Too-Tough Franchise Laws May Have Doomed Texas' Bid For Tesla Gigafactory

September 11, 2014

As we reported last week, Tesla is heading to Nevada. It's not going for the gambling or the scenery or the other entertainments on tap, but for the land -- specifically, the land at 2641 Portofino Drive, located at the Tahoe-Reno Industrial Center. That's where Tesla is building its lithium-ion battery manufacturing plant, better known as the "gigafactory".

Detroit News notes that Nevada legislators have made plenty of concessions to bring Tesla's $5 billion project to the state, including its 3,000 short-term construction jobs and an estimated 6,000 to 6,500 permanent jobs. Chief among those enticements is a huge package of incentives, initially placed at $500 million, but now valued at some $1.3 billion.

And that's not all. Detroit News discusses two other incentives being mulled (and likely approved) by elected officials. One guarantees a discount on electricity for Tesla, while:

"The other clarifies that Tesla would be able to sell the cars it manufactures at Tesla-owned dealerships in Nevada.... The latter was one of the hurdles Tesla had identified in Texas before announcing last week it had picked Nevada for the battery factory in a competition that also included California, Arizona and New Mexico."

Which, of course, reminds us that Tesla has had plenty of trouble gaining traction in the Lone Star State. Though the start-up automaker has plenty of fans in Texas, it's also got an army of enemies -- namely, the state's automobile dealers association. The group has been pressuring legislators to maintain Texas' franchise laws and prevent Tesla from selling directly to consumers.

That approach hasn't panned out too well (in Texas or anywhere else). Not only has it elicited plenty of hostility from consumers, it may also have cost Texas the right to host Tesla's gigafactory. 

OUR TAKE

It's a little ironic that Texas -- a state that places such pride in being "Like A Whole Other Country" that a substantial number of its residents keep trying to make that metaphor a reality -- is so enamored of run-of-the-mill, traditional U.S. franchise laws.

It's also ironic that a state that's offered loads of tax breaks to massive international corporations like Toyota was unwilling to let a small, luxury automaker sell a few thousand automobiles a year to consumers. Then again, given Texas' history with oil and gas and Tesla's product line of all-electric cars, maybe it's not so ironic.

That said, though Texas may have lost this round, it could have another opportunity in the future. Tesla CEO Elon Musk and his colleagues have dropped many hints that, if things go as planned, the company will build more than one gigafactory. Maybe next time, Texas. Maybe next time.

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