bypassing car dealerships — a business model prohibited by Texas law. Tesla currently operates three “galleries” in Austin, Dallas and Houston, but employees there are barred from normal dealership activities like discussing prices or offering test-drives.

Rodriguez told the House Licensing and Administrative Procedures Committee that innovative technology companies like Tesla cannot succeed under the current system. His legislation, House Bill 1653, is similar to deals the company has struck in other states like New York, Ohio and Pennsylvania.

[…]

Opponents pushed back against Rodriguez’s bill on Monday, arguing that it creates two separate systems for car sales — one for Tesla and one for everyone else.

“Everyone should play by the same rules,” said Bill Hammond, CEO of the Texas Association of Business.

“It’s a solution looking for a problem. Tesla’s problems are self-imposed,” said Carroll Smith, who represents Texas on the National Automobile Dealers Association board in Washington, D.C.

See here for the background. I’ve said before that I support allowing Tesla into Texas, and that it wasn’t them that was asking for special treatment, but according to RG Ratcliffe, that’s not exactly true.

First, understand that this is not a fight over whether a car or truck can be sold over the Internet. That already happens through dealerships across the state. Go online, look at the dealer’s inventory and make a purchase.

Second, know this bill is not really about bringing free markets to Texas retail sales of new autos by busting the monopoly of licensed franchise dealers. House Bill 1653 would exempt manufacturers such as Tesla from having to sell through a state licensed franchise dealership, but the manufacturer would be limited to having a dozen or fewer sales locations in the state. Limiting the number of manufacturer dealerships just gives Tesla a competitive advantage over the giant motor companies of Detroit while trying to be unthreatening to the majority of Texas dealerships. Such a carve-out for Tesla is not exactly about bringing consumer choice to Texas, even if Tesla In Texas tries to claim otherwise.

[…]

Whether the Legislature carves out an exception for Tesal or not, this debate is no more about free markets than was the Candy Bin Bill that I once covered.

Once upon a time, bulk sales of beans and grains and candy were found just in health food stores for hippies, not the upscale groceries of today. Only two companies delivered food to the consumer in bulk. One used gravity shoots that dropped product directly into the consumer’s paper bag. The other used bins and scoops for the consumer to measure out how much product they wanted.

The gravity dealer pushed legislation that banned bins and scoops as health code violations. Imagine, their lobbyists said, a plumber coming from auguring out a toilet drain and sticking his unwashed hands into the bin to scoop up food. Ugh! Gross!

The bin dealer countered by claiming the gravity shoots should be outlawed because they were anti-consumer – get too much product and you have to buy it anyway because there is no way to return the excess to the bin. Let the consumer have freedom of choice!

In the end, a compromise piece of legislation passed giving the health department the power to regulate bulk food sales, no matter how it is delivered. Think of the auto dealers as the gravity shoot dealers and Tesla as the bin and scoop. They both want to be regulated, just to their own advantage.

Read the whole thing, it’s a great overview. I don’t get the licensed franchise dealership model, just as I don’t get the three-tier distribution system for beer. It’s great for those who get to participate in it, but it’s hardly a “free market” and it doesn’t do anything for the customers. I say we should let Tesla sell its cars the way it wants to, but that doesn’t mean they should be the only ones. If Ford or Toyota or whoever wants to set up their own shops to sell their cars directly to the public, I don’t see the problem with that. Last I checked, other manufacturers in other industries can do this (do the words “Apple Store” ring a bell?) and the republic remains on its feet. I understand why TADA wants to maintain the status quo, and I understand why Tesla is seeking this limited entrance, but that doesn’t mean it’s the way things ought to be.

Related Posts:

One Comment

  1. Bill Daniels says:

    ” I don’t get the licensed franchise dealership model, just as I don’t get the three-tier distribution system for beer. It’s great for those who get to participate in it, but it’s hardly a “free market” and it doesn’t do anything for the customers. I say we should let Tesla sell its cars the way it wants to, but that doesn’t mean they should be the only ones. If Ford or Toyota or whoever wants to set up their own shops to sell their cars directly to the public, I don’t see the problem with that. Last I checked, other manufacturers in other industries can do this (do the words “Apple Store” ring a bell?) and the republic remains on its feet. I understand why TADA wants to maintain the status quo, and I understand why Tesla is seeking this limited entrance, but that doesn’t mean it’s the way things ought to be. ”

    Perfectly stated, and I could not agree more!