Electric carmaker Lucid has asked the full U.S. Court of Appeals for the Fifth Circuit to reconsider a ruling that upheld the Texas law barring automakers from selling cars directly to Texans. Lucid filed its petition for rehearing en banc on September 18, two weeks after a three-judge panel affirmed the law, the National Law Review reported.
Section 2301.476 of the Texas Occupations Code bars a manufacturer from owning or operating a dealership, so new vehicles reach Texas buyers only through independent franchised dealers. Lucid sells online and through company-owned showrooms it calls studios. In Texas it has a studio in Plano and a service center in Houston and no franchised dealers, and the Texas Department of Motor Vehicles told the company in 2021 that it could not sell cars at the Plano studio. The Texas Automobile Dealers Association intervened in the case to defend the law.
The panel ruled on September 4. Writing for the court, Judge Patrick Higginbotham held that the circuit’s earlier decisions upholding direct-sales bans, including a 2024 ruling on Louisiana’s law in a case brought by Tesla, controlled the outcome. Lucid “cannot meet its burden to negate every conceivable rational basis for the law,” he wrote.
Two of the three judges then wrote separately to say they doubted the result. Higginbotham wrote “to register my discomfort” with applying that precedent to an electric-vehicle maker “that perpetuates none of the ills that motivated” the Texas law. Chief Judge Jennifer Walker Elrod wrote, “I concur, as our precedent appears to tie us to this conclusion,” and repeated her earlier view that “economic protection of a favored industry is not, on its face, a legitimate state interest.”
Texas is not alone. Seventeen states have similar bans, the opinion noted, and some exempt manufacturers that make only electric vehicles or have no franchised dealers. Colorado lets a manufacturer own a dealership if it makes only electric vehicles and has no franchised dealers for the same brand.
The full Fifth Circuit can decide whether the federal Constitution permits the ban. It cannot decide whether the ban is good policy for Texas. That question belongs to the Legislature that wrote Section 2301.476, which meets again in January and can keep the law or rewrite it without asking any court.
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