Tesla is building a factory in Texas to make some of its cars, but when it’s up and running, the cars made there may have to go on a roundabout journey to get to Texan buyers (via The Drive). Because of state laws banning car companies from selling directly to consumers, Tesla could end up shipping the cars from its Austin factory to other states, before they’re sent back to their Texan buyers. The state’s lawmakers were debating legislation that would have prevented the situation, but they’ve now missed their chance to pass it before they have to go on break until 2023 — the factory is expected to be completed by the end of 2021.
Laws preventing automakers from selling their vehicles directly to consumers aren’t unique to Texas, nor are they targeted at Tesla: they were originally put in place in many states to keep manufacturers from undercutting their franchised dealers, and putting them out of business. Tesla doesn’t have franchised dealers to protect, but that doesn’t matter to Texas law as it’s currently written.
It’s an embarrassing situation for the state, where a worker at the new factory (where Tesla plans on investing a billion dollars) would have to wait for a car they made to travel to a dealership in another state for processing, and then return to them. That could even be the case for Elon Musk himself, who said he had moved to the state earlier this year. It’s also a little embarrassing for Tesla, which decided to build a factory in the state without securing a deal to sell its cars there.
There was a bill proposed in the Texas legislature seemingly tailored to help Tesla: it would have let companies sell their cars directly to consumers if they were completely driven by electricity or battery-power, and only if those companies never had franchised dealerships in the state. That could rule out companies like Ford, even though it sells EVs, but might also allow other EV makers like Rivian, Lucid, and Canoo to sell directly, once they start producing vehicles.
Tesla and other EV manufacturers have been fighting in many states to get permission to sell directly for years, and have even had a few recent successes: Tesla has been allowed to sell in Colorado (where Rivian recently got access as well) and Tesla was able to work out a legal loophole in Michigan. As many as 12 states allow Tesla to sell directly to customers, and others let Tesla open a limited number of dealerships.
But there are many states where hopeful buyers still have to jump through hoops, like having to mail paperwork across state borders 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 shut down, tabled indefinitely, or ignored for years. Tesla even has a page on its website where it asks customers to engage with their elected officials about these cases.
Connecticut, another state where direct selling isn’t allowed (though Tesla can lease cars to customers there), currently has legislation in the works to allow direct sales, and Tesla and Rivian are working together to try and get legislation through in other states this year as well. In many of the states, Tesla has found a way to get cars to customers, but not without hassle.
For Texas, though, the wait for legislation could be a while. Elon Musk tweeted in response to The Drive’s article about lawmakers running out of time, pushing for a change in the state. It’s not impossible that it could happen, even with the legislature on break until 2023: Governor Greg Abbott (who called Tesla “one of the most exciting and innovative companies in the world” when it announced its Texas factory) could call a special session to focus on the un-passed law. Abbott did not respond to a request for comment about whether he intends to do so.
It’s also possible a legal loophole could be created, like in Michigan. However, it doesn’t seem like Texas lawmakers are in a rush to go that route: Tesla also tried to win the right to directly sell cars to Texans in 2013 and 2015, and lost both times.