Concerning Texas' motor vehicle franchise laws
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By: Edward E. Whitacre Jr.
There's a debate in the Texas Capitol over whether the Legislature should change the long-standing motor vehicle franchise laws to benefit a single luxury electric car company. This company wants to sell their vehicles straight to consumers, circumventing traditional car dealers. Sounds like a good idea for Texas consumers, right?
In fact, the opposite is true. A special carve-out for a single company would violate free market principles and hurt Texas consumers. It's important first to understand the current motor vehicle franchise laws and how they are intended to benefit consumers in Texas.
All 50 states have laws that regulate the relationship between manufactures, distributors, and dealers for the benefit of the public. Here's how it works: manufacturers use their capital to build the best cars they can, they then sell those cars to locally owned and operated car dealerships.
The dealers then compete vigorously for consumers, investing in providing the public with the highest quality sales and service they can.
When locally owned and operated dealers compete for your hard earned dollars, you have bargaining power and more choices in where you buy your vehicle. whether you live in rural Texas or in a large city.
Reputation is everything in the car business, and car dealers work hard to earn the trust of their local communities. Just look at how many little league teams, local charities, and scholarship funds your local car dealer sponsors. Local dealers are motivated to invest in the local community, and everyone benefits.
And what about jobs? Today in Texas, there are over a thousand new car and truck dealerships employing hundreds of thousands of employees directly and indirectly. If you add the manufacturers who have set up large assembly plants in Texas to be closer to consumers and to capitalize on Texas' pro-business climate, that's another couple hundred thousand automobile employees who live, work, and pay taxes in Texas.
So how would the legislative cave out for a single company undo all the benefits outlined above? Here's how.
Any manufacturer can sell their product in Texas under current laws. They can go through the dealership model that everyone else operates under. Nobody is saying they can't do business here. In fact, they already do. It's not about their right to sell their automobile, it's about fairness and parity between dealers and fairness and parity between manufacturers.
Everyone knows that government shouldn't be in the business of picking winners and losers in the marketplace and under current law it doesn't. But if the law were changed to allow a single company to avoid the regulations that apply to everyone else, other companies will come along, asking for their own exceptions. An increasingly uneven playing field will emerge. Currently manufacturers and dealers have to abide by an inch thick set of regulations bestowed upon it by long forgotten Texas legislatures. It would be unfair and very UN-Texas like to exempt one California company from those regulations.
The competition between locally owned and operated dealerships, which drive down costs for the consumers, will be at risk if single manufactures are allowed to operate outside the franchise statute.
Texans are entrepreneurial. They welcome innovative cutting-edge business to the state. But they also know that it's unfair, and bad for business, to change the rules in the middle of the game for the benefit of a single player. If you have a good product, put it on the field. We welcome it. But when you change the rules to help out one player gain an unfair market advantage, everyone loses.
Whitacre is Chairman Emeritus, AT&T, Inc. and Former Chariman & CEO, General Motors Company