By on October 22, 2014

2013 Tesla Model S Summerside Lighthouse

It’s official: the ban preventing Tesla from directly selling its wares to customers in Michigan has been reinforced.

Michigan governor Rick Snyder signed into law HB 5606, now known as Public Act 354 of 2014. The act not only prohibits automakers from telling their dealerships what fees the latter can charge customers, but reinforces a law already on the books:

This bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan — because this is already prohibited under Michigan law.

Though Tesla can do little more than open a showroom and a repair shop for now, Snyder said lawmakers should “always be willing to re-examine” legislation with the aim of improving the consumer’s experience “in a more efficient and less costly manner.”

Meanwhile, at least one automaker is happy PA 354 is on the books. In a one-sentence press release, General Motors had this to say prior to the bill’s signing:

We believe that House Bill 5606 will help ensure that all automotive manufacturers follow the same rules to operate in the State of Michigan; therefore, we encourage Governor Snyder to sign it.

Per Jalopnik, GM sent a similar message to Ohio governor John Kasich back in March of this year regarding SB137, which would have allowed Tesla to directly sell to customers in the state; the bill later died in the Ohio Senate.

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44 Comments on “Tesla Direct Sales Ban Reinforced In Michigan, GM Supported Signing...”


  • avatar

    What a coincidence: just when Mercedes has terminated its 4% stake in Tesla by selling its shares. It started out by buying a 9% stake in the company for 50 million in 2009. With the 4% stake that was sold, Mercedes made a handsome 780 million.

  • avatar
    Spartan

    Funny how GM has been the downfall of Detroit for years and yet the Michigan legislature still allows these fools to control them. They’ll never learn, the liberals or the conservatives. They fall into the same trap because they’re padding their pockets.

    When will people wake up and vote these idiots out of office? I already know the answer and for that, I’m glad I don’t live in Michigan.

    • 0 avatar
      fourthreezee

      You’d think with the decades of poor quality GM products and BS would speak for itself. Campaign contributing are likely speaking now – Ohhh well

      This further reinforces my mantra: Friends don’t let friends buy GM cars… Ever.

  • avatar
    Pch101

    It certainly helps to torpedo the claim that the OEMs would all love to sell cars directly were it not for their dealers.

    • 0 avatar
      Quentin

      Well, at least one OEM.

    • 0 avatar
      Landcrusher

      Correct. It also bolsters the claims that companies are mostly happy to have government limit your choices to hurt their competition and that government seems happy to comply so long as they can get away with it.

      It’s clear here that ending the states’ protection of dealers will give consumers more choice because some manufacturers will continue the status quo.

    • 0 avatar
      healthy skeptic

      @Pch101

      >> It certainly helps to torpedo the claim that the OEMs would all love to sell cars directly were it not for their dealers.

      Actually, it doesn’t, because we don’t really know GM’s motivation here. GM is very heavily shackled to its own dealership network. Removing those shackles would be a daunting task, and the shackles would get angry. If the shackles are a competitive liability, and a tiny upstart comes along that isn’t wearing its own set, it’s much easier to force the upstart to wear a set of shackles than for GM to remove its own.

      You think GM wouldn’t love to be free of its shackles?

      • 0 avatar
        Pch101

        The freedom to get into a low-margin business that is outside of its skill set is obviously not much of a freedom from GM’s perspective.

        Most manufacturers of products don’t bother with retail. (Remember this the next time that you look for the Budweiser Mart, Green Giant Vegetable Emporium or Pepsiland market in your neighborhood.) Retail is a different animal from production, producers usually aren’t particularly good at it, and the margins are low.

        This idea is only exciting to those on the internet who believe (God knows why) that car prices would be lower if there was a monopoly retailer. This position makes no sense at all, and the fact that you can’t haggle when buying a new Tesla — you either pay sticker or don’t buy one at all — should make this obvious.

      • 0 avatar
        healthy skeptic

        @Pch101

        And actually, to think about it further, this definitely proves dealers are a competitive liability…because why else would GM complain? So I think your inference is dead wrong.

        • 0 avatar
          Pch101

          I understand that you hate car dealers. But your angst doesn’t provide the OEM with a compelling reason to want to bother with retail.

          Most manufacturers of products don’t retail them directly. There are good reasons for that.

          • 0 avatar
            Landcrusher

            Aside from the presumed hatred snark, PCH is correct.

            Want has nothing to do with things. GM leadership may indeed feel they would be better off without dealers. It doesn’t matter. They know it would be a nightmare to switch.

            Sudden legislative change would hurt GM without a doubt. They would certainly benefit only from a very slow retreat from mandated dealers. Likely, they would start their own Autonation clone and see how it goes. You would see minuscule change at the store level.

            Much of light aircraft sales is direct with others using dealers. Direct does not decrease the price. It only marginally improves the buying experience because the manufacturers tend to treat their sales people better than many dealers do, and they don’t have quite the fear of loss on any given deal when things go awry like a low volume, low margins dealer does.

            What you do get is more innovation in marketing and sales approaches. What you don’t get is a way to avoid all the costs of a dealer because the manufacturer can’t on one hand have a full cost buying experience store and a low cost Internet buying experience.

          • 0 avatar
            bosozoku

            And yet some do, as they wish to provide a different shopping / sales / service experience. Apple’s retail outlets come to mind as an example. I see no reason why Tesla should not be allowed to do the same if they so choose, regardless of whether the bigger players want to do the same.

          • 0 avatar
            healthy skeptic

            @Pch101

            I don’t hate care dealers per se, but I think the whole buying experience as currently offered by the franchise system leaves quite a lot to be desired, to put it mildly. Even at its best, its still a stressful, combative experience. As a consumer, I also deeply resent that car dealers have put state laws on the books that force me to buy only from them, and deny me the option to purchase directly from the manufacturer. But beyond that, if a dealer can compete successfully in a hybrid system where both forms of purchase are allowed, all the more power to ’em.

            Now to address your points:

            >> The freedom to get into a low-margin business that is outside of its skill set is obviously not much of a freedom from GM’s perspective.

            So it’s okay for them to deny a competitor that does have that skill set? And GM is somehow not capable of learning this skill set?

            >> Most manufacturers of products don’t bother with retail. (Remember this the next time that you look for the Budweiser Mart, Green Giant Vegetable Emporium or Pepsiland market in your neighborhood.)

            The reason they don’t is that it doesn’t make sense from a market perspective, not because they’ve been saddled with middlemen by state law or industry history.

            >> Retail is a different animal from production, producers usually aren’t particularly good at it, and the margins are low.

            Why don’t we let the market figure that one out? And again, why should GM care in that case? Yet…they’re complaining! Hmmmm…

            >> This idea is only exciting to those on the internet who believe (God knows why) that car prices would be lower if there was a monopoly retailer.

            There isn’t a monopoly retailer. There are dozens of manufacturers competing with each other, and that will still be true even if all go only to direct sales. (In actually, I think a hybrid system would emerge.)

            >> …the fact that you can’t haggle when buying a new Tesla — you either pay sticker or don’t buy one at all — should make this obvious.

            You mean you pay *invoice* price with Tesla. Sticker is invoice + middleman markup. If I don’t like Tesla’s product or its price, I go buy from one of their competitors. Just like…uh…every other industry.

            Let’s be clear: when you “haggle”, it’s a fight to find you the middleman who will charge you the least amount of markup. Or…you can go right to the source and buy directly. No markup to begin with! As with all products, it ain’t gonna get cheaper than buying directly from the folks who actually make the product.

          • 0 avatar
            Pch101

            The issue wasn’t what Tesla should or shouldn’t do, but why GM is doing what it is doing.

            The answer is pretty obvious — GM doesn’t want any more OEM competition than necessary. It takes minimal effort for GM to lobby in its own backyard to pass this bit of legislation that keeps out a rival, no matter how small or irrelevant that rival may be.

            GM sacrifices nothing by giving up the chance to operate retail stores that it didn’t want in the first place. This retail model is important to Tesla but it would be a burden to GM.

          • 0 avatar
            ect

            Operating an auto dealership is a “low-margin business”? Whatever the margins are, it sure seems to be highly profitable, judging by the lifestyles that successful dealers enjoy, and the interest of the corporate dealer networks in (first) getting into the business and then expanding their operations by acquisition.

            The fact that dealer associations have lots of money to throw at politicians across the country to preserve their legislatively-created and enforced industry structure also confirms that it is a very profitable business.

            Those profits come from consumers, whom the dealers regularly screw over, in myriad ways. In essence, this legislatively-created structure means that consumers are paying economic rent to dealers. Which benefits the dealers, not the consumers.

            In Canada, several OEMs operate with a mix of corporate and dealer stores. It seems to work. In my experience with MB, the dealer I went to offered a better deal than the corporate store I went to, but the corporate store programs set up a benchmark that the dealer felt he had to beat.

            A mix of corporate stores and dealers sets up an additional layer of intra-brand competition, which can’t be bad.

            As for GM’s trying to stick it to Tesla, I wouldn’t go looking for some deep corporate strategy. They had the opportunity to stick it to a competitor, and they took it. Pure and simple, almost a reflex action, no great thought required.

          • 0 avatar
            Pch101

            If you don’t know the difference between profit and margin, then I can’t really help you.

          • 0 avatar
            ect

            Your attempts at self-promotion as knowledgeable are completely belied by your immaturity and lack of life experience. Not to mention your complete inability to accept that you might actually be mistaken about something.

            Whether or not the auto dealership business is low-margin, as you claim it is, does not mean it is low profit (as your statement is clearly meant to suggest).

            In fact, I suspect that margins in the service department (for example) are very high, but that is a digression.

            My point was exactly that your characterization of the business as low-margin, whether true or not, is irrelevant if it is in fact highly profitable for the owners. Which it certainly appears to be.

          • 0 avatar
            Pch101

            If you don’t grasp the difference between profit and profit margin, then I can’t help you.

            And apparently you don’t, so I can’t.

            Instead of typing replies to me, go learn something about the car business. If you actually have the superior business experience that you (so frequently yet unconvincingly) claim to have, then it should become obvious what the problem is.

          • 0 avatar
            ect

            How very amusing. You completely ignore the substance of the discussion to focus (as you so often do) on ad hominem attacks that I’m sure you think are witty, but really come across as quite juvenile. And, by the way, reveal much more about you than they do about your intended targets.

            As for me, I’ve been semi-retired for a number of years, and now work mostly with technology start-ups. I have been a C-suite executive in a a very successful company that was a Tier 1 supplier to all of the D3 (which is an important factor in why I can be semi-retired today).

            If you truly want to engage in a serious discussion of substance, I’m all ears.

            On the other hand, if you think your snarky remarks towards me and others – often calculated to disguise the fact that you are not all-knowing – will impress us with your vast intelligence, you are mistaken.

            Your call…

          • 0 avatar
            Pch101

            I find it funny that a guy who can’t figure out the difference between profit and profit margin is so eager to engage me, when it obviously can’t end well for you.

            Once again, if you can’t figure out why low-margin retailing would not be that exciting to a major manufacturer, then I doubt that you have much experience in any sort of business that is relevant here.

            If you have anything substantive to add about cars, then feel free, but I won’t be holding my breath.

          • 0 avatar
            ect

            “…it obviously can’t end well for you.” For someone with so little real-world experience, you sure are full of yourself. For no apparent reason.

            You completely miss the point – whether or not OEMs would want to engage in direct sales, and to what extent, isn’t the issue. In a free market, they would have that option. They don’t, because dealers have lobbied furiously (and spent lavishly) to get states to legislate against it.

            You suggest that “low-margin retailing” should be an unattractive business. Tell that to Home Depot. Low margins don’t mean low profits. And you offer no evidence, that, taking into account all of the revenue sources available to car dealers, their business should be considered “low-margin”.

            In fact, a little bit of actual research would show you that AutoNation earned an ROE of 18-19% in each of the last 2 years. GM, by comparison, made 16.7% ROE in 2012, and 12.4% in 2013. Apparently, selling cars in the regulated environment the states have legislated can be more profitable than manufacturing them.

            Your puerile little snipes are vaguely amusing, in one sense. They reveal much more about your own character and insecurities than anything about your supposed targets.

      • 0 avatar
        FreedMike

        @healthy skeptic:

        “You think GM wouldn’t love to be free of its shackles?”

        The “shackles” are GM’s basic business model (and the same holds true of every other manufacturer besides Tesla). Retooling for a completely different model would be a nightmare.

    • 0 avatar
      Dr. Kenneth Noisewater

      Indeed, which torpedoes the dealers’ claims that Tesla would undermine their relationship with legacy OEMs.

      Franchise protection laws exist to protect the value of franchises from abuse by OEMs, not the franchise system itself. Tesla’s in the right, and should not be subject to those laws if they haven’t sold any franchises.

    • 0 avatar
      stuki

      But not the only relevant claim, which is that OEMs’ customers would benefit from not suffering under a monopoly/oligopoly.

      Monopolies are rarely much of a problem for the monopolists themselves, after all. Just ask a taxfeeder about his retirement plan.

  • avatar
    mr.cranky

    Where is the logic in this legislation?

    It offers nothing for consumers while protecting the bottom line of GM and seedy car dealing crooks.

    There ought to be a government for the people, by the people. Instead, we have a government that’s for ONE person and one person only: The Corporation.

    • 0 avatar
      VoGo

      Mr. Cranky,
      These law is less to help automakers, and more to protect local auto dealers, who are major contributors to political campaigns.

    • 0 avatar
      bball40dtw

      This was originally a bill to prohibit auto manufacturers from dictating the fees franchised dealers can charge customers. The State Senator that is from the district I grew up in, Joe Hune, added the additional wording into the bill. Even though it’s an election year and his wife is a lobbyist, that bright red district will elect him again.

      According to many, it was already illeagal for Tesla to sell cars in Michigan without a franchised dealer. I don’t know how the old language would be legally iterperated vs the new language.

    • 0 avatar
      stuki

      There is a government for “the people.” Of course, the guy called “the people” only, if ever, existed in Karl Marx’ fantasy. Meaning, the real world ideal, is not to wish for some childish Communist slogan, but rather that there ought to be no government, period.

  • avatar
    Rday

    Looks like the shills at the UAW and GM are still trying to dictate to the American consumer what is good for them. They both deserve to take a dirt nap and be exposed for the greedy incompetent and corrupt organizations they both are.

    • 0 avatar
      bosozoku

      What the hell does this have to do with the UAW?

      As soon as you mentioned them my tin foil hat spidey sense went off. Yeesh.

      • 0 avatar
        Dr. Kenneth Noisewater

        TSLA is nonunion, and likely to remain so for the foreseeable future.

        Still, I doubt they’ve got any more motivation in this fight than they would for the Right-to-Work state fight, likely rather less.

      • 0 avatar
        Landcrusher

        Everything. I wonder how much lobbying UAW put into to this. Had their been big support to end dealership mandates, you can bet they would go to the mat to defeat it.

  • avatar
    Discoman

    Hmmm. Does the big guy feel threatened by a little startup that focuses on the customer and ownership experience? Little man must be squished like grape between big guy’s fingers, heh, heh, heh.

  • avatar

    My apologies to those making their living selling cars, and I am open to any criticism if I am missing something. It seems the dealership way of doing things may be becoming obsolete. In my experience the guys at the dealership are either telling me lies, or misinformation out of ignorance. I know there are exceptions, so no offense to the good salesmen.

    I remember maybe 5 years ago, was at the Serpentini dealership in Strongsville, looking for a car for my mother. We were there to see my good friends father who was selling cars, and told another salesman we would come back when he was in. The salesman refused to let this go, following us around and raising his voice. We to show us the Impalas. He said, “here’s one, right here”. It was a Malibu (The weird looking Saab clone).

    Maybe people who aren’t into cars as much as a lot of us on this site prefer the hands-on approach offered by dealerships, but I think the public should be allowed to buy cars from wherever they want. It seems this legislation is artificially extending the life of this business model. If people really want/need the dealership experience, and the dealerships truly have something to offer the public, they will win. If not, let’s cut out the middleman. It’s terrible that some jobs will disappear. Lots of milkmen lost their jobs many years ago, I am too young to know if the government stepped in.

    • 0 avatar
      Landcrusher

      The dealership is not obsolete because of trade ins.

      The experience you get exists because it is not appropriately penalized. Internet sales will not really change that unless you sell your car yourself. Otherwise, you will just have used car guys treating you badly when you sell.

    • 0 avatar
      Scoutdude

      The job of the salesman is not at jeopardy in this ruling, the issue is factory owned stores vs franchise operations, not whether or not there is a salesman on site.

      • 0 avatar
        stuki

        For those in the habit of looking at forests rather than individual trees/rulings; if all laws and rules and other nonsense concerning the sales and distribution of cars were removed, there would inevitably be shortcuts between production and consumption that would limit the rent collectible by slick talking intermediaries hiding behind gratuitous obfuscations.

  • avatar
    OneAlpha

    Do you suppose that Tesla could argue that they aren’t actually selling the cars, they’re just trading them for money?

    I’ve heard of more tortured logic than that making it past a judge.

    • 0 avatar
      mcs

      A twist on that would be that they could sell a gift card that could be redeemed for a car if the buyer chooses to do so. Another twist is that they could go into the wheel business. If you buy 4 wheels, you could get a gift card for a free car to attach the wheels to.

  • avatar
    Onus

    States can’t ban a person from going to the DMV with MSO, and a bill of sale. Seriously not too sure how states enforce this issue.

  • avatar
    JEFFSHADOW

    1: In 1984 many states made it illegal to resell tickets to the Jackson’s Victory Tour concerts. So enterprising people would list a Frisbee for sale for $140 with FREE Jackson Tour tickets included!
    2: I sold Oldsmobiles for 14 years and knew my product very well. I sold hundreds of Oldsmobiles to discerning customers who appreciated a low pressure sales approach and I had long term repeat business as well!

  • avatar
    Carilloskis

    There are ways around the sales men in current dealerships if you know what the invoice for the vehicle is you can go talk to some one in the back normally the dealerships fleet manager, who is a salaried employee you might have to do a little negotiating. the Dealer still makes money off the sale and doesn’t have to expend resource to sell a vehicle, Most dealers make nearly all their money on service, and warenty work anyways , so if they make you happy with a purchase then you’ll more likley be back for service. My parents have either ordered their vehicles direct or had their dealer locate the cars they want. When my dad went to order his 2011 Mustang in august of 2010 it turned out that the dealer had one on order identical to the one he spect out except for a diffrent color piping on the leather the car arived 3 weeks later and he only paid invoice for it.

    Somebody brought up apple as a direct sales company whlie you can buy from the apple store or their web site you can also buy their products from many retailers including walmart best buy target AT&T simply Mac etc. for all around the same price, they also charge the same reguardless of if you buy in store or online. but they still have to pay retail staff reguardless of where you buy, so i dont think manufactures direct selling gives the consumers any beniffit , just gives the manufacture a bigger profit margin.

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