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Friday, 05 April 2013 16:12

Tesla Motors Takes on Texas Franchise Laws

In its latest battle with state dealer associations, electric vehicle maker Tesla Motors is trying to change existing franchise laws in Texas.

Tesla is behind bills introduced earlier this month in the Texas Legislature that seek an exemption to current restrictions on factory-owned dealerships for electric vehicle makers that have never used independent franchised dealers. It is Tesla’s most direct challenge to franchise laws already on the books.

The Texas Automobile Dealers Association is opposing the legislation.

If it becomes law, the proposed change would free Tesla from what one company executive calls “perhaps the highest barriers in the nation to operating” Tesla's factory-store model.

Tesla’s current operating situation in Texas is “expensive, time consuming and just ridiculous,” said Diarmuid O’Connell, Tesla's vice president of business development.

The company has two gallery locations in Houston and Austin but staffers are prohibited from engaging in selling activity. They can’t give pricing information or take orders. A potential buyer in Texas must contact out-of-state Tesla representatives to complete a sale, O’Connell said. The buyer must also make his or her own shipping arrangements.

Tesla also has service centers in Austin and Houston, but they aren’t allowed to make warranty repairs, he said.

The Texas dealers association says Tesla’s proposed changes aren’t good for dealers or consumers.

“The best way for any manufacturer to retail their vehicles is through great dealers,” said Karen Phillips, the association’s general counsel. “They’re the ones who know how to retail, who know how to satisfy the customers, and they’re the ones who should be selling the product.”

In addition to testifying at upcoming hearings, association representatives also are speaking to individual legislators about the bills. Phillips predicts the legislation will fail to gain approval before the Texas body’s session ends in late May.

“To think you should have an exception because you have one electric vehicle is arrogant,” she said, adding that other manufacturers have been working on electric vehicles “for a long time.”

If the legislation passes, Tesla says it will open more stores and service centers.

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