Tesla Battle Far From Over: Austin Pushes for Change in Texas Corporate

People by Beth Cortez-Neavel | 11 min read tweet



| 11 min read

As Joshua Baer pulled out of the garage in his orange Tesla Roadster Sport there was no sound but the street traffic near 7th and Brazos. No engine purr, no buzzing to life, not even a muted hum.

The Roadster was Tesla Motor’s first battery-electric model with a sporty carbon-fiber and aluminum build. The car, doppelganger to the Porsche Boxter Spyder, is now out of production to make way for the newer Model S, a high-tech computer in a luxury sedan package. Tesla anticipates the release of their new Model X in 2015. As Tesla’s notoriety and new manufacturing plans butt heads with Texas car sales laws, an increasing number of Austinites are showing their support of the burgeoning company.

A Car Unlike Any Other

Baer, the 38-year-old founder and Executive Director of Capital Factory, said his Roadster was one of the first Teslas in Austin. He owns the 86th car in the signature series. He signed up for the car after a night spent watching Al Gore’s “An Inconvenient Truth,” before the first Tesla was put into production.

“I read about this car the next morning. I had just seen this thing about global warming and climate [change],” he said. “I knew of Elon Musk and was really impressed with things that he had done. I believed that he could pull something like this off.”

Baer wired Tesla $100,000 on the promise of getting the Roadster, still in the design stage and a few years away from the assembly line. Baer said the three-year wait was well worth it. He drove the electric car almost every day for about four years, and still takes it out for a spin when he’s not driving his Model S around town. Baer’s not stopping at the Model S, he’s already paid his $10,000 down payment – $5,000 each – for two of the new Model Xs.

Although Tesla doesn’t break down the buyer numbers from city to city, over 1,000 Model S cars have been registered in the state. There are galleries and service centers in Austin, Dallas and Houston. Austin also has a Tesla Motors Club which Baer used to help organize.

Tesla Motors is the brainchild of a few Silicon Valley engineers, mainly Elon Musk who co-founded PayPal and the spacecraft manufacturing company SpaceX . Tesla was founded in 2003, but the Roadster didn’t make an appearance on roads until 2008. Musk told 60 Minutes that he designed the company to shatter the myth that electric vehicles have to be slow, ugly and boring. The ultimate goal is to bring electric cars to mass market as soon as possible.

Last May (and again in July), Consumer Reports rated the Model S its highest car rating to date, a 99 out of 100, likening it to something Marty McFly might have replaced his DeLorean with in the movie “Back to the Future.” The magazine said slipping behind the wheel of the Model S is like “crossing into a promising zero-emissions future” and is brimming with innovation interwoven with “impressive attention to detail.”

Al Gore would be proud – the car is environmentally friendly. The Model S with its 85 kWh battery can go zero to 60 in 4.2 seconds and travel 265 miles in between charges. It has aluminum door handles that slide out on touch and melt back into the door when not in use, a trunk in the back and a “frunk” under the hood. It comes with a car-shaped smart key that has to be inside the car, but not in the ignition.

The main attraction – or distraction – is the 17-inch touchscreen in the center console. The entire car is equipped with Wi-Fi that lets drivers pull up full-screen GPS maps, alerts drivers of near-by charging stations and immediately downloads software updates that keep the car running. The touchscreen has a web browser and app capabilities. For example, Baer has an iPhone app that can locate the car if he’s lost it in one of our Texas-sized mall parking lots. With a swipe of his finger he can lock and unlock the car remotely, see how much charge the battery has and heat up the seats before he goes for a drive.

It doesn’t hurt that the car is also fun to drive. Austin entrepreneur Billy Marcus was the 131st person to get his Tesla Model S in late August of 2012. Before that, he had a Roadster on loan from Tesla and gave it back once his Model S came in. He said there’s nothing like driving a Tesla.

“I have never felt the same feelings that I have when I get into a Tesla. I don’t feel like this car will ever feel old to me,” Marcus said. “I’ve only owned it a year and a half, but I sing its praises every time I get in. The way the car handles is better than any car I’ve ever owned.”

Baer said driving a Tesla also makes him feel powerful and fast. “The power is immediate. It almost feels like playing a video game, where you have a controller and you hit the ‘A’ button and it just goes,” he said. “You touch the pedal and the car surges forward. It feels like you could have an egg balanced on a spoon and the egg wouldn’t fall off. It’s a smooth ride.”

But despite Austin’s affinity for the car, it hasn’t been a smooth ride for Tesla in Texas.

Texas Laws Stymie Tesla Sales

Tesla Motors, unlike most every other car company, keeps the Apple model of factory-direct sales. All its retail is done in shopping centers and high-end malls like The Domain in North Austin instead of going through a third-party dealership. All service and warranty repairs are done in Tesla-owned service centers, which also cut dealerships out of the equation.

But in Texas and a few other states like New Jersey and Arizona, it seems that the dealership associations are calling the shots about who can and can’t sell in the state.

Under Texas Occupations code TEX OC. CODE ANN. § 2301.476 – a franchise law that’s the result of years of lobbying by the Texas Automobile Dealers Association – Tesla and any other factory-direct vehicle company is prohibited from selling, delivering and servicing cars.

In the 2013 legislative session, Elon Musk, Tesla’s Vice President Diarmuid O’Connell and Texas Tesla owners lobbied for two bills that would allow Tesla to sell in state. Senate Bill 1659 and House Bill 3351, filed by Republican Senator Craig Estes from Wichita Falls and Representative Eddie Rodriguez, a Democrat from Austin, would have amended the code to allow American electric and battery-powered vehicle manufacturers to sell directly to the public. But the bills didn’t make it to either the House or Senate floors for a chamber-wide vote. Dealerships were worried the bills would hasten the day when their local and “family-owned” businesses would compete with large-scale manufacturers. But the dealers’ key lobbying point was that factory-direct sales would hurt the consumers.

As Austin-based watchdog group Texans for Public Justice pointed out in a September 2013 report , Tesla may not have dropped enough “political cash” into their lobbying efforts to repeal the “antiquated” restrictions on the electric vehicle and factory-direct model. They reported dealership interests invested more than $2.5 million in Texas’ 2012 elections. Gulf States Toyota’s Thomas Dan Friedkin and Gulf States Toyota PAC were the two top contributors, responsible for a combined $784,634. B. J. ‘Red’ McCombs, of Red McCombs Auto Group fame, was the third highest backer at $306,500 and the Texas Automobile Dealers Association PAC came in fourth, giving $285,750. While Tesla made only $7,500 campaign contributions, TFPJ reported the company did pay eight lobbyists a combined $345,000 to push for the bills’ passage.

Alexis Georgeson, Tesla Motors’ spokesperson said the effort to change legislation was not about killing the third-party auto dealer franchise, but about creating opportunities for American innovation to grow.

“We’re not a threat at this point to large-scale dealerships,” Georgeson said. “Elon has alluded in the past that the dealership model may work in the future when we’re trying to move hundreds of thousands of units a year. At this point our stores are providing a no-pressure sales environment and the first goal of our stores is to educate and engage consumers about Tesla and about electric vehicle driving. Manufacturer-direct sales are needed to jump-start electric [cars], drive down prices and get people more comfortable with adopting this technology.”

So instead of retail centers, Tesla continues to run galleries in Texas. At the Tesla outlet in The Domain, company representatives can show off the cars and its cool features, but are prohibited from discussing prices, the reservation process, financing, leasing or purchasing options. Galleries also can’t offer test drives; something the Tesla advocacy website said inhibits their ability to reduce misconceptions about electric cars.

If a Texas consumer wants to buy a Tesla they have to jump through a few hoops.

“Someone in Texas has to do their own research, go online, find the price, and then call in and speak with HQ in California to actually complete the transaction,” Georgeson said.

Cars have to be delivered by a third party, and until 48 hours after the car’s delivery, Tesla can’t give any information or guidance to the consumer, making it difficult for the customer to buy into this emerging electric vehicle technology.

But Tesla is continuing to push for new legislation in many states, including Texas.

The Battle Isn’t Over

Musk has been warned that it can take three sessions to get anything controversial through the legislature in Texas, especially since the Texas Legislature meets only every two years, instead of every year like most states. Tesla has also talked about taking cases to the federal level if the state won’t budge, Georgeson said. “We’re very dedicated to this issue,” she said.

But Tesla won’t let the restrictions thwart their future plans to build a gallery in Dallas and a service center in San Antonio. Texas is also in the running for Tesla’s new “gigafactory” that would bring 6,500 job opportunities to the state.

Nevada, Arizona and New Mexico are also in consideration for a new lithium-ion battery plant. Tesla said it is looking for space that would cover 500 to 1,000 acres, but Georgeson said the company isn’t commenting on qualifying factors.

Recently Governor Rick Perry, a long-time proponent of big business and small-government in Texas, came out in support of changing the franchise laws to make electric vehicle sales more accessible to the consumer although his press office noted he’s not going to call a special session to remedy this any time soon.

Perry said in a Fox Business News interview that the factory-direct sales model makes sense. “We live in a different world than we did 30 years ago, 10 years ago,” he said. “I think it’s time for Texas to have an open conversation about this.”



Fox Business News Video: Governor Perry on Tesla.

“The law is outdated and contradicts the free-market gospel regularly preached by state lawmakers,” the editorial said. “Nonetheless, next session, the Legislature should allow Tesla to create its own network of stores and service centers.”

Some, like Baer, think the entire debate is absurd. “I obviously didn’t have any trouble buying a Tesla in Texas. Regardless of what they say the law is, Tesla is selling lots of cars in Texas. The whole debate is kind of silly. I think it’s absolutely ridiculous that Tesla technically can’t sell cars in Texas. This is a perfect example of a strong lobby perverting a law to have the opposite of its original intended effect. These laws were made for another time and era.”

Photos by Savanna Rose for Techzette