Tesla Makes Cars in Texas but Has to Re-Import Them to Sell in the Lone Star State Leave a comment

The Texas legislature adjourned on May 31 without making any changes to the state’s auto dealer franchise laws—meaning that the only way for Tesla to sell electric cars made at its forthcoming factory in Austin will be to ship them out of state and re-import them.

The Drive first reported the franchise laws currently prohibit auto manufacturers like Tesla from directly selling cars to consumers, but instead require cars to be purchased through third-party dealerships—meaning Tesla stores can’t sell to or ship to Texans. As it stands, loopholes allow Tesla to operate “galleries” where prices aren’t discussed, but no Tesla facilities in Texas can process paperwork and cars have to be delivered for pickup from out of state depots:

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 isn’t unique in these restrictions. It’s just a standout because Tesla is actually building a factory there. As of 2018, some sixteen states had laws that would prevent Tesla from opening its own direct dealerships, while an additional nine had limits on the total number of stores that the company could operate. California, where Tesla’s main U.S. facility is located in Fremont, doesn’t have a similar law on the books.

Tesla CEO Elon Musk has said that the Austin manufacturing plant will employ 10,000 people by the end of 2022 and could begin building cars as soon as late 2021. The $1.1 billion project will make Tesla models including the Semi, Model 3 compact, Model Y, and the Cybertruck.

HB 3479, a legislative proposal that would have exempted companies that solely manufacture battery-powered vehicles and didn’t maintain franchised distributors in Texas, never made it out of Committee after being heard in May, according to the Drive. That bill was mostly tailored for Tesla and would exclude most other large manufacturers that make electric vehicles, but the Verge reported it could benefit other companies including Rivian, Lucid, and Canoo. Another more sweeping bill relating to electric vehicles, HB 2221, stalled after being voted out of committee. That means Texas legislators essentially dropped the matter before the end of the session. These and similar proposals have been fought against by auto distributors and car dealers, who (justifiably) worry that manufacturers could simply view them as an unnecessary middleman and undercut their prices, driving dealerships out of business.

Musk tweeted late last month that “Tesla sure would appreciate changing the law, so that [the workaround] is not required!” But it seems quite unlikely the situation will change anytime soon.

The Texas legislature does not meet every year and isn’t scheduled to meet again until January 2023. According to the New York Post, the sole remaining option for Tesla to directly deal cars in the state anytime soon would be for Governor Greg Abbott to call a special session on the topic—while Abbott has threatened to hold such a session, it would specifically relate to Texas GOP-backed voter suppression bills, and his office didn’t respond to the Post’s requests for comment on Tuesday. Similar proposals have gone unheeded in 2013 and 2015.