Texas Snubs Tesla As Clock Runs Out On Direct-Sales Bill: What About The Hyperloop & Gigafactory?

June 2, 2015

Yesterday, a gavel banged in Austin, Texas, bringing the state's 84th legislature to an end. As with most legislative sessions, officials made progress on some fronts, but many bills were tabled or died in committee.

As Auto News reports, two of those failed bills would've allowed Tesla Motors to sell its battery-electric vehicles directly to consumers in the state. The automaker had hoped that one of the two would've come up for consideration, but neither made it to the floor of the House or Senate.

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Unfortunately for Tesla CEO Elon Musk, the Texas legislature meets just once every two years, for about four-and-a-half months at a time. So, unless Governor Greg Abbott calls for a special session, elected officials won't convene again until 2017 -- and even if Abbott makes such a move, it's unlikely that Tesla carries enough weight to be considered during the session.

And so, Tesla's string of recent victories in states like Maryland and New Jersey has been broken by Texas' dealership network -- a network that retains considerable power in rural areas where excitement about battery electric vehicles remains muted. For at least the next two years, Tesla's operations in Texas will be limited to the company's controversial galleries, where sales staff can share information about vehicles like the Model S, but they must refer shoppers to Tesla's website for pricing.

That's bad news for Tesla and its fans, but it may also be bad news for the Texas economy. How so? Because the state's snub could result in Musk building other projects -- not to mention investing his considerable wealth -- in other states. For example:

The Gigafactory: Tesla chose Nevada as the homebase for its first advanced-tech battery research and production facility. Although Texas was in the running for the site, the Lone Star state's too-tough franchise laws may have doomed its chances. Tesla has said that, if all goes as planned, other factories will follow in other states, and based on the overwhelming response to the Tesla Powerwall, we'd guess that expansion plans are already underway. Unfortunately, Texas' legislative snub isn't doing much to smooth things over with Musk & Co.

The Hyperloop: Elon Musk's Hyperloop proposal for vacuum-tube transport is so crazy, it just might work. Though the inventor had said that he wasn't planning to be heavily involved in its development -- and in fact, he encouraged other folks to have a go at it -- Musk announced in January that he was interested in building a Hyperloop test track in Texas. Not coincidentally, that was at the start of Texas' legislative session, leading many to believe that he was using the test track as a means of enticing legislators to open Texas' doors to Tesla. Now that those doors have closed -- and now that other inventors are looking to create a test track in California -- Musk's Texas investment may be pulled.  

Tesla's rumored all-electric pickup: Tesla knows that pickups are big business in the U.S. and that converting truck drivers to battery-electric vehicles would be a huge help in driving the auto industry away from gasoline engines. Musk has floated the idea of creating an all-electric Tesla truck and basing production in Texas, but as the company's vice president for business development, recently said, "It’s...logical to ask why would we invest major amounts of money in a state where we can’t even do business." Which is considerably less subtle than the "b" in "subtle".


Despite Tesla's setback in Texas, the company has made huge headway in the U.S., and it's undoubtedly poised for greater achievements down the line. Dealerships networks may deny it, may insist that it'll never happen on their watch, but they come off sounding like George Wallace standing in a schoolhouse door. (NB: Musk would probably like the civil rights comparison, since he once said that if Tesla can't sell cars in Texas, the automaker will be metaphorically forced to "the back of the bus".)

Most dealers know this. Some think that an ill-conceived charm offensive will buy them time, but the smart ones in Georgia, Maryland, New Jersey, and elsewhere are working with Tesla to ease the transition to direct sales -- and make sure they're not left out in the cold themselves.

In other words, expect Tesla to continue messing with Texas. It may have lost the battle, but we expect it to win the war.


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