Texas Gives Tesla the Boot

It's official: Tesla Motors (NASDAQ: TSLA  ) has lost a key battle against the Texas Automobile Dealers Association. It appears the electric-vehicle maker won't be able to sell its cars in the Lone Star State after all, because of the state's strict regulations against manufacturer-owned dealerships. This is a huge loss for Tesla, particularly given the sheer size of the Texas market.

Everything's bigger in Texas
As the second largest and second most populous state in the U.S., Tesla can't afford to ignore Texas forever. It's surprising, than, that Tesla's outspoken CEO, Elon Musk, hasn't yet commented on this decision by Texas lawmakers. In April, Musk traveled to Texas to plead Tesla's case for selling its cars directly to consumers in the state.

During his visit, Musk argued, "What we're asking for from the Texas Legislature is really simple -- it's just, let us sell our products directly to the people of Texas like we're able to do in the rest of the country." The Texas Automobile Dealers Association, on the other hand, claimed that allowing Tesla to sell its cars directly to Texas consumers would open the floodgates for other carmakers to sell direct to consumers.

Tesla has fought and won similar battles in other states, including New York, Florida, New Jersey, California, Colorado, Oregon, Washington, and Massachusetts. However, Texas is an important piece of the puzzle for Tesla, as the company strives to transform the car-buying experience in this country. Worse still, Tesla will have to wait until the state's legislature meets again in a general session in 2015 before it can revisit the issue, according to Automotive News.

What now?
It will be interesting to see what Musk has to say on this heated topic. Perhaps it will be similar to what he told Forbes in April:

It is crazy that Texas, which prides itself on individual freedom, has the most restrictive laws in the country protecting the big auto dealer groups from competition. If the people of Texas knew how bad this was, they would be up in arms, because they are getting ripped off by the auto dealers as a result (not saying they are all bad -- there a few good ones, but many are extremely heinous).

Investors shouldn't have to wait too long to hear from Tesla's CEO. The company is holding its annual shareholder meeting later this afternoon.

Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.


Read/Post Comments (23) | Recommend This Article (8)

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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 June 04, 2013, at 5:43 PM, ckgod wrote:

    To be clear it's not Tesla can not sell cars to Texans. Tesla just can not do direct selling there is Texas. It's always legal, by US constitution, to purchase the car from other states via internet.

  • Report this Comment On June 04, 2013, at 5:57 PM, NMZuni wrote:

    Tesla has the right idea. Get rid of the dealers. If anybody is interested I can give you my dealer horror stories. But, I am more interested in your dealer horror stories. The have to be truthful, but would like to see if your tops mine. There are some good dealers in New Mexico, Rich was one, but it went out of business. University dealership has a rep for a bad maintenance shop.

  • Report this Comment On June 04, 2013, at 6:14 PM, jamesdan567 wrote:

    All I can say to the Texas Auto Dealers Association is

    "Be careful what you wish for"

  • Report this Comment On June 04, 2013, at 6:39 PM, Arussell89 wrote:

    Wait wait wait...

    Didn't Texas Gov. JUST spend some tax payer money coming out to California to try and get Tech companies to come out and work in Texas???

    Seems to me that the Automobile dealer associations have a bit more of a grip on the Texas Senate than the tax payers do in this situation.

    seem's foolish!!

  • Report this Comment On June 04, 2013, at 6:56 PM, pvanhoesen wrote:

    Concur with the above.

    If you don't want my sales channel, you don't deserve my jobs. Tennessee l has a rabid electric car fan base, a very robust supply chain for auto manufacturers, and one of the best entrepreneurial environments in the country will welcome Tesla with open arms.

  • Report this Comment On June 04, 2013, at 7:14 PM, hfbill wrote:

    So much for free enterprise. I love the way republicans are all for free enterprise and no gov't regs except for when it hurts them or their cronies.

  • Report this Comment On June 04, 2013, at 7:16 PM, mottledtool wrote:

    If you look at the map of Tesla's proposed Supercharger stations, Texas was one of the only states in the Oil Belt where there were even plans for installing them prior to 2014. Expect nothing but stalling and resistance from the politicians in oil producing and refining states. I'd call putting the interests of big car dealers ahead of the interests of the general public as more of the same kind of politics.

  • Report this Comment On June 04, 2013, at 7:25 PM, MrKevinSD wrote:

    Car dealerships only raise the price of cars, Tesla's way of doing business will put them out of business.... People don't refer to car dealerships as car stealerships for nothing.

  • Report this Comment On June 04, 2013, at 7:47 PM, normgarry wrote:

    At the rate Tesla is building cars, I don't see why they'd need dealerships. And by the way, I HATE TEXAS.

    youtube.com/watch?v=SWHlEC-SjFM

  • Report this Comment On June 04, 2013, at 7:49 PM, RCWIII wrote:

    Hummm... Elon Musk's Mind against The Best Minds in Texas? This Texan will bet on Musk... His next move will be Federal... Telling someone how they have to sell what they legally manufacture violates the Sherman Anti Trust Act - being anti-competitive (With the Texas Automobile Dealers Association in this case)... BYE, BYE, BYE TxADA

  • Report this Comment On June 04, 2013, at 7:54 PM, csbulldog wrote:

    The reason the Automobile Dealer Associations have had so much clout is because democrats had run Texas until just the 1990's and it takes a while to change all the laws the Dem's put in place. American airlines was given "protected territory too. They are both "pets" of the Dem's not the Repub's. If Tesla's business model was so great, then why has the big 3 not done the same?

  • Report this Comment On June 04, 2013, at 8:19 PM, AjitC wrote:

    Those of you who have been around may remember that Texas has a tradition of among the nation's worst crooked politics. Duh? Who killed JFK in Dallas, TX? Lee who? With what? Rusty bolt action rifle? Distant moving target? Right!

    People who buy Model S are sophisticated. They will buy the car via the internet have it shipped by a 3rd party truck. Texas can not control illegal grass trade. How they will keep people from buying Model S.

    In the end, the case will end up in Federal Court with the support of the Obama Administration.

  • Report this Comment On June 04, 2013, at 10:29 PM, amckane wrote:

    Tucker... A Man and His Dream.

  • Report this Comment On June 04, 2013, at 10:50 PM, botcher99 wrote:

    The auto dealers don't want them selling their own vehicles because other carmakers might want to do that too.....

    Oh too bad. About time for another revolution in the car industry. Cut out the middleman and all their little gimmicks, lies and manipulations to steal from car buyers.

    What about creating a holding company, contracting exclusive rights to sell Tesla vehicles in states where the crooked minions rule.

    Or, just buy the governor. Shouldn't cost much.

    Hey, go Tesla. Boo Texas.

  • Report this Comment On June 04, 2013, at 11:53 PM, ray123456 wrote:

    Tesla is NOT making money, they have gotten MILLIONS from taxpayers over the last 10 years, get subsidies from both Federal and state governments and some states like California are making regular cars cost more by demanding manufacturers of them buy carbon credits, from YOU GUESSED IT Tesla. In other words you are paying them again for nothing. They are going to make 240 million dollars for doing nothing from people who buy fords, chevys and dodges. That is the screwed up world of liberal politics in the market place. To be sure, if it was not for your tax money and money that you paid extra on your car for, Tesla would have been out of business 6 years ago.

  • Report this Comment On June 05, 2013, at 1:58 AM, snjpage1 wrote:

    Ray123456

    You need to go check your facts. They are doing so great that they just paid back the green loan they got from the government 10 years ahead of time. The GOP hate to see a green company be successful and they will do everything they can to try to stop its sales. Tx and Va are run by the GOP and they are both trying to stop them. There is no reason for Tesla to have a network of dealerships. It is just an excuse to try to make the company fail.

  • Report this Comment On June 05, 2013, at 4:17 AM, RUTHELLAOWENS wrote:

    Ray, I guess you missed the article....

    Tesla pays off $465 million U.S. loan nine years early.

    Texas is a joke. I live here. Air quality, lousy, water quality, lousy, the TCEQ (Texas Commission on Environmental Quality) lousy.

    I won't hold my breath, trying to get a good breath.

    These types of silly roadblocks have us decades behind in going green. We should be solar energy, and wind energy leaders in sunny Texas. Instead the old school energy companies have us locked in.

  • Report this Comment On June 05, 2013, at 10:17 AM, oldone50s wrote:

    why would anybody in there right mind want to buy a vehicle without a dealership close by. where would you have the warranty work done and car serviced without a dealership.

    common sense tells me there will be problems.

  • Report this Comment On June 05, 2013, at 11:20 AM, CommonScents wrote:

    Just yesterday I walked through the gigantic Galleria mall in Houston, and there is a Tesla STORE in the mall. I almost went in, just to check it out. But I'm not in the market for a $100k+ car right now. Apparently this "store" is strictly a showroom?

  • Report this Comment On June 05, 2013, at 11:47 AM, lassiecox wrote:

    anyone with a new car uses the dealership to honor the warranty and do preventive maintanance. usually selling the car back where hebought it when buying a new car.

    Don't mess with texas is no joke, buy through another state and live in texas will find texas justice, the beginning of the end of tesla motors either in unison with obama disappearance or before

    Only an idiot would but an overpriced BRICK on the internet from a bankruptcy political donor swindlling expert, who has swindled american taxpayer out of money from a companey he stole from eberhardt back in 2002 and billions have disapeared down the elon rabbit hole the company has never turned a profit. or paid a dividend, while rlon bought a 15 million dollar home during sequestration, listing a phony ipo buying its own shares to create the illusion of value combined with massive P R Stunts has lured the unwary taxpayer into buying shares that are not worth the paper they are written on.

    what is a company worth that has built up a massive deficit over the last 11 years, and gotten built around 5,000 cars making rediculous claims to have sold more EV's than the other EV cars in the market, including the prius.

    if you fall for his barrage of lies you will chase cars and suck eggs, bow wow, ha ha ha what a phony

  • Report this Comment On June 05, 2013, at 11:54 AM, lassiecox wrote:

    Texas is immune from the job losses experienced by bankrupt states like, california LA and michigan where detroit is the largest city in america, and is sincere about its ability to lure real high tech companies to texas---The State has no interest in bankruptcy expert political donor recipiant experts into the state to witness its exodus whenever hydrogen fuel cell propelled cars hit the road in 2014, putting an end to the coal powered plugin green cars, with the color of coal emissions.

  • Report this Comment On June 05, 2013, at 11:57 AM, lassiecox wrote:

    RUTHHELLOWENS SHOULD MOVE OUT TO CALIFORNIA OR UP NORTH---OR--- DO SOME GOOGLING ABOUT AIR QUALITY INDEX AND WATER QUALITY ISSUES AROUND THE COUNTRY SO HER PERSPECTIVE MIGHT REEK OF TRUTH INSTEAD OF THE FALSEHOODS IT REEKS OF

  • Report this Comment On June 05, 2013, at 12:12 PM, lassiecox wrote:

    JAMESDAN467 IS A PERSON WITHOUT A CLUE ABOUT PREVENTIVE MAINTANENCE AND WHAT HAPPENS WHEN A CAR NEEDS SERVICE, READING HIS OTHER COMMENTS REC=VEALS ANOTHER MUCK PR STUNTSTER TRYING TO SELL TESLA SHARES FOR A COMOANY WHO HAS NEVER PAID A SINGLE DIVIDEND AND IS PRESENTLY IN DEBT FOR BILLIONS, FACING THE FUTURE OF AUTOMOTIVE ENERGY, THE HYDROGEN FUEL CELL, AT WHICH TIME THE COAL POWERED LAPTOP BATTERY POWERED PSEUDO CAR WHERE THE BATTERY SWELLS UP BEYOND ITS CASING WITH 5 OR 6 YEARS, LIKE LAPTOPS, WILL BE GONE BY THEN, ALONG WITH YOUR INVESTMENT, OR LEFT WITH ANOTHER " brick '

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