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Will Tesla Motors Really Build Trucks in Texas?

By John Rosevear - Apr 13, 2013 at 9:00AM

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It'll be quite a while before Tesla looks to build a new factory -- in Texas or anywhere else.

Is Tesla Motors (TSLA 5.14%) 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 (TM 0.48%) 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 (GM 2.69%), 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.

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