Under Texas law, can automakers sell their products to consumers directly?
No. Under state law in Texas and every other state, all car manufacturers are required to sell their products through independently-owned franchised car dealers. Automakers are the sole consumer product manufacturers in the United States restricted to such unique sales model mandates. As such, automakers have invested significantly for decades to establish and support a franchise business model with hundreds of independent business partners and local employers throughout the state.
Why should Tesla be forbidden from selling its cars in Texas?
It’s not. Nothing precludes Tesla or anyone else from entering the Texas market today like any other auto manufacturer competitor. The Texas Legislature should not grant special preferential treatment to a single corporate interest at the expense of all other existing automakers – companies that have already long standing and extensive investments in the state under its existing rules and laws.
Doesn’t what Tesla is asking for make sense since it’s a special kind of company?
But it’s not. It’s an automaker of premium electric vehicles. Multiple automakers offer electric vehicles for sale in Texas. And they do it successfully through the prescribed dealership model. The Legislature should not play favorites and grant one company an exemption, but instead continue to require all vehicle products to compete in the free market on a level, equal playing field.
Can the car buying process be improved?
Absolutely. And manufacturers and dealers alike are working to improve the car buying experience for everyone – making the process simpler, more transparent, and more consumer-friendly – while striving to maintain fairness and balance in Texas franchise law. Changes to state franchise law should not restrict such reforms to only the premium car buyer.
Do dealers add extra costs to the price of an automobile?
The cost of selling automobiles – from service centers, real-estate, employees, training and marketing – exist whether the auto is sold through licensed independent dealerships or manufacturer-owned stores. Selling an automobile directly from a factory gallery does not eliminate these costs. The burden of getting a car to the consumer is the same no matter who sells the car.
What role do Texas dealers play in the car ownership experience?
New car dealers do a lot more than simply selling Texans cars and trucks. Franchised dealers provide test-drives, deal with trade-ins, educate consumers about automobile operation and their features, complete extensive and often complicated registration and titling work. Dealers are also continually trained to perform warranty and recall repairs in a timely manner that provides the least amount of disruption to the consumer. In addition, local dealers compete with other dealers to offer the service and financing options for the consumer which consumers may not get from a direct sales model.
How do dealers play a role in vehicle recall and warranty?
State law requires that recall and warranty work be performed by licensed and certified franchised dealers that exist in every corner of the state. All automakers want consumers to participate in recalls and believe that recalled vehicles should be repaired as quickly as possible. Typically, your local dealer is able to repair a recalled vehicle as soon as the owner brings it to the dealership.
How are dealers a part of Texas’ rural fabric?
There are more than 1,700 franchised new-car dealerships across Texas, each competing locally with each other for customers on price, service and warranty repairs. Furthermore, there are over 165 local dealerships in cities with less than 15,000 in population. I n many cases these dealerships are the largest employer in these small towns and play an integral part in their hometown community’s well-being. This intrinsic value cannot be measured in dollars and cents but are a significant piece of our rural communities.
How is what Tesla is asking for a big deal?
First, it would alter long standing market dynamics and create two sets of rules for competitors. It is patently unfair for the state to have a long-established set of laws governing how most manufacturers must distribute and sell their products, and then select others to enjoy a clear competitive advantage by being exempted from those complex laws.
Further, it could be precedent setting. There are other potential new start-ups that could take advantage of what Tesla is seeking. Every market participant should be treated fairly and equitably under state law on a level playing field.
Why can’t consumers buy new cars and trucks online?
They can and do… hundreds of times every day.