UPDATE, Oct. 1, 2013:
"Tesla is dedicated to this issue in Texas and until a resolution has been made in the next session, we will continue to operate locations as galleries, in accordance with the existing law," Tesla spokesman Alexis Georgeson said in an email Tuesday to International Business Times.
The Texas state legislature meets every odd-numbered year for 140 days between January and June. The 84th Texas state legislature will convene on January 13, 2015, after which state lawmakers could examine a law that prevents Tesla from selling its cars through its own dealership network.
Original story begins here:
Tesla Motors Inc. (NASDAQ:TSLA), maker of a popular electric sports car, has a lot of challenges in its mission to become the car of the future in an industry where there hasn’t been a successful U.S. startup built from the ground-up since Chrysler in 1925.
Among the major obstacles to becoming the first maker of a mass-produced electric car with a range of more than 200 miles, the Palo Alto, Calif.-based manufacturer of the acclaimed Model S luxury electric sedan is expanding its global network of retail dealerships. Like Apple Inc (NASDAQ:AAPL), Tesla Motors wants strict control over its retail network: it basically wants to sell cars through slick storefronts as Apple does with its Apple Retail Store operations.
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But in the U.S., Tesla is hitting a snag: dealers don’t want carmakers intruding into their retail business, and these dealers have forked out huge amounts of cash to either keep Tesla-owned showrooms out of their states, or they are lobbying heavily to get state laws passed to prevent Tesla from directly selling its cars to the public. In states where Tesla cannot operate showrooms, the cars have to be delivered directly to customers who must order the cars online.
There’s a push right now in states, including North Carolina and New York, to not only prevent Tesla from opening local outlets, but in New York’s case to force Tesla to dismantle three showrooms, one each in New York City, Westchester and Garden City. The Colorado legislature passed a measure banning Tesla from opening any more stores in the state, but it will allow the current dealership near Denver to continue operations.
The impetus seems perplexing at first. For a country like the U.S. that prides itself on being a beacon of the free market it seems antithetical to prevent an entrepreneur like Tesla CEO Elon Musk from going directly to the customer and allowing shoppers to kick tires and test drive cars out of Tesla showrooms.
However, dealers say they can’t compete if, for example, a General Motors Co. (NYSE:GM) decided to cut them out and develop their own network or dealerships, because the automakers would have a price advantage. And dealers feel that allowing Tesla to develop its retail network would open the way for other carmakers to do the same.
Tesla, hardly a mass-market car maker, claims dealers are just trying to force it to do something it’s loathe to do: give up control of its retail network by either cutting off Tesla Motors’ access to local markets or by forcing it to sell its cars through third-parties, like the ubiquitous car and truck dealerships.
The debate has led Tesla fans to establish a White House petition demanding federal intervention to allow Tesla to sell directly to consumers in all 50 states. The petition hit a threshold minimum number of signatures in July, requiring the White House to issue a response. (It hasn’t yet; it usually takes a few months.)
Nowhere has this battle played out more dramatically than in Texas, where dealers strike a little-guy David pose and say they risk being trampled by the Goliaths should those giants be allowed to enter the market.
Bill Wolters, president of the powerful Texas Automobile Dealers Association (see below) said earlier this year that changing the franchise laws to accommodate Tesla would open the way for other carmakers to swoop in and compete with “our family-owned businesses.”
Whether allowing Tesla-owned showrooms into Texas would under any circumstance also allow GM or Toyota to do the same, one thing is pretty clear: the Texas dealers’ market is already highly concentrated, and just four entities have shoveled the lion’s share of dealer-associated political contributions to state and federal officials.
According to Texans for Public Justice, an Austin-based group devoted to tracking local political contributions, the following four dealer-associated political donors have given 55 percent of the $2.5 million in campaign contributions in the 2011/12 campaign cycle, of which most have gone to current Republican members of the state’s executive branch. Topping the list of contributions received is Gov. Rick Perry at $257,154, followed by Lt. Gov. Greg Abbot with $224,370.
If you filter out smaller contributions from small, family-owned car dealerships, these four donors made up 71 percent of all contributions greater than $15,000. These donors might be fighting for the small dealer-owned business, but if so they’re carrying an enormous amount of the burden of paying for favorable legislation, either selflessly or out of self interest.
Here are the most deep pocketed car-dealer political movers in the state of Texas:
Thomas H. Friedkin
Friedkin, a 78-year-old billionaire, is by far the biggest auto-dealer contributor to Texas politicians. He owns the world’s second-largest Toyota franchise and operates in Texas, Oklahoma, Louisiana, Mississippi and Arkansas.
The former actor and stunt pilot founded Gulf States Toyota Distributors in 1968 after the famed late Carroll Shelby, the guy who put American high-performance autos on the world map, turned down Toyota’s offer to become a distributor.
Friedkin is Texas royalty. One of his sons, Dan, is chairman of the family-owned holding company that controls the massive Toyota distributor. In 2001 Gov. Rick Perry named Dan to head the Texas Parks and Wildlife Commission, a nod to Thomas’s lifelong devotion to both environmental conservation and big-game hunting.
Friedkin’s share of all car-dealer contributions to Texas politicians in 2011/12: 18 percent, or $453,324. But that's not all.
Gulf States Toyota PAC, through which members of the Friedkin family, including Thomas, have contributed, is the second-largest Texas-dealer associated donor to political causes in 2011/12. Virtually everyone on the list of 2012 contributors to the PAC was affiliated in some way with Gulf States Toyota Distributors, according to OpenSecrets.org. Money going through the PAC was distributed to U.S. House and Senate lawmakers in every state in which the dealership operates.
The PAC was the second-largest Texas dealer-associated political contributor with 13 percent of the total for 2011/12. Together, Thomas H. Friedkin and the Gulf States Toyota PAC represented a whopping 31 percent of all Texas car dealer-associated political contributions.
Billy Joe “Red” McCombs
McCombs, 86, is a Texas entrepreneurial legend and the second-biggest individual auto-dealer contributor to Texas politicians. The self-made billionaire college dropout is the co-founder of mass media giant Clear Channel Communications, Inc. and chairman of the controversial private-military operator Academi (more commonly known by its former name Blackwater Worldwide), as well as the former owner of the San Antonio Spurs, Denver Nuggets and the Minnesota Vikings. He owns San Antonio-based Red McCombs Auto Group.
The percentage of McCombs' contributions to Texas politicians in 2011 and 2012 out of the $2.5 million car dealers contributed: 12 percent, or $306,500.
Texas Auto Dealers Association PAC
The TADA appears devoted mainly to keeping Texas Republican incumbents in office. Its biggest recipients have been Texas Lt. Gov. David Dewhurst, state Comptroller Susan Combs, state Attorney General Greg Abbot and Gov. Rick Perry.
In 2011/12, TADA doled out $285,750 in political contributions in the state, representing 11 percent of total dealer-associated contributions.