Tesla Giga Texas to Jolt Local Economy, Now It's Time to Allow Direct Sales In The State

by Eva Fox July 27, 2020

Tesla Giga Texas to Jolt Local Economy, Now It's Time to Allow Direct Sales In The State

Featured image: Green Car Reports

The decision to build a new Tesla factory in Texas brought much joy and excitement to Texans. The $1.1 billion Gigafactory in Travis County will produce the highly anticipated Semi, Cybertruck, Model Y, and Model 3.

However, Texas residents will find it difficult to buy Tesla vehicles despite being manufactured in the state. Current Texas law prohibits automakers from selling new vehicles directly to buyers without using franchised dealerships. At the same time, Tesla's policy is, on the contrary, aimed at the direct sales model.

Under the law, for Texas buyers, the company will first have to take the cars it assembles at the new Texas plant across state lines so that they don't count as sales in the states, and then return them for delivery to their customers.

“There are some hoops (Tesla) will have to go through” for Texas customers unless the state law is changed, said Wedbush Securities analyst Daniel Ives. "They can’t sell (directly) in Texas."

However, Ives said he does not consider the issue to be serious for Tesla. The company will ship thousands of Texas-built vehicles across the country and beyond. Ives said he doesn't expect the issue to raise prices for Texas customers.

The Tesla Factory, according to local Tesla supporters, is a great boon for the region. Tesla estimates Giga Texas will create at least 5,000 jobs. The factory is supposed to attract thousands of new non-Tesla jobs, too, due to secondary effects. There are many high-paying jobs in Austin right now, but “where we’re really deficient is in those middle-skill jobs,” said Mayor Steve Adler.


Source: Tesla

Given the great benefits Tesla will bring to the state, it would be prudent for Texas to consider allowing its residents to purchase cars directly from the automaker.

Defenders of the Texas law, which prohibits automakers from also having dealerships—along with the Texas Automobile Dealers Association—argue that the rules protect consumers by preventing manufacturers from establishing monopolies. But critics call them protectionist measures that cement dealership owners as third-party intermediaries. In essence, this law is aimed at protecting the owners of dealerships, rather than protecting consumers.

The company still cannot legally sell its vehicles in Texas via its business model, which excludes franchisees. Tesla currently has Galleries in the state where Texans can view the company's technology and vehicles, but are prohibited from taking orders or even negotiating prices. Texans can either purchase vehicles from Tesla dealerships outside of Texas and bring them back, or buy online, in which case the cars are delivered to them across state lines.

In this context, this law makes no sense, because the only ones it protects are dealers. However, there are high expectations that state policy will be revised. Texas must change this law so that cars made in the state's plant can be bought by Texans directly from Tesla.

Article edited by @SmokeyShorts, you can follow him on Twitter








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