I'm glad Texas is 100% free market, otherwise things could get weird.
Tesla is going to build cars in Austin Texas that they cannot legally sell to someone living in Texas.
Tesla is going to build cars in Austin Texas that they cannot legally sell to someone living in Texas.
Under Texas franchise laws, which are similar to those in most other states, automakers like Toyota and General Motors cannot sell you a car. They must sell their cars to independently owned third-party businesses that in turn sell them to Texans—you know, new-car dealerships.
As it stands, Tesla’s company-owned outlets cannot legally sell a car in Texas, nor can the company “deliver” a car within the state even if bought by a Texan. Owners had regularly rallied against this soft ban as early as 2013. There are workarounds, some detailed on forums within Tesla’s own website. The company has more than a dozen Texas “galleries,” where cars can be viewed and described—though staffers may not discuss prices.
Any Texan can go online and order a Tesla through the company’s website. But no orders may be placed or processed within any Texas facility owned by Tesla. One buyer noted his paperwork had been FedExed to and from a Tesla Store in Nevada for completion.
Once ordered, the vehicle is shipped to one of Tesla’s eight Texas service centers. The buyer must first pay for it online (from outside the facility grounds), and can then drive it away—meaning Tesla has not actually “delivered” the car to a buyer, but simply made it available to be “picked up” by an existing owner.
Texas is quite happy to register it and collect sales tax on the purchase, of course.
At last, change was expected by many in 2021 because the backdrop to the state’s legislative session was substantially different than it was in 2019. Following a highly publicized site search for its second U.S. vehicle assembly plant, the company announced in July 2020 it had chosen Austin, Texas. That Austin plant is now well into construction, and production of the Tesla Cybertruck and other EVs is to start within the next 12 months. Tesla has posted hundreds of job openings, and said it hopes to employ 5,000 people.
Most of the auto industry presumed that in exchange for dropping a billion dollars or so into the Texas economy, Tesla had extracted a promise or a handshake deal that the ban on selling its vehicles would be lifted. Otherwise, it was noted at the time, Tesla would face the peculiar prospect of having to ship all Texas-built vehicles out of the state—even those to be delivered to buyers within five miles of its new plant. No way that would actually happen, right?
On March 12, State Representative Cody Harris [R-District 8] introduced HB 4379, a bill that would have essentially permitted Tesla to deliver electric cars in the state. The bill crafted a narrow exception to the dealer franchise law that would allow automakers to sell cars directly in Texas if they solely built battery-electric vehicles and never maintained franchised distributors in Texas. Only Tesla and a handful of EV startups fit that description.
HB 4379 was finally heard by the House Transportation Committee on May 11, two months after it was filed by Rep. Harris. That was a win, of sorts: Earlier versions of the bill in previous sessions hadn’t even gotten that far. Sadly for Tesla, that’s where it ended; the hearing was simply the first of seven steps that must occur within 140 days for a bill to become law in Texas. But the bill was not passed out of committee by the deadline of May 13, meaning it will progress no further. The direct-sale ban will remain in place.
A different EV bill, HB 2221, filed by Transportation Committee chair Terry Canales [D-District 40] was voted out of committee. The “Electric Transportation Act” has five ambitious goals to spur EV usage in Texas, but it stalled after that step.
Jeff Carlson, Harris’s chief of staff, was simply pleased HB 4379 got its committee hearing in the first place: “That’s a big deal,” he said. He expressed confidence the testimony would “open some eyes” in the state to the positive attributes of allowing direct EV sales. He suggested such sales would be “the future of the state,” which might well like to attract other EV makers once Tesla has opened its plant. He also pointed out that the outcome reflects the way the Texas Legislature is designed to operate. “It’s a process built to kill bills, not to pass them,” Carlson said.
So another bill to exempt Tesla (and other direct-sale automakers) will have to be introduced two years hence, and the process will start all over again.
