Michigan May Be Latest To Ban Direct Sales Of Teslas

Because car dealerships don’t want to move beyond an era of gladhanding salesman upselling customers on unnecessary add-ons — and because they apparently want to give electric car company Tesla as much free advertising as possible — they are pushing for Michigan to enact legislation preventing carmakers from selling directly to consumers in the state.

Tesla doesn’t operate the typical network of franchised auto dealers. Instead, people looking to buy one of the pricey electric cars does so directly through Tesla. The company does, however, operate a small number of display operations where people can look at Tesla models and ask questions about the cars.

This hasn’t sat well with various auto dealer industry groups who have backed legislative attempts in multiple states seeking to ban direct sales.

The Michigan effort is particularly underhanded as the ban on direct sales was quietly attached to an unrelated bill regarding fees charged by auto dealers on Oct. 2, shortly before the legislation went to a final vote.

The amended bill passed through the Michigan state House and Senate and now sits on the desk of Gov. Rick Snyder, who has until Tuesday to decide whether to veto or sign the legislation.

The Michigan Auto Dealers Association claims that Tesla is already violating existing state law by not selling cars through franchised dealers. Tesla maintains that it’s not breaking the old laws because it simply doesn’t operate any sales businesses in Michigan.

The amendment, backed by the MADA, attempts to close this purported loophole by clarifying that the law applies to all manufacturers who “sell, service, display or advertise vehicles in the state.”

“One of the things that was added to the bill was a section that states this law applies to all manufacturers. There’s no creation of new rules,” said Terry Burns, executive vice president of the MADA to the Detroit Free Press. “If a manufacturer wants to come in and sell cars in the state of Michigan, they should probably follow Michigan law.”

But Tesla’s general counsel counters that the amendment is not a simple clarification of the law; it’s an attempt to change the law and ban the sale of Teslas.

“People don’t introduce bills unless they intend to change the law,” he explained. “Secondly, people don’t sneak language in at the last minute unless they know it will be consequential.”

Tesla doesn’t even operate a display in Michigan, but the state wants to join Texas, Arizona, Colorado, North Carolina and Virginia on the list of states that are terrified of living in a world where car dealerships aren’t always necessary.

The fact is that auto dealers face a future where they may no longer be such an integral part of the retail landscape.

“The market will eventually push that in that direction,” Christie Nordhielm, associate professor of business at the University of Michigan’s Ross School of Business tells the Free Press. “Rule one of distribution is there’s only one customer, and that is the consumer. Everyone else is a middle man.”

State Representative Tom McMillin of Rochester Hills was the only “no” against the final bill, arguing that the government should not be in the business of deciding how cars are sold.

“If a company wants to try to distribute their product different than through dealerships, they certainly should be able to,” he explained to the Detroit News. “The only winners in that would be the consumers.”

In September, the Supreme Judicial Court of Massachusetts threw out a lawsuit aiming to block Tesla from selling directly to customers and using a retail storefront to display model vehicles.

Weeks earlier, the Georgia Automobile Dealers Association filed a complaint with the state’s Department of Revenue, claiming that Tesla sold too many through its one retail store in the state.

A petition asking the White House to introduce federal legislation to allow for direct sales to consumers in all states gathered more than 130,000 signatures last summer. The White House responded by saying that consumer choice is important, but that laws regarding things like auto sales are best left in the hands of the individual states.

While most states don’t have active bans on direct sales, a recently passed law in New Jersey expressly allows Tesla and others to sell directly to consumers.

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