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Tesla Underground: Texas Franchise Rules Make Model S Owners Skirt The Law


Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

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Over the last couple of years, Tesla Motors has fought legal and legislative battles in a number of states over proposed or current state laws that try to stymie its unique factory-direct sales and service model.

In most cases--Massachusetts, New York, and North Carolina, among others--Tesla has managed to stave off the proposed laws, which are typically backed by franchised car dealers, or it has won lawsuits based on current laws that were brought by dealer groups.

MORE: Auto Dealers Fight Against Tesla Stores: Elon Musk Weighs In

But in Texas, which has the nation's most Draconian anti-Tesla rules, the company's lobbying efforts have run into a brick wall.

As a result, Texan Model S owners have had to jump through all sorts of odd hoops to buy and maintain their cars.

"It was kind of a hassle," says Brad Holt, a 26-year old Dallas filmmaker, describing the purchase of his 85-kWh Model S. "But in the end, it was worth it."

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Enlarge Photo

Dealers Only

Texas law dictates that only franchised dealers can sell cars in the state.

Tesla, of course, has no dealers. It markets its cars through company-owned stores or galleries (think: Apple Store) and buyers complete the sale online through company headquarters in California.

Service and warranty repairs are also handled by Tesla-owned service centers.

Last spring, Elon Musk visited the Texas state capitol in Austin, and managed to find sponsors in the House and Senate for a  bill that would have allowed any American manufacturer of 100-percent electric cars (i.e., Tesla) to operate in the state without franchised dealers.

But, despite testimony by Musk and Tesla vice president Diarmuid O'Connell--as well as the support of  Model S owners and fans who rallied inside and outside--the bills died in committee.

The Texas legislature adjourned in June, and it will not reconvene until 2015.

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Tesla owners & supporters gather in Statehouse in Austin to support company [photo: John Griswell]

Enlarge Photo

Influence dealers

The current iron-clad Texas franchise law is the result of years of lobbying by the powerful and well-connected Texas Auto Dealers Association (TADA), founded and run for 30 years by legendary Texas lobbyist Gene Fondren.

In 2012, dealership interests "invested" more than $2.5 million in the Texas legislative elections, according to the the watchdog group Texans For Public Justice. Sixty percent of Texas lawmakers received checks from TADA in 2012.

Two elderly billionaire car dealers, Tom Friedkin  and Red McCombs--the latter is also chairman of the former Blackwater security firm--kicked in more than a million dollars between them.

Tesla, meanwhile, made no direct political contributions.

The electric-car maker did, however, pay eight lobbyists a total of $345,000 to push for passage of its bill, according to TFPJ.

But TADA and the car dealers more than doubled that effort, paying $780,000 for 26 lobby contracts.

"If Tesla and Elon Musk are serious about breaking Texas' powerful car dealer cartel," concluded the TFPJ report last month, "they will need to drop a lot more political cash."

Tesla's workarounds

Despite the legislative defeat, Tesla still manages to operate two stores (in  Houston and Austin), three service centers (Dallas, Houston, and Austin), and three Superchargers in the state.

MORE: Tesla Model S Vs Chevy Volt: Owner Compares Electric Cars

They've also sold nearly a thousand cars to Texans.

And it's all technically legal.

But there are some serious limitations on how the stores and service centers are allowed to operate.

No prices, no test drives

Store employees, for example, may not tell visitors how much a Model S costs. They can't give test drives. They can't discuss financing, leasing, or purchasing options.

Employees are not even allowed to refer interested people to  an out-of-state store. No sales-related activity is permitted.

Tesla Store - Portland OR

Tesla Store - Portland OR

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"People are forced to leave the gallery frustrated, lacking sufficient information about the car and the brand," notes the Tesla website.

When we called the Austin store, the young lady who answered the phone would say only that the Model S was priced like similar luxury sedans, and referred us to the Tesla website.

No talking to your mechanic

Many Texas Model S owners, Brad Holt among them, put down their $5,000 deposits without ever having taken a test drive.

Meanwhile, the service centers are owned by a local subsidiary, Tesla Motors TX, which serves as a subcontractor to the parent company.

Service centers are not allowed to display the Tesla logo or advertise that they do Tesla warranty work or service.


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