Tesla is building a factory in Texas to make some of its cars, but when it’s up and running, the cars being made there may have to take a detour to get to Texan buyers (through The ride). Due to state laws prohibiting car companies from selling directly to consumers, Tesla could ship the cars from the Austin factory to other states before returning them to their Texas buyers. State lawmakers discussed legislation that would have prevented the situation, but they have now missed their chance to pass it before going on hiatus until 2023 – the plant is expected to be completed end of 2021.
Laws preventing automakers from selling their vehicles directly to consumers are not unique to Texas, nor do they target Tesla: they were originally put in place in many states to prevent manufacturers from undercutting their franchise dealers and bankrupting them. Tesla has no franchise dealers to protect, but that doesn’t matter to Texas law, as currently written.
It’s an embarrassing situation for the state, where an employee at the new factory (where Tesla plans to invest a billion dollars) would have to wait for a car they made to travel to a dealer in another state for processing and then return to them. . That could even be the case for Elon Musk himself, who said he moved to the state earlier this year. It’s also a bit embarrassing for Tesla, who decided to build a factory in the state without making a deal to sell its cars there.
There was a bill proposed in the Texas legislature seemingly tailored to help Tesla: it would have allowed companies to sell their cars directly to consumers if they were powered entirely by electricity or battery power, and only if those companies never had franchise dealers in the state. That could rule out companies like Ford even though it sells EVs, but it could also allow other EV manufacturers like Rivian, Lucid and Canoo to sell directly once they start producing vehicles.
Tesla and other EV manufacturers have been fighting in many states for years to get permission to sell directly, and have even had some recent successes: Tesla was allowed to sell in Colorado (where Rivian also recently gained access) and Tesla was able to find a legal loophole in Michigan. As many as 12 states allow Tesla to sell directly to customers, and others allow Tesla open a limited number of dealers.
But there are many states where hopeful buyers still have to jump through hoops, such as send paperwork across state lines to get temporary tags, or drive to other states to make the purchase: Oklahoma, Nebraska, Wisconsin, West Virginia, Alabama South Carolina, New Mexico, and of course Texas have all proposed direct sales, but the bills have all been closed, filed indefinitely, or been ignored for years. Tesla even has a page on its website where it asks customers to discuss these matters with their elected officials.
Connecticut, another state where direct sales are not allowed (although Tesla can lease cars to customers there), currently legislation in the works to enable direct sales, and Tesla and Rivian are teaming up to pass legislation in other states this year also. In many of the states, Tesla has found a way to get cars to customers, but not without hassle.
For Texas, however, the wait for legislation can take a while. Elon Musk tweeted in response to The ride‘s article on lawmakers short of time pushing for a change in the state. It’s not impossible that it could happen, even with a hiatus from legislature until 2023: Governor Greg Abbott (who called Tesla “one of the most exciting and innovative companies in the world” when it announced its Texas plant) would be a be able to organize a special session to focus on the not yet adopted law. Abbott did not respond to a request for comment as to whether he intended to do so.
Tesla would certainly appreciate changing the law so that it is not mandatory!
– Elon Musk (@elonmusk) May 27, 2021
It’s also possible that there is a legal loophole emerging, as in Michigan. However, it doesn’t seem like Texas lawmakers are in a rush to go that route: Tesla was also trying to win the right to sell cars directly to Texans in 2013 and 2015, and lost both times.