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MIAMI, FLORIDA - OCTOBER 21: A Tesla Model Y electric vehicle is dispalyed on a showroom floor at the Miami Design District on October 21, 2021 in Miami, Florida. Tesla reported $1.6 billion in profits for the months of July, August, and September, a record for them. (Photo by Joe Raedle/Getty Images)
A Tesla employee cleans a car outside a Tesla showroom in Burbank, California, March 24, 2020. - Luxury electric car maker Tesla ended up closing its California plant in Fremont, a concession by its maverick head Elon Musk after a drawn-out standoff with the state authorities over the spread of the virus. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)
Frank Rogers went to Tesla’s service center near the Dominion in 2018 and took his first-ever spin in an all-electric Model 3.
“The thing that attracted me first was the technology, and when I got behind the wheel, it was the thrill of the ride,” said Rogers, CEO of a small-business services firm. “It’s like being on a roller coaster, but you can control how fast you go.”
A self-described “computer geek,” Rogers rushed home to buy one on the electric car maker’s website, carefully selecting the color, type of wheels, interior design and battery options.
Three months later, Rogers received his blue Model 3 with the 30-day temporary license plate tags at his home. A Tesla-contracted broker in the Dallas area helped him secure his registration and license plates.
“We signed the documents sent to us and it was pretty much hands-off,” he said. “But it took about three more months to get the plates.”
He had to return to Tesla’s far North Side service center three times to pick up new temporary license tags.
Earlier this year, his wife went online to buy a Tesla Model Y. But without a broker, Rogers said, it was “a fiasco,” with her driving to several drivers license branch locations to obtain plates. “It was just not knowing where to go.”
Rogers suspects Tesla buyers in Texas wouldn’t experience such hassles if the automaker could sell its vehicles directly to consumers. But it can’t. Texas law requires auto manufacturers to sell their cars, trucks and SUVs through franchised dealerships.
Texas customers must buy Tesla vehicles on the company’s website and fill out paperwork through email.
Here, Tesla remains limited to operating showrooms and service centers, such as the Dominion location. Employees offer test drives out of these sleek, Apple Store-inspired storefronts, but they can’t discuss pricing with potential car buyers or help with services most dealerships provide, like getting plates and registration.
“If Tesla could have helped us out — to figure out where to go — it would’ve been easier, just like dealerships,” Rogers said. “But with Tesla not being able to sell in Texas, that was on us to do.”
Selling directly to buyers over the internet is the heart of Tesla’s distribution model, and co-founder and CEO Elon Musk doesn’t appear to be budging on that front.
And partnering with third-party dealerships is seemingly out of the question; in fact, Tesla has been trying to tear down franchise dealership laws across the country.
Though Tesla has managed to overturn such laws in other states, including New Jersey and Massachusetts, it has repeatedly failed in Texas.
But Tesla may be playing a stronger hand in Texas than ever before. The company is building a $1.1 billion Cybertruck plant in Austin, and Musk announced Oct. 7 that it’s moving its headquarters from Palo Alto, Calif., to the state capital.
Given the size of Tesla’s investment here — in addition to the Texas operations of SpaceX, Musk’s other major venture — will Gov. Greg Abbott and state lawmakers finally consider upending the dealership law?
Tech entrepreneurs Martin Eberhard and Marc Tarpenning got Tesla rolling in 2003, with Musk largely bankrolling the company with part of the $180 million he’d made from the 2002 sale of PayPal — which he co-founded — to Ebay. The idea was to start with a luxury all-electric roadster, perfect its carmaking skills and eventually sell less expensive electric vehicles to the masses.
It’s succeeding. In its third quarter, Tesla sold a record-breaking 241,000 electric vehicles, despite tangles in its supply chain.
Yet traditional dealerships across the country — and lawmakers who protect them — are resisting Tesla’s direct-to-consumer push. Texas is one of nearly 25 states that either ban automakers from cutting dealerships out of the picture or put restrictions on manufacturers’ sales directly to their customers.
“What we’re asking for from the Texas Legislature is really simple,” Musk said in 2013 when Tesla first attempted to undo the franchise law. “Let us sell our cars directly to the people of Texas like we’re able to do in most of the country.”
The Texas Automobile Dealers Association fended off the bill that year and fought follow-up legislation in the past four sessions. The organization represents more than 1,200 dealerships across the state, many of whose owners are rich and politically connected in their communities.
“This is really the perfect battle as these two interests collide,” said Raji Srinivasan, an associate dean at the McCombs School of Business at the University of Texas at Austin.
Looking to take emissions-free vehicles into the mainstream, Musk has introduced “a disruptive technology to the traditional car model,” she said. And its internet-driven sales system is as much a challenge to traditional dealerships as its sought-after electric vehicles are to major automakers.
April Ancira, chairwoman of both the Texas and San Antonio auto dealer associations, testified against Tesla-backed bills in the latest legislative session.
“It’s not that Tesla itself is so frightening,” she said. “It’s just that we would hate to see one thing cause the demise of the backbone of America: family-owned, midsized businesses that are engaged in their communities and are great for their consumers considering the competitive pricing.”
As the vice president of the Ancira Auto Group in San Antonio, Ancira said she supports Tesla’s plan to move its headquarters to Texas. But she said she’s baffled by the company’s decision to forgo the franchise model, in which automakers can use dealerships to “have a mass distribution point without having to put up all of the capital and all of the risk on it.”
She wonders whether Musk would ever change his mind and partner with dealerships.
“I don’t know a dealer out there who wouldn’t raise their hand,” Ancira said. “If he said let’s do the dealership thing, I’d say, ‘Where do you want me to build?’”
State Sen. José Menéndez said he has “always been consistent on my opposition to changing the law for one manufacturer.” In past legislative sessions, the San Antonio Democrat worked across the political aisle to prevent the Big Three automakers and now Tesla from killing the state dealership law.
“I don’t think Mr. Musk decided to move his headquarters to Texas because it was going to buy favor with legislators,” Menéndez said. “Because if that was his thinking, he’s wrong.”
Neither Abbott nor Musk responded to requests for comment for this story. Tesla did not respond to questions as of press time, either.
Tesla has employed “a plethora of lobbyists” for nearly a decade trying to influence legislators, but they’ve fallen short because the franchise dealership model “is not broken,” Menéndez said.
He cited the economic benefits of local dealerships. San Antonio’s 78 dealers, he said, employ 8,700 workers who make an average annual salary of $69,000, with an overall payroll of $600 million.
“With all due respect, Mr. Musk, the state of Texas has gone over 150 years just fine without having to accommodate you,” he said. “I’m sure we’ll do just fine if you choose not to play by the rules.”
Menéndez said he “is a huge fan of the Tesla products” and offered an olive branch, of sorts.
“The day that Mr. Musk chooses to play by the rules that we have in Texas is the day that I’ll look at purchasing a Model S, but not anytime before,” he said.
Back at his San Antonio business, Frank Rogers said he expects lawmakers to continue icing out Tesla.
“It’s the Big Three that are keeping those other manufacturers from selling directly to consumers,” he said. “It’s a union thing. It’s a politics thing. It’s nothing about how good the cars are and how much people like the cars.”
Rogers said he could not imagine Musk partnering with a franchised dealership, since “his whole philosophy is to move the world toward sustainable energy, and I don’t think he’d park his car alongside a gas-powered car.”
Michael Danberry, president of the Tesla Owners Club of San Antonio, said the company-sanctioned group has garnered 246 members since forming last year. Other Tesla owners groups exist in Austin, Houston and North Texas.
After retiring from the Army, Danberry test-drove his first Tesla in Kansas City, Mo., in 2017.
“The test drive is what will hook you,” he said. “It just goes. There’s no sound. No shifting. It’s just a quiet go.”
Danberry placed an online order from the Tesla showroom for a Model S. Two years later, he and his family had moved to Dripping Springs, just outside Austin, when his wife, Carla — who also retired from the Army — bought a Model X over the internet. She had the same hassles Frank Rogers and his wife experienced.
“In Texas, they can show you a car and they can deliver the car, but they can’t sell you the car,” Danberry said.
The club president said he supports Tesla’s mission “to create an entire sustainable energy ecosystem,” adding: “Tesla is more than a car company — they’re a technology company.”
Teslas have become a common sight on Texas roadways, particularly in metro areas — which means the state’s dealership law hasn’t stopped buyers like Danberry. But he worries that the law and similar ones in other states may hinder startup electric vehicle makers such as Rivian and Lucid, both based in California.
“These new vehicle manufacturers don’t want to follow the dealership model,” he said. “They shouldn’t have to follow the dealership model.”
Srinivasan, the UT professor, said lawmakers in various states, including Texas and Connecticut, have aligned with franchise dealers, which she described as “traditional interests.”
Still, she believes Texans someday will be able to legally buy Teslas directly from the company, saying, “It’s a question of time.”
As for Ancira, she said she “is 99 percent sure” the law won’t change in the next Legislature. But she’s concerned about legislative sessions further out, as more dealer-friendly lawmakers such as state Rep. Lyle Larson, R-San Antonio, retire.
“You get put in the spot where you need to retell your story to ensure that there’s no disconnect from one session to another and build those relationships on a continuous basis as those players begin to change,” she said. “We’re concerned. But we’re trying to stay on top of this as best as we can.”