Most popular electric vehicles don’t qualify for Texas EV rebate program

By Brett Rowland and Tom Gantert | The Center Square

The best-selling electric vehicles in the U.S. don’t qualify for Texas’s rebate program because Tesla does not have dealerships.

That’s one of the many challenges Tesla still faces in Texas after moving its headquarters to the state in December 2021 from California. The company also faces the prospect of not being able to sell the vehicles it builds in Texas to Texans without shipping them out of state first, according to The Drive.

Texas released a list of electric vehicles eligible for the Light-Duty Motor Vehicle Purchase or Lease Program last month. The program offers rebates up to $2,500 for the purchase or lease of specific electric vehicles.

The list of eligible electric vehicles includes 142 different models from nearly every major car maker, including the lowest priced electric vehicle for sale in the United States. It also includes 22 BMW models, 17 offerings from Porsche, 15 from Audi, 14 from Ford, six from Mercedes Benz, and two from Bentley, among others. The list includes three models from Nissan, including some Nissan Leaf models. The vehicle models on the list range from 2017 to 2022.

Tesla, the Austin-based company that makes the most popular selling electric vehicle models in the U.S., is notably absent from the list.

“The program currently requires that eligible vehicles must be purchased or leased from a licensed new vehicle dealer or leasing company in Texas,” said Laura Lopez, the media and community relations manager for the Texas Commission on Environmental Quality, which runs the rebate program. “Under Texas law, vehicles purchased directly from the manufacturer or an out-of-state dealer not licensed to sell or lease new vehicles in Texas are not eligible for a rebate.”

Tesla moved its headquarters to its Gigafactory Texas in Travis County in December 2021 thanks in part to tax breaks from Travis County and the Del Valle school district worth up to $64.7 million, Reuters reported.

Tesla spent $5 billion to acquire the land and another $1.1 billion to build the 4.5 million-square-foot plant, according to media reports. Tesla previously said the factory would create 5,000 jobs. The average annual salary would be about $47,000, Reuters reported.

Texas laws prevent Tesla, and other automakers, from selling vehicles directly to consumers. Some state lawmakers had advanced measures that would have allowed the company to get around those laws, but the measures failed to advance and the Legislature won’t return until 2023. The Texas Automobile Dealers Association said the Texas laws protect competition.

“Texas franchised dealer laws protect competition and provide the most efficient and effective delivery model for new and used car sales in Texas,” said Jennifer Stevens, a spokesperson for the Texas Automobile Dealers Association. “The current system works well for Texas and Texans.”

Without a change to state law, Tesla faces the prospect of having to ship the vehicles it makes in Texas out of state for Texans to be able to buy them. Tesla has a string of galleries in the nation’s second-most populous state, but gallery employees are not allowed to discuss pricing.

State Rep. Cody Harris, a Republican who represents District 8, introduced a bill in 2021 that would make an exception to the dealer franchise law, but the measure failed to advance. Nonetheless, Harris told The Center Square that Tesla will thrive regardless of what happens in the 2023 legislative session.

“As markets and technologies change, we want to be the go-to state for businesses who are being crushed by burdensome regulation in other parts of the country, which is why Tesla chose to move here from California,” he said in an email.

Zach Whiting, senior fellow of technology policy at the Texas Public Policy Foundation, said the state’s franchise laws were outdated.

“The prohibition on direct vehicle purchases from manufacturers comes down to Texas’s antiquated franchise laws. Understandably, the auto dealerships oppose changes to the franchise laws … However, technology has opened new possibilities to purchase the vehicle you want, not necessarily a vehicle in a dealer’s lot,” he said. “As a matter of liberty within the free market, one should be able to purchase whatever vehicle, from whomever, wherever, and however one wants and can afford.”

Carla Bailo, president and CEO of the Center for Automotive Research in Michigan, said Texas is not the only state with dealership laws. Many other states have similar rules on the books.

However, she said she expects dealership laws to change over time in response to consumer demand despite the political pull of dealerships, which are often strongly integrated into local communities.

“It certainly hasn’t slowed down Tesla’s sales – they are still selling in all these places they don’t have dealerships – and a lot more companies are starting to go that way because the consumer really likes it,” she said. “[Dealership laws] are protecting something that might be going by the wayside in any case. The dealer, unfortunately, hasn’t always been a pleasant experience for a lot of people.”

Tesla Motors CEO Elon Musk referenced the challenges in a tweet last year.

“Tesla sure would appreciate changing the law, so that this is not required!” Musk tweeted in May 2021 in response to a news report about the prospect of having to ship cars built in Texas out of state before they could reach buyers in Texas.

Recent studies state those likely to buy an electric vehicle already own one and have an annual median household income of $95,000. BlastPoint, a data analytics company in Pennsylvania, reported that its research found about 25% of likely buyers of electric vehicles have an annual household income above $150,000 a year.

One of the most expensive electric vehicles eligible for the rebate in Texas is the 2021 Bentley Bentayga, a plug-in hybrid. The sticker price for that vehicle is $183,225, according to Kelley Blue Book. The projected car payment for a $183,000 vehicle for someone with great credit, a $10,000 down payment, and a 48-month loan is $3,875 per month, according to Driveway.com.

The state has awarded 1,058 rebates worth $2.57 million in taxpayer money for hydrogen or electric cars in 2021. The state law puts a cap of 2,000 rebates.