Even though only a few dozen Teslas have been sold to people in Michigan, and even though the electric vehicle maker has no storefront display operations in the state, the home of America’s auto industry has decided it needed to pass a law actually banning carmakers from selling automobiles to Michigan consumers without first going through a franchised dealership.
Tesla, for those who aren’t aware, eschews the traditional dealership model and instead sells its pricey cars directly to consumers.
Michigan law already requires that anyone selling a car in the state do so through a dealership, but since Tesla has no retail operations in Michigan, it maintained that it wasn’t violating the law by allowing Michigan residents to buy their cars online.
And so, with the backing of the Michigan Auto Dealers Association, an amendment to existing law was quietly tacked on to an unrelated bill at the last minute and passed through the legislature with no resistance. Last week, it went to the desk of Michigan Gov. Rick Snyder, who signed it into law on Tuesday afternoon.
That amendment explicitly states that the dealership-only requirement applies to all car companies who sell, service, display or advertise vehicles in the state.
This clarification effectively shuts the door on Tesla’s direct-sales approach in Michigan, meaning state residents will need to go out of state to buy one of the cars. That, or Tesla will need to make arrangements with franchised dealerships to sell their cars.
The bigger thing that MADA was trying to do was prevent other car companies from thinking they could bypass dealers and get into the direct-sales game. Publicly, U.S. auto companies, including GM, have come out in support of the Michigan ban, but that doesn’t mean they haven’t been watching Tesla’s business to see if they too could cut dealerships out of the process.
There are also numerous overseas manufacturers who haven’t been able to crack the U.S. market because of the lack of dealerships. If consumers could become accustomed to direct sales, it would open the door to new manufacturers who can’t afford to pay a middle man.
Not surprisingly, Tesla is not thrilled about the decision by Gov. Snyder to sign the bill.
“What’s good for GM’s customers is not necessarily good for Tesla’s customers. What’s good for gasoline cars is not necessarily good for electric cars. Tesla is selling a new product with a new technology,” reads a statement from Tesla. “The evidence is overwhelming that a traditional dealer-based approach does not work for electric cars.”
Michigan joins Texas, Arizona, Colorado, North Carolina and Virginia on the list of states with laws banning the direct sale of automobiles.
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.
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.