Will Tesla Motors Really Build Trucks in Texas?

Is Tesla Motors (NASDAQ: TSLA  ) really planning to build a new factory to make electric trucks -- in Texas?

"Planning" probably overstates things some. But the Silicon Valley-cool maker of electric cars seems to have a pickup in its future plans -- and its CEO said this week that a factory in Texas could be in the cards.

Tesla needs a favor in Texas
As always with Tesla, there's more to the story.

Here's the background: Tesla's rock-star CEO, Elon Musk, was in Austin this week, pressing Texas state lawmakers to pass a measure that would allow his company to sell its cars directly to consumers.

Most automakers sell to their U.S. customers via franchised dealerships, which are usually locally owned. That system has been in place for many decades -- and those local dealer-owners have encouraged their local politicians to pass laws protecting their franchises over time.

Many states have laws that, shall we say, strongly encourage automakers to sell via dealer franchises. But Tesla doesn't play from that rulebook. Taking a page (several pages, actually) from Apple and its wildly successful retail strategy, Tesla sells directly to its customers via factory-owned stores.

In several states, Tesla's stores have taken heat from local dealer associations and state legislators. Some of that heat has ended up in court: Earlier this year, Tesla got Massachusetts courts to dismiss a lawsuit that sought to shut down a Tesla store there.

But Tesla doesn't have a store in Texas, because Texas' rules about car-dealer ownership are probably the strictest in the country. That lack is probably costing Tesla quite a few sales. That's why Musk went to Austin to lobby state legislators for an exemption -- and that's why he dangled the possibility of a future Tesla truck factory in Texas.

Was this just a carrot for lawmakers? Or a real plan?
Musk might actually have a chance of winning this battle. Texas Gov. Rick Perry said last month that he would support allowing direct sales of electric cars, if legislators were to approve such an exemption.

But the exemption faces stiff opposition from the Texas Auto Dealers Association, which howled predictably about how an exemption for Tesla would "limit free enterprise" and somehow inflate the cost of new cars. (Their case may sound dubious, but dealers' contributions to local legislators' re-election campaigns probably speak louder than any argument the dealers' association might be able to make here.)

That's probably why Musk felt the need to drop a carrot. He told Automotive News that Tesla would start investing more in Texas if the company won the sales exemption. Those investments would include new Tesla retail stores, of course, but Musk said they might include something else in a few years -- a second Tesla factory.

And what would that second factory make? A "really advanced electric truck," Musk said. He says he has an idea in mind for such a vehicle, and that it might make sense to produce it at a new plant -- but probably not for several years.

Is that really going to happen?

Don't hold your breath, Texas
I'm totally willing to believe that Musk has a great idea for an electric truck -- the Model S turned out well -- but I'm a little skeptical of the idea that Tesla will be building a new factory in Texas any time soon.

Tesla already has a big factory in Northern California, bought from Toyota (NYSE: TM) in 2010. It's a huge facility, and large portions of it are currently standing unused. The company has lots of room to expand its operations on-site before it will need additional manufacturing space.

Tesla's sales of its first mass-produced car, the upscale Model S sedan, have been quite good -- the company expects to build 20,000 cars this year. But Tesla is still a long way from the production volumes that would require a second factory.

In its factory's heyday, when it was jointly operated by Toyota and General Motors (NYSE: GM  ) , it produced 6,000 vehicles a week, or almost 300,000 a year.

Tesla has a long way to go before it hits anything like those numbers. And until it does, I'm skeptical that the company will spend big bucks to build a second factory far from its headquarters. Even in Texas.

Will Tesla's growth really continue?
Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. Despite progress, a looming question remains: Will Tesla be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.


Read/Post Comments (7) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 13, 2013, at 11:44 AM, Bearista wrote:

    There are Tesla stores in Texas. There's one in Austin and one in the Houston Galleria. They're not allowed to discuss pricing or give test drives. They do direct you to the website to order one online. You can sit in the Model S at the store though. I don't think it's hurting sales THAT much.

  • Report this Comment On April 13, 2013, at 12:01 PM, bobthegoodone wrote:

    All we need now are trucks costing more than a 100,000 And stupid me I thought 60,000 trucks were crazy

  • Report this Comment On April 13, 2013, at 12:32 PM, wpalajac wrote:

    Do we really need more trucks on the road carrying nothing more than a driver and a case of beer?

    That said, I love my black Tesla-S w/21" wheels and 0-60 in 4.4 seconds and will probably buy one after i triple mortgage my house! :-)

  • Report this Comment On April 13, 2013, at 12:43 PM, puffn1x wrote:

    Think about this. A 1200lb battery going 70mph. how were the crash tests?

  • Report this Comment On April 14, 2013, at 12:20 AM, rapnjoe wrote:

    Toyota has a modern efficient plant in Texas, maybe Tesla and Toyota are seeking an even stronger partnership where Tesla uses the existing Toyota plant instead of building a new one,

  • Report this Comment On April 14, 2013, at 8:28 AM, TMFMarlowe wrote:

    @rapnjoe: And that plant builds Toyota Tundra pickups, as I recall. Interesting point.

    Thanks for reading.

    John Rosevear

  • Report this Comment On April 14, 2013, at 1:57 PM, Marshgre wrote:

    @puffn1x

    The Tesla has been designed to receive a five star rating in all categories. The 1200lb battery actually adds rigidity to the passenger compartment. And with all that weight at the bottom of the car improves on the road stability and handling making it easier to avoid accidents.

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