As reported in this morning's Houston Chronicle, the Texas department of transportation denied Detroit-based GM's application for a license to sell used cars and trucks in Texas. Regulators cited a new law that strengthens a prohibition against manufacturers having an ownership interest in local dealerships.
The transportation department will give GM a chance to appeal the ruling, though regulators say chances of overturning the decision are slim, the paper reported.
For GM, the ruling will bar the opening of its first online-linked used-vehicle store, which was planned within the next two weeks, according to GM spokesman Donn Walker.
Through the new GM DriverSite program, consumers were supposed to be able to search online from a database of select used cars that are returned to GM dealers after leases terminate. After picking a car, potential buyers were to head to the Houston-based GM DriverSite store to test-drive the car. DriverSite is not related to GM BuyPower, the company's other online initiative for marketing its new vehicles.
Houston was chosen as a test site for a planned national DriverSite program, which GM intends to use to help sell its used vehicles, Walker said. GM chose Houston because it has a huge used-car market, and its population is technologically savvy, he added.
Asked why GM didn't get regulatory approval before building the Houston store, he said, "No one should underestimate government bureaucracies, and how long it takes to get things done." He continued, "DriverSite was and hopefully still will be how we market and sell used cars."
"I am fairly confident that this will become a reality," he said.
GM officials did not comment on whether the company planned to appeal the decision.
James McQuivey, analyst at Forrester Research said dealer franchise laws in Texas are particularly stringent. GM could face two choices: create a subsidiary that could sell the used cars or set up a used car superstore in which the automaker would hold a 49-percent stake, McQuivey said.
"Basically GM could possibly rearchitect this thing so they're not the owner of the used car dealership themselves," McQuivey said.
He said other companies, including Hertz and Ford (at Fordpreowned.com), have managed to set up online sites to sell used cars. Ford, which is testing its program in four cities, asks that customers pay $300 to order a vehicle, which is delivered to a nearby dealership, where a dealer makes the sale and takes a commission.