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Tesla Messes With Texas: Can Elon Musk Succeed In The Lone Star State?

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Elon Musk

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If you haven't been to Texas in a while, it might be time to pay a visit.

Oil is still big business there, but wind farms are picking up speed. And although there's plenty of farmland, today's Texas  -- especially the Austin area -- is a high-tech hub, home to start-ups, gaming firms, and more. 

Which is why Texas seems like a good match for electric car manufacturer Tesla, and why the company's CEO, Elon Musk, is so eager to gain traction with well-heeled, eco-friendly Texans. 

There's just one problem: like most states in America, Texas' franchise laws prevent automakers from operating their own dealerships -- a holdover from the auto industry's early days. That's why Musk is currently in Austin, lobbying state legislators for change.

Unfortunately, Musk isn't winning any friends among dealers themselves. Granted, the Texas Automobile Dealers Association, wasn't exactly on his side to start with, but when an internal email urging Tesla employees to rally their friends in Texas got leaked to Forbes, tensions escalated. Here's an excerpt:

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. 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

In a follow-up interview, Musk appears pretty level-headed about Tesla's lobbying efforts, and he knows advocacy is almost always an uphill battle. But could Tesla follow another path to victory in the Lone Star State?

THE STATE OF THINGS

The good news for Tesla is that it's been gaining momentum elsewhere in the U.S. A bill to ban Tesla stores in Minnesota was recently defeated in the state senate. And in Massachusetts, a judge threw out a lawsuit that dealers brought against Tesla for violating franchise laws similar to those found in Texas. 

The bad news is that in both of those instances, Tesla was fending off charges brought by powerful dealer networks -- and it did so in courtrooms, not in state legislatures. Running defense in the judicial system is a far cry from mounting an offensive on capitol hill, lobbying legislators to make room for Tesla in the legal code.

For Musk to get anywhere in Texas, his best bet probably lies in reminding elected officials how difficult it is for the state's residents to purchase and maintain Tesla vehicles. Potential customers can peruse cars in showrooms in Austin and Houston, but the folks who work there can't discuss pricing, much less conduct sales. And once customers have managed to purchase a Tesla vehicle and have it shipped to Texas, they can't take it in for repairs -- they have to have technicians in Fremont, California evaluate the vehicles remotely, then Tesla sub-contracts maintenance to companies in Texas.

That's a headache for buyers, and in a state that places a premium on individual liberty -- not to mention start-ups -- legislators might see that as outrageously cumbersome.

Of course, there is a second option: Tesla could push the envelope at its Texas showrooms, forcing the Texas Automobile Dealers Association to sue. In court, Musk & Co. might be able to play the poor, put-upon upstart, which could persuade judges to rule in its favor -- judges who might be easier to woo than legislators. 

Are you a fan of existing franchise laws? Or would you like to see them revamped for Tesla? And if legislatures won't revamp those laws, what's Tesla's best strategy for effecting change? Sound off in the comments below.

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Comments (7)
  1. Seriously, why can't Tesla & Fisker become one company?? They both make the same product & both products cost about the same, so in my honest opinion, both companies should become one company because only rich people & celebrities can afford them, anyways.
     
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  2. Tesla and Fisker aren't remotely the same. Fisker's car isn't all-electric, nor is it a feasible family sedan. Tesla's are much morre well made and well reviewed.

    Fisker is also bankrupt.

    Tesla is planning on making an affordable electric in the future.

    But that is how emerging technologies work, they always start as a luxury good. Electric vehicles aren't cost effective for the mainstream consumer. yet.
     
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  3. I think both companies would argue that they produce very distinct products. Tesla makes fully electric vehicles, while Fisker makes (or made) extended-range cars, not unlike the Chevrolet Volt. It's true that those vehicles are expensive, but that's one of the few things the companies have in common. IMHO, arguing for their merger is a little like arguing that Lexus and Audi are indistinguishable from each another and ought to become one.
     
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  4. Tesla could try what some companies have done here in Australia, and setup on federal land, which is in Texas, but technically outside of Texan jurasdiction, like an international airport, or a seaport (at least, that can work here, don't know about the US/texas laws...)
     
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  5. @joe, you are misinformed. The Model S is 100% electric, unlike the Fisker, which is a hybrid gas/electric. Fisker is financially insolvent and no longer manufacturing their vehicle. Additionally, the Fisker has been plagued with quality problems that have resulted in long warranty repair waits, and a founder that jumped ship. He should have stayed at Tesla. Tesla is a financially solid and now (presumed) profitable, publicly traded company. Fisker will unfortunately die an ugly death to the chagrin of the early adopting owners of the Karma.
     
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  6. I like where Tesla is heading over all as the first auto maker to succeed from a place other than Detroit! But not sure why they want to fight the status quo that is established here in Texas. If they grease enough state politicians I'm sure that something will be done to allow them to move forward. Their best chance is to build momentum in the citizens to complain to the legislation to get this done the quickest route. Not sure a state judge would rule in their favor and if so it might take a few years. My advise is work with the citizens to make things move forward. There are a lot of green companies and green tech organizations that can be of help to Tesla understand the unique Texas environment in Austin.
     
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  7. Elon Musk wants to establish a second launch site for his Space X program (he's the ceo) in Texas. It will employ lots of Texans and bring in lots of Federal dollars. The Governor of Texas is obviously in favor of this. He is also in favor Tesla selling his cars directly. Let us all put two and two together.
     
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