Tesla will have to ship Texas-made cars to other states before it can sell them to Texans because of state laws

Elon musk
Tesla CEO Elon Musk. Jae C. Hong/AP
  • State laws mean Texas-made Teslas must be shipped to other states before residents can buy them.
  • Texas lawmakers decided to not pass legislation allowing carmakers to sell directly to customers.
  • Tesla is building a factory in Austin, which is set to be up and running later this year.
  • See more stories on Insider’s business page.

Tesla will have to ship its electric vehicles made in Texas to other states before selling them to Texans due to state laws, The Drive first reported.

Elon Musk’s carmaker is building a factory in Austin, Texas, which it expects to be finished by the end of 2021. But the firm won’t be able to directly sell to residents in the state.

Texas state laws ban car companies from directly selling to customers. Instead, the companies must sell their vehicles to independently owned car-dealerships, which then sell to customers.

Texas lawmakers, who only meet for 140 days every other year, decided not to pass legislation that would allow automakers to directly sell to Texans, The Drive first reported. The meetings ended on Monday without any change to the franchise laws. The next time lawmakers will meet will be in 2023.

Texans wanting to get their hands on a Tesla can order one on the company’s website. But they won’t be able to place an order in any of Tesla’s Texas facilities.

Residents have to drive to other states to buy the Tesla, or have paperwork sent to another state for processing. The car is then shipped to one of Tesla’s service centers in the state, where the buyer can pick it up.

Elon Musk responded to The Drive’s article on Twitter, saying “Tesla sure would appreciate changing the law, so that this is not required!”

-Elon Musk (@elonmusk) May 27, 2021

Tesla is not only affected by franchise laws in Texas, but also in South Carolina, New Mexico, Connecticut, and other states across the US, according to tech critic David Pogue.

There are nine states, including Colorado, North Carolina, and New York, that restrict the number of dealerships that Tesla can have in the area, according to Pogue.

This Texas franchise law isn’t just affecting Tesla. Other car companies, including Toyota and General Motors, are also banned from selling state residents their cars.

Tesla plans to hire up to 5,000 workers for its 2,100-acre Gigafactory. It plans to build its Cybertuck, Semi truck, and Model 3 and Y cars at the plant.