For more than two years, Californian automaker Tesla Motors [NASDAQ:TSLA] has been in a constant battle with auto dealer associations and pro-auto dealer legislators across the U.S. over its right to sell its luxury electric cars direct to customers at its own Tesla-owned stores.
Auto dealer unions opposed to Tesla owning and operating its own stores and service centres say that the company is trying to subvert statutes designed to protect car buyers and franchised dealers from over-powerful auto makers. Tesla argues that its stores ensure the highest customer service for all of its customers — and that auto dealers are now trying to use the same laws which were once written to protect consumers are now being used to harm them.
Thankfully however, recent months have seen a gradual cooling of hostilities towards Tesla Motors, with more and more states coming to compromises over Tesla’s direct-to-consumer sales practices. Some have allowed Tesla to operate limited numbers of stores or creating exemptions to existing auto dealer franchise law, while others have allowed Tesla to operate on the same terms as a franchised auto dealer.
Texas has a very robust, very open, very effective automobile sector that seems like it’s working quite well the way that it is. Texas Gov. Greg Abbott
But as even some of the biggest names in the auto dealer world are now standing on Tesla’s side of the aisle in support of its right to sell direct to customers, the Texas Governor Greg Abbott maintains that the Lone Star State will remain closed to Tesla Stores for the foreseeable future.
As Bloomberg reports, Tesla’s CEO Elon Musk has been trying to convince Texas legislators for two years to change the law to allow Tesla to operate legally within the state. That has included hiring twenty lobbyists and spending more than $150,000 on campaign contributions aimed at changing minds in the state capital.
Back in January, Musk even visited Austin days after the legislative session convened in order to plead the case for changing the law to allow direct-to-customer sales. But despite several pro-Tesla bills being proposed by supportive legislators, not a single one made it out of committee due to a lack of support from the wider House or Senate.
The reason why? According to Gov. Abbott, legislators don’t see what’s wrong with the system right now.
“Texas has a very robust, very open, very effective automobile sector that seems like it’s working quite well the way that it is,” Gov. Abbott told Bloomberg Radio on Tuesday this week. “If you’re going to have a breakdown in a car, you need to have a car dealership there to make sure that the vehicle is going to be taken care of. We haven’t seen that from Tesla.”
It’s an old argument which was once a commonly used reason given by auto dealers associations keen on stopping Tesla from operating its own stores and service centres. Yet Tesla’s exemplary after sales and service record — not to mention the highest reliability report scores and service report scores from Consumer Reports — have proven that argument wrong so many times that it has lost all credibility.
With over-the-air software updates and remote diagnostics capability too, Tesla doesn’t even always need a customer to bring their car to a service centre to be fixed: many common faults can be diagnosed remotely and then fixed at a customer’s home or place of work by one of Tesla’s highly-trained mobile ranger mechanics.
In other words, the arguments being given by Gov. Abbott are ones which can be easily disproven.
So why is it that Tesla and Texas are struggling so much to come to an agreement? In a word, market size.
After California, Texas is the second-biggest automotive market in the U.S., with Texans buying more than $81 billion worth of cars every year. Allowing Tesla to operate within the state would not only dramatically increase the number of Tesla electric cars from the 3,000 cars currently registered in the Lone Star State, but would also likely dramatically cut into the profits of franchised auto dealers currently operating in the state — especially those who sell high-end luxury brands like Mercedes-Benz, Porsche, Audi and BMW.
But Tesla — like its fans in Texas — views it only being a matter of time before attitudes change. Indeed, more and more dealerships are starting to realise that the halo effect of Tesla’s high-end luxury Model S means that consumers who can’t afford a Tesla are looking to other, less-expensive electric and hybrid cars after seeing or experiencing a Tesla Model S for the first time.
Moreover, many realise that by supporting anti-Tesla measures, they risk actually losing customer support, with pro-Tesla customers voting with their feet if they feel their local dealership was party to anti-tesla lobbying.
For now, Texas remains closed to Tesla Stores, but that hasn’t stopped Tesla from opening its fourth Tesla Gallery today — offering interested parties the chance to find out more about electric car ownership while expanding its service centre network within the state.
The new location — Houston North — combines a service centre, supercharger site and Tesla Gallery. While customers can’t order a Model S at the new location, nor can they arrange for servicing in person, they can find out more about living with an electric car.
And if a customer asks why they can’t buy a Tesla Model S from the new Gallery — we’re guessing Tesla’s staff will have one simple direction.
“Ask your representative.”
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