Texas Law could prohibit Tesla move to Lubbock

Reported by: Sydney Ryan
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Updated: 3/27/2014 10:25 pm
The city of Lubbock wants to land a $5 billion factory. Tesla Motors is looking at four Sunbelt states for its fuel cells plant.

"Texas is a great state for businesses and businesses to grow, because we have no state income tax and great people and a great work ethic so bringing jobs to the state of Texas is awesome," said Annette Sykora, dealer at Smith South Plains.

"Texas is the best state in the United States to start a business, to have a business, to own a business," added State Senator John Frullo.

Nevada, Arizona and New Mexico are also contenders for the lithium battery plant. Texas has the climate, infrastructure, workforce and incentives to close the deal, but it also has a law that Tesla can't abide by. 

Tesla Motors want to sell its cars directly to consumers, with no independent car dealerships. 

"It was a hugely debated issue last session that never got anywhere," said State Senator Robert Duncan.

"Texas has franchising laws and those are really designed to protect consumers, to make sure that if you make a huge investment in purchasing a vehicle ... then you're assured as a consumer that there's going to be a dealer to provide a warranty, to handle the recall," explained Sykora.

Tesla has the option to bring business to Texas, but only if they abide by the current, existing laws.

"I believe they can do it, and I would be surprised if dealers would not be interested in looking at that," said Frullo.

Although the battery plant would create approximately 6,500 jobs, changing the law could result in a huge loss economically. 

"Without that dealer-franchise system, if you went to manufacturers selling directly a lot of people think that would reduce the price, and actually that would increase the price because it would eliminate all the price competition," explained Sykora.

No dealer competition means no room for negotiations. State legislators must decide if landing the battery plant is more important than maintaining the status quo in how vehicles are sold.

"Texas needs to look at the policy, considerations underlying why the law is what it is and if it needs to be changed or adjusted. Change it for that reason and not be basically bought off for changing a law that actually impacts a lot of private investment in Texas," said Duncan.

"The law works now and they can come and sell cars under the current law that we have, where a lot of cars are sold each year. There's no reason to change that law because one company doesn't like it," added Frullo.

Governor Rick Perry is in favor of changing the franchise law. He brought up the subject in the last session but it was quickly brushed away.

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