By on September 22, 2016

Tesla Model X

After its two-year-long bid to gain a sales foothold in Michigan hit a brick wall, Tesla has filed a lawsuit against the state.

The suit, filed in a U.S. District Court in Michigan, targets governor Rick Snyder and other top officials, Reuters reports.

Unlike other automakers, Tesla uses a direct sales model to get its vehicles to buyers, rather than a traditional franchised dealer network. That clashed with state laws forbidding the practice — laws passed in 2014 to exclude companies like Tesla from using a direct sales model.

Recently, Michigan denied Tesla a dealership license.

The lawsuit demands that Michigan officials hand over an order allowing the automaker to sell vehicles. Tesla, as well as its CEO, Elon Musk, wants it in writing that the company is “entitled to a vehicle dealer license.” Beyond that, it wants a judge to repeal the law that bars the company from operating in the state.

Tesla is able to operate stores in 23 states and the District of Columbia, but four states, including Michigan, have shut their doors. Other states have placed limits on the number of stores Tesla can operate.

In a statement reported by Reuters, Tesla blames existing automakers and protectionist policies for its market shutout.

“Unfortunately, the local auto dealers and local manufacturers have made clear that they oppose any law that would allow Tesla to operate in Michigan,” Tesla states. “As one leading legislator told Tesla: the local auto dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here.”

While its dealership application was shot down, Tesla has a used car license application that is still under consideration.

[Image: Tesla Motors]

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39 Comments on “Tesla Sues Michigan After State Bars Vehicle Sales...”


  • avatar
    SCE to AUX

    Payola – it’s the only explanation for such madness.

    I guess the citizens have no say in the matter.

  • avatar
    DukeGanote

    Electrifying!

  • avatar
    TrailerTrash

    Well….answer me this…are not there a whole lotta consumer laws like this?
    If laws were made for what is figured to be consumer protection or support, then they should cover the entire lot.
    I don’t know all the history behind manufacturers and their dealer networks, bt if there is a protection of this and it benefits employees and manufacturers, it seems pretty standard stuff.
    I mean, if we are gonna bash government regulations for benefiting certain industries over another or even certain businesses over others, the fight would be a pretty big fight.
    Let’s begin with government support of many local industries vs outsiders.
    Even tax incentives that give certain fav to some and not all.
    I still think giving sports franchises huge tax breaks and gov funding is sinful.
    But then, that’s just me.
    And correct me if I am wrong, but doesn’t the government even give the NBA and MLB and NFL monopoly privileges no other businesses get?

    • 0 avatar
      VoGo

      Great point, TT,
      It’s obvious that the Michigan government (Republican controlled) has decided to favor ICE carmakers over Tesla. And the reason for that is obvious: the millionaires who own car dealerships are the largest donors to their political campaigns.

      For all the internet babble about how the government favors Tesla (99% untrue), it’s interesting to see the facts that state governments routinely legislate to discriminate against Tesla.

      And at the end of the day, it’s consumers who get screwed by these archaic laws protecting dealerships.

      • 0 avatar
        TrailerTrash

        ya…kinda missed my point.
        Sorta.
        I am against these regulations. But most regulations as well.
        And as you, and PCH1 know, I am completely on the opposite side of the isle as you folks.
        Here…dunno, exactly. Just smells bad.
        Not sure if a Tesla or any car is the same as a laptop.
        If you are limiting service providers, service should be easy.

        But good grief…monopoly regulations like this are a deep sin of our society and government of the powerful.

        GOP or DEM. They are both chock full of filth n greed.
        Which is what I think is the strong and deep power behind followers of trump… the deplorables?

        • 0 avatar
          VoGo

          If anyone still thinks that Trump is an alternative to filth and greed, they haven’t been paying attention.

          • 0 avatar
            TrailerTrash

            ya…I do.
            But I must admit, my wife agrees I am deplorable.
            On good days.
            But to suggest I don’t pay attention is pretty bad.
            He is not filthy and if you haven’t paid attention the the pig Billy…then you are not paying attention, or are quite the enabler.

        • 0 avatar
          WheelMcCoy

          TT – “Which is what I think is the strong and deep power behind followers of trump… the deplorables?”

          Forgotten in the narrative is that it’s one half (or some fraction) of Trump supporters are deplorables. The other part is worth hearing out.

          But I see you got that covered in your followup post. On good days, you’re deplorable, on other days, you’re not. :)

          • 0 avatar
            VoGo

            Marital infidelity? Check
            Cheated on taxes? Check
            Afraid to release detailed medical records? Check
            Afraid to release tax returns? Check
            Uses charitable foundation to pay off politician so she won’t investigate phony ‘University’? check
            Phony university? Check
            Cheated nearly everyone who has done business with him? Check
            Talks about banging his own daughter? Check
            Used bankruptcy to rip off business partners for his own gain? Check
            Squandered most of the $200M his dad gave him? Check
            Xenophobic bigot? Check
            Incites political violence? Check
            Serial liar and birther? Check

            No, TT, not filthy at all.

  • avatar

    Well, here’s the problem.

    Musk describes his politics as “half Democrat, half Republican.”

    I’m thinking the politics of Michigan rejected him personally. The entire state is run by the Democrat machine. Unions being the driving force.

    • 0 avatar
      VoGo

      WhiskeyRiver,
      Have you considered basing your posts on actual fact?

      Michigan House: 63R vs. 47D
      Mighigan Senate: 27R vs. 11D
      Governor: R
      Lt. Governor: R
      Secretary of State: R
      Attorney General: R

      Summary: Michigan is completely ruled by Republicans.

      • 0 avatar
        Adam Tonge

        It’s ruled by Republicans because of gerrymandering, the loss of population in areas historically dominated by democrats (Detroit, Flint, Saginaw, Benton Harbor, Lansing), the loss of almost all industrial jobs north of Saginaw, and the fact that Michigan Democrats can’t be bothered to vote during non-presidential elections. We’re only blue every four years.

      • 0 avatar
        TrailerTrash

        But it is weird that it vote blue in presidential elections and has these stats as well.

        • 0 avatar
          Pch101

          The state House of Representatives has more Republican seats even though more votes are cast for Democrats.

          Michigan has its state Senate and gubernatorial elections every four years during the midterms. Democratic turnout is lower during the midterms, which helps the Republicans.

          Both the US Senators are Democrats, but a majority of the US House members are Republican.

          • 0 avatar
            Adam Tonge

            We are a strange state. Our politicians are the worst of both worlds. Tax and spend Republicans! Flint would have never moved away from the Detroit Water System if there wasn’t a GOP jobs project creating the new Karegnondi Water Authority. The KWA is useful in a few ways; jobs were created in Republican districts, businesses and contractors got paid by their politician buddies, and most importantly, the influence of Detroit on other parts of the state is minimized. All this could be done under the guise of helping people.

          • 0 avatar
            TrailerTrash

            adam
            that’s not truthful.
            to put that hell on repubs is really bad twisting of the truth.
            but so it goes.

            madness. just madness.

          • 0 avatar
            Adam Tonge

            That’s exactly what happened. KWA was a jobs project that wasn’t going to save people in the Flint area any money. Even without factoring cost overruns, staying on the DWSD would have been cheaper over the next 40-50 years.

            This a completely separate issue from the governor appointed EM deciding to switch to Flint River water. However, the switch wouldn’t have been made without the creation of the KWA.

            I vote for both Democrats and Republicans. The Republican leaders of this state deserve every bit of hell heaped on them for how they handled the Flint water crisis. What are Rick Snyder’s taxpayer paid legal bills at right now? Oh. $3.4 million. I wonder what else we could do with that $3.4 million.

          • 0 avatar
            Pch101

            The National Auto Dealers Association gives the vast majority of its political contributions to Republicans.

            Michigan’s state government is dominated by Republicans.

        • 0 avatar
          WheelMcCoy

          It *is* weird. Must be something in the water.

          • 0 avatar
            shaker

            Or, the Republican-LEAD state government?

            One wonders if there isn’t some sort of federal anti-trust statute that could support Tesla’s case.

    • 0 avatar
      Pch101

      It’s odd that Whiskey River posts frequently on a website called The ***Truth*** About Cars, when I can’t recall the last time that he made an accurate statement about anything.

      • 0 avatar
        tonycd

        Whiskey River should be sentenced to chug whiskey watered down with poisonous Flint municipal water, arranged by the city’s Snyder-appointed “emergency manager,” as punishment.

  • avatar
    notwhoithink

    I kinda feel like the folks in Michigan are playing with fire. Sooner or later Tesla is going to win in court, whether it’s a “bought and paid for” Michigan court or a Federal Court, or SCOTUS. If it ends up being one of the latter then they’re going to end up setting a precedent that undermines laws in other states, at which point the whole house of cards that is legislated franchise dealers comes crashing down nationwide. Instead of adapting to the new reality they’re trying like hell to hold it back through legislation with with the most flimsy of legal basis.

  • avatar
    jimble

    Is anything stopping Tesla from selling its cars through franchised dealers besides its inflexible adherence to its business model?

    • 0 avatar

      @jimble

      Nothing is stopping them from using franchised dealers like other manufacturers. In fact Tesla have said they aren’t against this long term, but in the short to medium term they want to handle it all themselves.

      Their argument goes that the sales model for selling EV’s is different to ICE vehicles and the franchise dealers are not educated or equipped to make that transition and will more than likely steer customers to non EV choices. From what I’ve seen at Nissan and GM dealers, this argument does hold water, sales staff steer customers to another vehicle more often than not.

      Dell exclusively sold computers direct via their website initially which was revolutionary at the time. Many years later you can buy a Dell at Walmart.

      Once EV’s are here to stay and franchise dealers start to sell them as enthusiastically as an ICE car, Tesla may agree to a franchise sales model. The more the dealers and manufacturers resist, the longer it will take for such a change to occur.

      • 0 avatar
        tonycd

        My understanding is that Elon Musk personally received business advice from Steve Jobs, and that Musk is profoundly impressed with the way the Apple business model – own the hardware, own the sales outlets – gives his company the level of control that ensures a quality customer experience that he could never achieve through franchised dealer.

        When one looks at Apple’s higher levels of customer satisfaction and ability to command higher prices compared to its competitors – and the slimepit Tesla would plunge into if they had franchised dealers – it’s hard to disagree.

        Toyota and, for a short while, Saturn have been able to enforce civilized treatment of customers within a franchised-dealer model. But Toyota had to go to extreme lengths to lash down their dealers with franchise agreements that ensured that. The rest of the industry shows that’s a very hard thing to do.

        • 0 avatar
          WheelMcCoy

          Just adding that Apple learned from their Best Buy experience. There, Apple products were relegated to the back of the floor, and sales people, less knowledgeable about Apple products, steered customers toward PCs.

          • 0 avatar
            shaker

            Most Best Buy workers and their families/friends could afford a PC, so they knew the OS and the hardware enough to make a sales pitch.

            The white “boutique” computer with the one-button mouse that cost twice as much was a tough sell, so yeah.

    • 0 avatar
      Kendahl

      They might. It depends on whether the goal is to protect the independent dealership system or to prevent the sale of Tesla automobiles. It would be important for the nominally independent dealer to behave like a captive Tesla store. Finding competent people willing to do so might be difficult.

    • 0 avatar
      healthy skeptic

      @jimble

      >> Is anything stopping Tesla from selling its cars through franchised dealers besides its inflexible adherence to its business model?

      Maybe a better way to word that would be: Is anything stopping direct sales by the auto industry besides protectionist state laws for car dealers?

  • avatar
    healthy skeptic

    >> “As one leading legislator told Tesla: the local auto dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here.”

    Thanks, leading legislator. But what about the citizens/consumers? You know, the ones that elect you to represent them? You think they like being forced to buy from car dealers whether they want to or not?

  • avatar
    shaker

    “Thanks, leading legislator. But what about the citizens/consumers?”

    They just pay the legislator’s salary, which they treat as an entitlement – but lobbyists ladle on the “gravy”.

  • avatar
    stevelovescars

    I understand protecting franchisees. If I had a Ford dealership I wouldn’t want Ford to be able to come in and open their own store down the street. This is what Subway did years ago and they screwed a bunch of the small business owners that invested in franchises. They got their asses handed to them in court.

    However, since Tesla has never had franchisees, there are no independent businesses to protect. That is what the law in Michigan specifically said… until two years ago when Gov. Snyder and the GOP led legislature in the state changed the law. It used to require OEMs to sell through THEIR franchisees rather than directly, and it was changed to read that they had to sell through a franchised dealership.

    Now they are going to spend more taxpayer dollars to defend a lawsuit that is going to cost all of us a lot more than they made in payola from the dealer association. All the while, there are a lot more critical issues in the state.

    What I don’t get, though, is that it doesn’t require a dealer license to open a repair facility in Michigan. Why doesn’t Tesla just open small service centers in the state. Sell directly online and deliver the cars over the border in Ohio or Indiana?

    Today, there are plenty of their cars driving around Michigan already but they are spending a fortune to truck them out of state for repairs. The two processes of selling vs. servicing have been tied together forever, but it isn’t necessary.

    When Saturn first started their distribution network they awarded large geographies to each dealer rather than single points. The idea is that the dealers would compete with other manufacturers rather than with each other. However, the idea always floated around that a dealer could cover a geography with a small number of showrooms but open service satellites so that people in remote areas would be more comfortable owning one. It made sense… you would drive an hour once to buy the car knowing that warranty service was available nearby. The concept never went into practice as far as I know. Mostly because dealers had a very sales-oriented outlook.

    But it isn’t as if they couldn’t keep a car or two on site for test drives. Just call them service loaners.

  • avatar
    Jerome10

    I wish I could remember all the details, but it has been awhile. I know there was a big blow up about this a few years ago, then I read the actual law and what Michigan has done made total sense to me. Something like basically car companies must sell through a franchised, not company owned, dealership.

    I could argue that is a stupid law. But to allow Tesla to do it while not allowing anyone else is not equal treatment. And whatever Michigan did, again, from my memory of the situation, was simply clarify that there are no exceptions for anyone.

    So either Michigan changes their law for everyone or Tesla has to follow the existing laws like everyone else.

    I frankly do not see how Tesla has a case here.

    • 0 avatar

      @Jerome10

      A couple of years ago the laws were changed in Michigan to make it harder if not impossible for Tesla to sell there.

      At the time the dealers claimed the new law didn’t change anything. So if the new law didn’t change anything why pass it? Clearly they knew exactly what they were doing by closing a loophole Tesla has used in Massachusetts.

      http://www.freep.com/story/money/cars/general-motors/2014/10/17/michigan-verge-banning-tesla-stores/17386251/

      Not all cars have to be sold through a dealer. Kit cars and speciality ars are sold direct. The laws loophole allowed those to be sold; they pose no threat. Here comes a threat, there goes the loophole.

    • 0 avatar
      SSJeep

      Tesla has a case here because the franchise law in Michigan is not exactly fair to start with. All the current law serves to do is protect current franchisees in exchange for filled political coffers courtesy of NADA and “dealership associations”.

      The law on Michigan’s books is akin to telling someone that if they want to open a sub sandwich shop in the state, they must franchise through Subway, Quiznos, Jimmy Johns, etc by fiat… Even though everyone knows independent sandwich shops produce a better product and dont pose a large threat to established franchises.

      This case also reminds me of home internet services – states and cities have laws that protect incumbent providers from competition. There are many companies that would like to build and compete in the residential data market, but your choices are limited to one cable vendor and one telephone vendor due to restrictive laws and covenants.

      This case will be very interesting to watch indeed.

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