Free Market in Texas? Not for These Cars

by Angie

Have you heard about the Tesla Model S? It is a beautiful, streamlined sporty sedan that runs entirely on electricity with 0 emissions. Its range on one charge is considerably farther than that of other electric cars — from 208 to 265 miles depending on the battery, which can be charged at any regular 240- or 120-volt outlet. And it was honored as Motor Trend’s Car of the Year in 2013.

In addition to superior performance, Tesla’s cars are different because they are sold directly by the company rather than through dealers. This seems sensible on the face of it, since having an intermediary raises the price unnecessarily. But according to the Chicago Tribune, ” No fewer than 48 states ban or limit direct sales of automobiles.” In some states, stores owned by Tesla Motors itself can sell the cars, while in other states Tesla can open stores for marketing purposes but cannot actually sell the cars at the stores.

Texas — which prides itself on being “open for business” — is one of the most difficult states for Tesla.

The Austin- American Statesman reports,

“You can visit one of the two [yes, TWO!] ‘galleries’ Tesla Motors operates in the state — one in Austin, the other in Houston — but employees can’t tell you how much the car costs. They can’t offer you a test drive. They can’t even give you their website address.”

Auto dealers call these rules “consumer protection,” but who are they really protecting? Online sales by other companies such as Amazon.com have grown exponentially because they give good customer service at prices that are often lower than brick and mortar stores. Why would lawmakers expect TeslaMotors.com to treat its customers any differently?

Bill Wolters, president of the Texas Automobile Dealers Association, identifies who is really being protected when he says that he fears  “if they change the franchise laws [to allow companies to sell cars directly], it allows every other manufacturer to come in and do what Tesla is going to — compete with our family-owned businesses.”

I can understand his fear, but as Steve Chapman wrote in the Chicago Tribune, “Since when is ‘compete’ a bad word in free-market Texas?” Is it possible that another reason this electric car is being repressed is that it gives high performance without petroleum products?

Also, it is not surprising to find out that ALEC (American Legislative Exchange Council) is involved in the state laws that limit Tesla. For example, in 2013 North Carolina’s Senate Bill 327 stated that cars could not be sold through unlicensed out-of-state dealers via telephone or Internet. This bill, aimed at Tesla, was developed by ALEC. It passed in the NC Senate, but fortunately it was dismissed by the state’s House of Representatives.

A petition to allow Tesla Motors to sell cars directly to consumers has been established on whitehouse.gov. It has already received the 100,000 signatures needed for a response from the White House, but more signatures will help the cause. Visit this link to sign the petition!

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5 responses to “Free Market in Texas? Not for These Cars

  1. I was surprised to find the Tesla article posted here. Nevertheless, the Tesla S is a gorgeous all-electric car. I think Consumer Reports gave it the highest rating ever for any car. If I remember correctly, about 300 have been sold to people in the greater DFW area. Tesla is opening a service facility in Farmers Branch to support these local vehicles. Oh, I think any article about the Tesla should mention that a typical model costs $90,000 with a $7,500 federal tax credit for being all-electric. To get the maximum credit you need to owe at least $7,500 in federal income taxes. They do have a substantially shorter range, lower performance base version for about $70,000. I do think it is odd that Tesla can’t sell direct in Texas. It is no surprise that ALEC and car dealers want to keep it that way. Personally, it is not an issue that gets a high priority from me.

    • It is true that the Tesla Model S (and their other models, too) is a high-end luxury car, and therefore this is not a pertinent issue to most people. However, I believe as a matter of principle that laws should not single out one type of business without an extremely solid and demonstrable reason. I don’t see that kind of reasoning here.

      • I guess the type of business singled out here is automobiles. I don’t know if there are, or ever were, reasons to single out automobiles by requiring sales through dealers. I wouldn’t be surprised if there were some consumer protection aspects in the past. An automobile is a very large purchase, second only to a house in many cases. Perhaps there was a desire to have state law apply (e.g., state lemon law) to the purchase which is much easier if there is an in-state business entity in the transaction. As was mentioned, its pretty clear dealers would like to get the dealer profits and don’t want that encroached upon. It’s just not high on my priority list. Now if Tesla would give or loan me a car, that would change.

  2. Thanks for a great write-up. Tesla is basically being shut out of the market by these ridiculous laws intermediary laws, the only beneficiaries of which are, of course, the intermediaries! I recently reblogged something on the subject here: http://tiffany267.wordpress.com/2013/05/18/republican-cronies-versus-business-freedom

    I stumbled across your post while searching for tagged “free market”, which is an interest of mine. Browsing your blog, I am unsure if you are for free markets or only for an end to cronyism. I do share your opposition to cronyism as it is a dangerous violation of our individual liberties. Alarmingly it has become the status-quo in the U.S.

    Though I do not share your sentiments with regard to Citizens United on the grounds of free speech (your stand on the matter leads me to suspect that you are not pro-economic liberty), I applaud your concern about corporations and government working together against others’ interests. I’m tentatively following your blog as a result.

    Thanks and have a lovely day.

  3. Tiffany, I just read your article on Tesla and its shut-out by the North Carolina legislature. Nice job! It seems both Texas and North Carolina want to keep Tesla from competing in their states. Even though you and I do not agree on everything, we both agree that our country is being ruined by crony capitalism.

    For us to effect change in our country, we must find issues that most Americans can agree upon. It is only then that we get the attention of Congress and the President. Neither side can do it on its own. Politicians and others try to polarize and divide the American people so that they can keep the status quo. As long as they can keep us from working together, they will have the upper hand. If we can learn to work together, we have the best chance of getting the change we need for a better America.

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