Owners sue Tesla for monopoly in electric car repairs and parts

In short:

A federal judge revives a class-action lawsuit against Tesla for monopolistic practices in repairs and parts.

• Monopoly accusation: Tesla limits repairs and parts, increasing costs and waiting times.
• Sherman Act: They allege that Tesla violates this law and California’s antitrust law.
• Restrictions: Tesla controls the sale of parts and services, hindering independent shops.
• Comparison: Other manufacturers allow more accessible and economical repairs at various shops.
• Repercussions: The ruling could change the automotive industry and benefit consumers.

A U.S. federal judge has taken a significant new turn in the case of Tesla vehicle owners accusing Elon Musk’s company of practicing monopoly in the repair and parts markets. This ruling revives a previously dismissed lawsuit, which could severely impact Tesla’s image and operations.

Monopoly accusations in repairs

Judge Trina Thompson, from the San Francisco District, ruled that Tesla owners could file a class-action lawsuit based on the claim that the company forces them to pay excessive prices and endure long waits to repair their vehicles. Owners fear that turning to unauthorized shops could void their warranty coverage.

According to the allegations, Tesla would be violating the Sherman Act, which prohibits monopolistic practices in the United States, as well as California’s antitrust law. Thompson highlighted the possible existence of a monopoly due to Tesla’s refusal to expand its network of authorized service centers and its exclusive control over the diagnostic updates and software necessary for Tesla vehicles.

Additionally, Tesla is accused of restricting the sale of parts, limiting original equipment manufacturers’ access to external suppliers. In this way, the company not only maintains control over parts but also forces Tesla owners to buy them directly from the company, increasing costs and waiting times.

Evidence of the parts monopoly

The judge found significant evidence that Tesla restricts the sale of parts solely through its own channels, making it difficult for owners to obtain parts through other means. This tactic seems designed to ensure that only Tesla can perform repairs, preventing independent shops from competing in the market.

With this measure, Tesla not only controls the flow of parts but also their prices. This creates a dynamic where consumers have few options, contradicting antitrust laws designed to promote competition and protect consumers.

Comparison with other manufacturers

In contrast, most car manufacturers allow owners to have repairs done at independent shops, which not only facilitates access to more economical repairs but also generates healthy competition in the automotive service market. For example, companies like General Motors and Ford have adopted a more open approach, allowing owners to use parts from other companies and access a broader network of repair shops.

Tesla’s stance could be seen as a deliberate strategy to maximize its service and parts revenue, but it could also prove counterproductive. In 2023, Tesla reported $8.3 billion in service and other automotive revenue, representing 9% of its total revenue of $96.8 billion. These figures underscore the company’s dependence on its aftermarket services, which may explain its reluctance to open the parts and repairs market.

Legal and tax repercussions

Judge Thompson’s decision comes at a crucial time for Tesla. In a similar case, the company faced several unified class-action lawsuits alleging monopolistic practices since March 2019. The lawsuits combine complaints from owners who are forced to pay premium prices for both repairs and parts, simply because Tesla controls access to these services.

Matt Ruan, lawyer for the plaintiffs, expressed satisfaction with the court’s decision and mentioned that Tesla owners are eager to move to the next phase of the case. On the other hand, Tesla and its lawyers have argued that the accusations are based on an “illogical theory,” claiming it would not make sense for the company to degrade its repairs and parts, as this would jeopardize its most profitable vehicle sales and leasing business.

Impact on the industry and consumer awareness

Jérôme, a passionate car and mechanic enthusiast, observes that this case could have significant repercussions in the automotive industry and for consumers. If the court rules in favor of the plaintiffs, we could see a change in how automotive companies handle their repair and parts services.

For Tesla owners and other electric vehicle owners, this case highlights the importance of being well-informed about warranty terms and service options. With the rise of electric cars, competition in the repair and parts market will become increasingly crucial to ensure fair prices and accessibility.

Finally, it is important for consumers to demand transparency and competition in all aspects of the automotive market. Only then can they ensure they receive the best possible service without falling victim to potential monopolistic practices.