Tesla Sales Still Prohibited by Michigan Law, Company Starts Lobby Action

Tesla Motors is still struggling to overcome legislative issues in some US states that don't support its business model.
Tesla Sales Still Prohibited by Michigan Law 1 photo
Photo: Raysonho
Tesla has a unique approach to its sales strategy, and the California-based company has encountered issues with local laws in several US States. As opposed to traditional car companies, Tesla prefers selling its cars on its own, without the regular dealer network.

Tesla claims this approach brings value to its customers and ensures a better relationship between the two parties. State legislators such as Michigan's Governor, Rick Snyder, disagree. Snyder signed a bill last year which bans automakers to sell vehicles directly to customers in the state of Michigan.

The legislation was backed by the state's new car dealership lobbyists and closed a loophole Tesla had been using until that time to operate. The Palo Alto carmaker bypassed traditional dealer networks by using a legislative gap in the previous bill in the Michigan state, which stated that "carmakers were prohibited from selling new vehicles directly to retail customers except through its franchised dealers." That particular loophole was closed by last year's Michigan bill by removing the word "its" from the sentence.

Interestingly, State Senator Darwin Booher introduced a bill in April 2015 that seeks to allow direct sales of the three-wheeled "autocycles" to consumers in Michigan. This bill aids Elio Motors in selling its products. The business model concept used by Elio Motors is the same in principle as Tesla's, but the bill introduced in April would still imply a ban on Tesla cars because it only allows this sale strategy for "three-wheeled autocycles," basically enclosed and reversed trikes, while enforcing the ban on automobiles.

Roger Penske, the owner of several dealerships in other states, supported the idea of the ban and claims that Tesla should look over history and evaluate the fate of other car companies that tried to have their own dealerships: "it's been a failure," Penske says.

Meanwhile, Tesla estimates they have over 400 customers from the Michigan state who have had to drive to neighboring states or even to Canada to buy a car. Among these 400 customers, some bought Tesla cars online. Currently, Tesla has retail stores in 25 states and the District of Columbia.

The Palo Alto-based company has over 55 Michigan-based suppliers, with whom they spend over $120 million to build American-made cars. "Why shouldn't we be allowed to sell cars in Michigan?" asks Jim Chen, Tesla's vice president of regulatory affairs in a recent interview with Detroit News.
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About the author: Sebastian Toma
Sebastian Toma profile photo

Sebastian's love for cars began at a young age. Little did he know that a career would emerge from this passion (and that it would not, sadly, involve being a professional racecar driver). In over fourteen years, he got behind the wheel of several hundred vehicles and in the offices of the most important car publications in his homeland.
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