Austin braces for Tesla lobbying blitz

AUSTIN – Locked in a brawl with auto dealers, Tesla Motors CEO Elon Musk is unleashing some of the most powerful lobbyists and consultants in the state to persuade lawmakers to make it easier for his company to sell electric cars in Texas.

Ahead of the legislative session, Musk has assembled an all-star team of politically well connected forces at the Capitol – almost all entrenched with top Republican leaders – to lay the groundwork for a full Tesla blitz come January.

Musk, the California billionaire who also heads the rocket company SpaceX, is pressing the Legislature to allow Tesla to bypass traditional dealerships and sell cars in Texas through its stores.

An attempt failed last session, as Tesla was squashed by a network of state auto dealers and their own team of well-connected hired guns.

This time, according to lawmakers and lobbyists, Musk has revved up the Tesla influence machine to make sure he doesn’t lose again in Texas.

“Tesla is going to move in force to bring significant resources to this debate this session,” said state Rep. Jason Villalba, a Dallas Republican who last session supported the electric-auto maker’s push. “You’re going to see a lot of pressure on these young new members in the Legislature, a lot of movement on the floor and the backrooms to get people convinced this a good deal for Texas.”

Tesla’s opposition

Playing the influence game at the Texas Capitol is nothing new for Musk, who employed a team of lobbyists last session and parachuted into Austin on two occasions to personally push for legislation to help SpaceX and Tesla.

He is set to hit Texas again next month – two days after the legislative session starts – to headline a state transportation forum.

But this time, he’ll be coming back to Texas just months after disappointing state officials with a decision to pass up on the Lone Star State for Tesla’s $5 billion lithium-ion battery plant in favor of Nevada.

And the company’s opponents know it.

“They tried to use the giga­factory as leverage to get their foot in the door, but the gigafactory was never coming to Texas,” said Bill Wolters, president of the Texas Automobile Dealers Association. “I can’t imagine what kind of tale they can spin.”

Tesla’s main opposition stems from Wolters’ auto dealer trade group, which over decades has gained political clout, and deep-pocketed franchise owners who are also big campaign contributors.

Take B.J. “Red” McCombs, for example. He owns San Antonio dealerships and has described the state’s franchise dealer law “as sacred as Paul’s letter to the Corinthians.” He donated $35,000 to Gov.-elect Greg Abbott last cycle.

Houston’s Dan Friedkin, who chairs Gulf States Toyota, alone gave $350,000 to Abbott and another $150,000 to Lt. Gov-elect Dan Patrick this past cycle, state records show. Separately, political action committees for the dealer trade group and Gulf States Toyota have combined to give more than $360,000 to dozens of elected officials since 2013.

And collectively, the state’s auto dealers employ an even larger army of lobbyists at the Capitol, and they’ve pegged Tesla’s cause as enemy No. 1 for the upcoming session.

Their argument: Providing a carve-out for Tesla to do direct sales would give other manufacturers leeway to ask for the same treatment.

“It could create a massive domino effect,” said Rick Cavender, a San Antonio franchise owner who chairs the Texas Automobile Dealers Association.

Lobby team

Aware of the battle ahead, state records show, Tesla is spending up to $755,000 this year on contracts for 14 lobbyists – up from a maximum total of $455,000 for eight lobbyists in 2013.

This year alone, Tesla’s added several marquee names to its lobby roster: Mike Toomey, one of Gov. Rick Perry’s most trusted confidants; Neal “Buddy” Jones, a former lawmaker and the co-founder of a prominent Austin lobby shop; Craig Chick, a former senior policy adviser for House Speaker Joe Straus; and Adam Goldman, whose brother is a state lawmaker.

Karen Steakley, an ex-deputy legislative director for Perry, also recently signed on as the company’s first in-house lobbyist in Texas, according to state records.

During the Legislature’s off season, team Tesla started putting together a coalition of lawmakers, business groups and conservative organizations supportive of the electric-auto maker’s cause, said Ted Delisi, an Austin consultant with ties to Perry who is providing “strategy” for Tesla.

Delisi added that the company is also in discussions with Allen Blakemore, a chief strategist for Lt. Gov.-elect Dan Patrick’s campaign. Blakemore did not return a request for comment.

“We want folks that have a far reach,” Delisi said of the team Tesla is assembling.

State data shows the company is seeking inroads in other areas, too. Back in March, a Tesla lobbyist paid $4,000 to host four legislative staffers at a conservative organization’s forum on economic freedom.

And last month, lawmakers were invited to a Tesla VIP reception when Formula One held races in Austin.

Company officials say they are tapping a deep lobby bench to try and level the playing field.

“We understood the political equations,” said Diarmuid O’Connell, a Tesla vice president. “We would be stupid not to prepare and equip ourselves to argue effectively in this Legislature.”

Texas ban

Touted as possibly the most exciting automotive innovation in decades, Tesla has opted to push product directly to consumers from its own stores, shunning the traditional franchise dealer model. It’s sparked fights across the country between Tesla and auto dealers at statehouses and courthouses.

In Texas, the company operates so-called “galleries” in Dallas, Austin and Houston, and says it would like to open in San Antonio, but how many it would eventually expand statewide is an open question.

For now, the only way to buy a Tesla in Texas is to order one online or contact a dealer in another state: the state is one of five with a ban on direct sales of new cars.

And that’s the essence of the company’s messaging heading into next session: If Texas, marked with a sense of rugged individualism and entrepreneurial spirit, is all about the free market, then why can’t Texans decide how, when and where to buy a Tesla?

“It’s about consumer choice,” said state Rep. Eddie Rodriguez, D-Austin, who last session sponsored the Tesla legislation. “It’s not meant to be an assault on the entire system.”

‘Antiquated’ system

That idea has caught on with Perry, who is set to leave office in January. He told Fox News during the height of the gigafactory negotiations with Tesla that the current franchise system is “antiquated” and it might be time to revisit those rules.

Asked earlier this week if Abbott supports Tesla’s movement, a spokeswoman said only that the governor-elect “will consider any bill that reaches his desk with the goal of making Texas better.”

Rodriguez, the Austin lawmaker, sponsored a bill last session to allow Tesla to sell directly to Texans but it stipulated that if the company sells more than 5,000 cars a year it would have to start to franchise its operation.

A total of 667 Tesla vehicles have been registered in Texas so far this year, down from 939 last year, according to Kelley Blue Book.

Mulling no limits

Rodriguez may file another bill this session on behalf of Tesla, one that does not cap how many vehicles it can sell but instead would allow the company to operate a set number of storefronts across the state. Rodriguez said he’s still weighing his options ahead of the session.

But Villalba, the Dallas Republican who sponsored the Tesla bill with Rodriguez last session, said he can’t get on board with giving Tesla the go ahead for an unfettered number of sales without going through the dealer system.

“I don’t want to see a company like Tesla get a special deal in the face of the dealers,” he said.

State Rep. Gene Wu, a Houston Democrat who also sponsored the Tesla bill, said Tesla sales would remain minute compared with the overall Texas market regardless of the number of storefronts.

“The number of cars Tesla sells in Texas would be outnumbered by one dealership in Houston in a month,” he said. “This is not a zero sum battle.”