Texas To Ban Tesla From Fixing Its Cars At State Service Centers

You won't find a single car dealer operating in Texas selling any electric vehicle (EV) made by Tesla Inc. That's because under state law, car makers must sell cars through a third-party dealership, which Tesla has adamantly refused to do.

Now, a bill introduced at the Texas state legislature will ban Tesla from servicing its own EVs in Texas, as well.

Republican Senator Kelly Hancock has introduced SB 1415 that will ban Tesla from servicing its cars through its own service centers.

If the bill passes, which it has a good chance of doing given the hefty political clout wielded by the car dealers lobby, the bill might become law as soon as September 1, 2019. So far, Texas car dealers have beaten every attempt that would have repealed the state's third-party dealership mandate.

Under pressure from car dealers, the Texas legislature in May 2015 refused to take-up several bills that would have allowed Tesla to sell cars directly to consumers. It defeated a similar measure in 2013.

Tesla still insists its direct-sale model is the only way it wants to sell its EVs. Tesla has launched several lobbying efforts to change the law, but has always failed to convince the state legislature, which is being influenced by the car dealer lobby.

Texans, however, seem to love Tesla EVs and have bought thousands of these vehicles (Model S, 3 and X), which Tesla delivers from other states to comply with the law.

Tesla has been able to service its EVs in Texas through its own service centers, which aren’t currently covered by the state’s direct-sale rules. That will change if SB 1415 becomes state law.

Interestingly, the federal government is on Tesla’s side in this thorny issue. In May 2015, the U.S. Federal Trade Commission (FTC) urged Michigan lawmakers to repeal the state's third-party dealership mandate, arguing Michigan's auto practices are anti-competitive.

"In our view, current provisions operate as a special protection for dealers -- a protection that is likely harming both competition and consumers," said the FTC in a statement at the time.

In some states with third-party dealership mandates, Tesla maintains showrooms but is barred from selling cars directly, allowing test drives, and directing customers to the Tesla website. Many see Texas’ coddling of its car dealers as a free market issue because car dealers are using the law to protect themselves from competition and create a monopoly.