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Tesla, auto dealers clash over franchise law

Tesla Motors CEO and billionaire Elon Musk hopes to persuade lawmakers this session to revise the franchise law so Tesla can sell its $69,000 cars directly to Texans. Customers and journalists examine a Tesla Model S sedan at an event in Beijing, China. <137>Tuesday, April 22, 2014. Tesla Motors delivered its first eight electric sedans to customers in China on Tuesday and Musk said the company will build a nationwide network of charging stations and service centers as fast as it can. (AP Photo/Ng Han Guan)<137>
Tesla Motors CEO and billionaire Elon Musk hopes to persuade lawmakers this session to revise the franchise law so Tesla can sell its $69,000 cars directly to Texans. Customers and journalists examine a Tesla Model S sedan at an event in Beijing, China. <137>Tuesday, April 22, 2014. Tesla Motors delivered its first eight electric sedans to customers in China on Tuesday and Musk said the company will build a nationwide network of charging stations and service centers as fast as it can. (AP Photo/Ng Han Guan)<137> AP

Monopolies are bad for consumers, both sides fighting over whether Tesla Motors can enter the Texas new car market agreed last week. But monopoly is in the eye of the beholder.

At a debate hosted by the Texas Conservative Coalition Research Institute, the Texas Automobile Dealers Association argued against carving out an exception in Texas’ current franchise law, which says new cars can be sold only through dealerships. Tesla wants to sell its electric vehicles directly to customers, bypassing traditional car dealerships.

Tesla Motors CEO and billionaire Elon Musk hopes to persuade lawmakers this session to revise the law so Tesla can sell its $69,000 cars directly to Texans.

At Wednesday’s debate, Ricardo Reyes, Tesla’s vice president of communications, said the current system has created a monopoly for dealerships. But Bill Wolters, the president of the dealers association, said Tesla itself is seeking a monopoly, since no other company could sell Tesla Motors’ product.

“How does a manufacturer of a product that owns every retail outlet benefit a consumer or the state of Texas?” Wolters asked.

Reyes said Tesla just wants to sell directly to customers.

“All we’re asking to do is be allowed, unfettered, to compete,” Reyes said.

“It is odd to me that the only thing consumers can’t buy direct is booze and cars in this state,” Reyes said. “Imagine the Girl Scouts having to sell through a distributor network. Imagine Apple having to sell through a distributor network.”

Wolters said the franchise law protects Texans and the state’s dealerships. He said dealerships support schools and hospitals in communities statewide and ensure that Texans have access to safe cars.

“If we didn’t have franchise laws, the manufacturers, as they should, would focus on their shareholders and only have dealerships in the most profitable, highly populated areas of our state,” Wolters said. “Do we want to jeopardize two-thirds of the dealerships in our state?”

Dealerships in other states have not suffered from Tesla’s presence, Reyes said. “There is no data to back up these doomsday scenarios.”

In the last session of the Texas Legislature, a bill that would change state law to allow Tesla sales in the state was approved in the House committee on Business and Industry but it did not receive a vote in the House.

Musk renewed his case for changing state law during an interview with the Texas Tribune CEO and Editor-in-Chief Evan Smith this month at an annual conference hosted by the Texas Transportation Department. He pointed to a compromise that Tesla and New York forged under which Tesla was allowed to open five stores for direct sales. He suggested Texas allow Tesla to open seven stores.

If the Legislature again balks at changing the law this session, Reyes said, Tesla won’t give up.

“Texans want to buy our vehicles directly from us,” he said.

“We’re responding to good old fashion market demand — people want to be able to buy the best cars they possibly can.”

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