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Tesla set to build cars in Austin, but still can't sell directly to Texans

Kara Carlson
Austin American-Statesman

All the vehicles Tesla makes at its new $1.1 billion Austin-area manufacturing facility will still have to leave the state before they can be sold to Texas consumers.

That's because a bill that would have allowed the electric automaker to sell directly to Texas consumers failed to pass during the just-completed session of the Texas Legislature.

Texas law has long prevented automobile manufacturers such as Ford, Chevrolet and General Motors from selling vehicles directly to consumers. Instead, the sales must go through third-party franchised auto dealerships, which are locally owned. 

House Bill 4379, authored by state Rep. Cody Harris, R-Palestine, would have allowed makers of vehicles powered solely by electricity or batteries to act as dealers under state law, and which would have allowed them to sell directly to consumers. The law change would have only applied to vehicle brands that have never been sold by third-party franchise dealers in Texas.

More:Elon Musk says hiring for Tesla's Austin factory could hit 10,000 workers

The bill never advanced beyond the committee level in either the Texas House or Senate. 

Construction continues at the Tesla assembly facility near Austin on May 13.

Tesla, which says its manufacturing facility in southeast Travis County could open before the end of the year, would have been among the biggest beneficiaries had the measure become law. Tesla doesn't use third-party franchised dealerships, instead selling vehicles directly to customers over the internet.

Without the law change, Tesla vehicles built at the new Austin facility will need to be shipped out of state and brought back before they can be delivered to Texas customers.  

Sunday, long after the bill's progress had stalled, Musk weighed in on Twitter, expressing his desire for the law change. His tweet replied to a post from 'Tesla Owners Online' which included an article from The Drive detailing the issue. 

"Tesla sure would appreciate changing the law, so that this is not required!" Musk tweeted. 

Any proposed change to the law now be unlikely until 2023 during the next regular session of the Legislature, unless the issue is brought back up in a special session. 

Tesla has fought the regulation for years without success. But this year the proposed change came after Tesla made massive investments in Texas. The changes have been opposed by critics including Texas Automobile Dealers Association, which says existing state law prevents manufacturers from establishing monopolies.

Currently, Tesla showcases its vehicles and technology at galleries in Texas but is barred from taking orders or discussing prices. To purchase a vehicle, Texans have to purchase vehicles directly from Tesla outside of Texas and drive them back instate or buy them online where the cars are delivered from across state lines.

Musk also previously hinted that customers might be able to pick up vehicles on-site at the Travis County facility. In February, in an appearance on the "The Joe Rogan Experience" podcast Musk said the Austin factory would likely allow tours and could eventually allow people to drive vehicles they've purchased right off the property.

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Dan Ives, an industry analyst with Wedbush Securities, said the bill's failure to pass "makes no sense."

"Tesla is spending billions to build out in Texas... and now they cannot sell cars to someone in Austin within an earshot of the factory," Ives said. "Head scratching is an understatement given the number of jobs Tesla is bringing to Texas."

Austin is expected to be a key location for Tesla moving forward, and a priority for Musk who confirmed in December that he had relocated to Texas.  At the time he said his two biggest focuses are on Tesla's Austin-area manufacturing facility and his South Texas SpaceX facility. 

Construction continues on the 2,100-acre site in the Austin area. Musk has said the facility could start deliveries in a limited capacity as early as this year. The factory is expected to produce Tesla's Cybertruck, Semi, Model 3, company sedan, and Model Y vehicles, as well as batteries at the site. 

The facility could hire more than 10,000 people through 2022 and is Tesla has already started the process of hiring for the factory. Currently, more than 200 positions are listed. 

Editor's note: This story has been amended to note that House Bill 4379 did not pass the Texas House. 

More:Texas bid to impose state tax on electric vehicles fails — for now