Buffett seeks exemption from Texas law

on Apr25

Warren Buffett swooped into Texas last week to meet with officials about working around a state law that bans vehicle manufacturers from operating dealerships in the state — even stores selling other vehicles.. Photo credit: REUTERS

Warren Buffett has run afoul of the same Texas law that prevents Elon Musk from selling Teslas at factory-owned stores.

But Buffett, in contrast to Musk, may succeed in getting the rules changed in his favor.

Texas law bans vehicle manufacturers from operating dealerships in the state — even stores selling other vehicles.

Berkshire Hathaway Automotive has about 30 dealerships employing 4,200 and selling 20 brands in Texas. But parent Berkshire Hathaway Inc. also owns Forest River Inc., a maker of recreational vehicles. The combination puts Berkshire Hathaway Automotive in violation of the law.

Buffett swooped into Texas last week to meet with officials about a legal workaround. Buffett met with Lt. Gov. Dan Patrick and — “according to multiple Capitol sources and an unchallenged news story” — Gov. Greg Abbott, according to an article by The Texas Tribune.

Carve out

A piece of “carve-out” legislation that would legitimize Buffett’s auto-retail operations, soon dubbed the Buffett Bill, was crafted and deployed in record time. In less than a week, the bill was introduced, heard by a committee and sent to the Senate floor, where it was debated.

Berkshire Hathaway Automotive was formed in March 2015, when Buffett’s company bought Van Tuyl Group. Buffett has owned Forest River, which makes the Coachman, Shasta and Palomino RV brands, among others, since 2005.

In contrast, Tesla remains barred from selling its vehicles at its preferred factory-owned stores in the Lone Star State.

In its effort to sell outside the franchised dealership system, Tesla has faced its stiffest challenges in Texas, Michigan and Connecticut. So far, Tesla has been unable to crack the political strength of dealer groups and legacy automakers in those states’ legislatures. Tesla has galleries in Texas and Connecticut, but it can’t sell cars through them. Michigan won’t allow even a gallery.

In other states, Tesla obtained its own carve-outs: laws that allow it to sell vehicles, but which are written so as to bar others from following in its footsteps.

Cummins, too

Berkshire Hathaway Automotive isn’t the only company currently battling the Texas law. Diesel engine maker Cummins Inc. owns nine dealerships in Texas and has been told it is in violation of the law.

The Texas Automobile Dealers Association is opposed to allowing Cummins to continue operating its dealerships, the Texas Tribune reported. A hearing has been held in the Cummins case, but no bill has made it to the state Senate floor yet.

Representatives of the Texas dealers association and Berkshire Hathaway Automotive did not immediately return calls seeking comment.



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