Yes, it’s a wacky world we live in. Tesla founder Elon Musk moved Cybertruck manufacturing from California to Texas in a huff. But he should have looked at Texas’ franchise tax laws before taking his Tesla marbles. You see, franchise tax laws make it illegal to sell vehicles directly to customers in Texas.
But it gets worse. Issues like this can be taken up with the Texas state legislature because, you know, they’re all for business. The problem is that it didn’t resolve this in-state sales issue. Plus, they are only in session for 140 days and won’t meet again until 2023. The state legislature only meets once every other year according to The Drive.
Texas residents will have to purchase Tesla Cybertrucks outside of Texas
So now what? Texas residents who want to purchase a Tesla Cybertruck must now buy it outside of Texas. So while Tesla wraps up construction of its Gigafactory just outside of Austin, it will begin making Cybertrucks it can’t sell in Texas. And every single Cybertruck built in Texas will have to be shipped out of Texas to a different state before a Texan can purchase it.
Because, you know, California is so difficult to do business in. Part of Texas Governor Greg Abbott’s pitch to Musk was how friendly to business Texas is. He must have known he wasn’t being honest, but at least he was convincing. But there’s more.
Earlier this year Musk announced he was moving to Texas because of the “freedom” it offers over California. We wonder how he felt about there being no power for days during the big snowstorm this past winter? And now this?
Selling directly to customers goes against many state’s franchise tax laws
Look, we love Texas and California both. And we hate to see this issue continually dog Tesla. It sells directly to customers, and that goes against many state’s franchise tax laws. It has been fighting states over this from the beginning of Tesla itself.
Many even thought it might hasten Tesla’s demise. Dealers have argued that they help protect customers. They say another advantage is that they help to maintain fair competition.
Mainstream dealers are concerned about the precedent it creates for manufacturers to cut out the dealer
Dealers aren’t worried about Tesla itself. But they are concerned about the precedent it creates for manufacturers to cut out the dealer system. Recently, Volvo announced it will stop selling cars through dealerships. As you can imagine, Volvo dealers are not happy.
But Volvo says that dealers are needed more than ever to service cars and fulfill the delivery and satisfaction of buyers. So Volvo dealers will be paid to complete the transaction and also make a profit on service and parts. But we’re sure dealers aren’t happy they won’t be making any percentage off of the sale of the car.
It’s a brave new world and things are changing in the car business. From the electric zeitgeist and alternative fuels to mega-stores like CarMax and AutoNation. While circumstances seemed fairly constant for a few decades it will be a bumpy ride in the car biz over the next few years.