Will a Shot at Tesla's Gigafactory Push Texas Car Sales into the Free Market?
Texas -- or at least its lawmakers -- is not fond of Tesla, the electric car seller. In 2013, lawmakers blocked a bill that would have allowed the company to bypass auto dealers and sell directly to consumers. For Tesla the car manufacturer -- the one that just put Texas on the shortlist for a $5 billion gigafactory -- the response was considerably warmer, with lawmakers wooing the startup, hard.
Tesla the car seller and Tesla the car manufacturer are, of course, one and the same. How, then, to explain Texas' schizoid half-embrace? Pretty simple. On the one hand, state officials love nothing more than bagging a big, high-tech job-creating factory. On the other, lawmakers are in the pocket of the state's auto dealers, whose economic clout, generous campaign contributions and the thousands of people they employ in every one of the state's legislative districts give the industry unparalleled power in Austin.
Tesla founder Elon Musk knew this when he announced last month that Texas, along with Arizona, New Mexico and Nevada, was a finalist for the gigafactory. Now he seems to be having second thoughts.
The Texas Tribune reports this morning that the state's restrictions on where and how cars can be sold "could harm Texas' chances of landing the $5 billion lithium-ion battery plant Tesla plans to construct by 2017."
As evidence, they cite an interview Diarmuid O'Connell, Tesla's vice president of business development, gave to Bloomberg, in which he said, "If Texas wants to reconsider its position on Tesla selling directly in Texas, it certainly couldn't hurt."
Here's the thing. Three of the four states Tesla named as finalists have laws restricting the direct sales of automobiles to consumers. So does almost every state in the country. It's a anti-competitive carryover from the Great Depression, when states were trying to protect local auto dealers from all-powerful Detroit car makers. This Planet Money episode explains it all nicely.
So to say that Texas' laws are harming its chances for the factory doesn't seem right; more important are what tax benefits and economic incentives each state is willing to offer. This is Tesla playing the same game with state officials as the auto dealers, basically dangling a large amount of money in front of them and suggesting they do as they're told. The same thing's happening in New Mexico and Arizona.
However cynical the gambit, Tesla's cause is righteous. Loosen the iron grip of auto dealers, introduce something resembling a free market and maybe, just maybe, car buying won't be such a miserable experience.
Send your story tips to the author, Eric Nicholson.