By on January 22, 2020

A long-standing legal battle pitting Tesla against the state of Michigan has finally been resolved. It was announced Wednesday that the automaker’s 2016 suit against the state, which forbids the direct-sales model employed by Tesla, ended in a settlement a day earlier.

The result? A way for Michigan residents to own and conveniently service a Tesla in the notoriously protectionist state.

Michigan law stipulated that new vehicles could only be sold to consumers through the age-old dealer model that cushioned its auto industry from modern threats. Upstarts like Tesla eschewed such a model for obvious financial reasons.

Tesla’s lawsuit resulted in a resolution filed in U.S. District Court that will make ownership of its vehicles a lot easier.

From Reuters:

The stipulation also says Tesla may “operate under existing Michigan law; sell cars to Michigan customers as long as the sales contract indicates the sale took place in a state other than Michigan; and, indirectly own service and repair facilities in Michigan through a subsidiary, Tesla Michigan.”

Under the settlement, Tesla can open galleries to inform potential customers about their vehicles, arrange demonstration drives, and carry out “ordering and purchase of a vehicle for which legal title transfers out-of-state.”

As a lack of nearby service facilities serves as a major roadblock to ownership, Tesla has long sought to open such centers in Michigan. The advent of the popular Model 3 only increased its desire to penetrate the market. Before now, owners living in the mitten had to drive to Ohio for servicing; the recent creation of a center in Toledo, while closer than Cleveland, still represented an inconvenient haul. If the car was disabled, it made the trip even more loathsome.

And this will remain the case until Tesla Michigan gets service centers off the ground. Ohio, of course, will remain the point of sale for most Michiganders.

[Image: JL IMAGES/Shutterstock]

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20 Comments on “Tesla, Michigan Finally Reach a Truce...”

  • avatar

    “….sell cars to Michigan customers as long as the sales contract indicates the sale took place in a state other than Michigan;”.
    Ok, so which state gets the sales tax? Apparently not Michigan…..?

    • 0 avatar
      Mike N.

      That is not the dealer lobby’s problem.

      But in all seriousness, I am pretty sure you pay sales tax in the state that you register your car. I bought a car out of state and the dealer arranged for my car to be registered in my home state and sales taxes paid there.

    • 0 avatar

      You would have to pay sales tax in both I believe
      And much worse…Michigan car insurance

    • 0 avatar

      Living outside Toledo, I might be able to answer this for you, having purchased cars across state lines. It can be done one of two ways. Sales tax may be collected by the dealer, based on your residence. My sales tax in Lucas County Ohio is higher than Monroe County Michigan. If the bill of sales shows tax collected, it is the dealers responsibility to remit to the proper authority. Conversely, I could decline to pay sales tax to the dealer. Again, the bill of sale will reflect tax not paid. So when I transfer the title or MCO to my name at the Lucas County Ohio clerk of courts, I would have to pay sales tax and fees. I would not pay double sales tax on this purchase.

  • avatar

    “Upstarts like Tesla eschewed such a model for obvious financial reasons.”

    This runs directly counter to some assertions I’ve read repeatedly in the comments here. So which is it – are automotive dealers a financial asset to OEM’s in 2020, or a financial drain?

    (I’m siding firmly with Steph on this one.)

    • 0 avatar

      And the next question: Do automotive dealers in 2020 enhance the sales and delivery process (from a customer standpoint), or would customers be better off with a direct sales model?

    • 0 avatar

      “are automotive dealers a financial asset to OEM’s in 2020, or a financial drain?”

      The last time I visited the NADA website, the reported that auto dealers’ average Return on Equity was above 30%. Most companies in competitive markets are very happy to achieve 15% ROE, and delirious if they can get 20%

      It should be noted that, whether or not the dealer model is a financial drain on OEMs, it’s a huge financial drain on aconsumers.

  • avatar

    I don’t get this.

    So they can run a service center owned by Tesla Michigan? How is this different than what any other auto company can do?

    “sell cars to Michigan customers as long as the sales contract indicates the sale took place in a state other than Michigan” – What’s difference here? Couldn’t Tesla dealer in Ohio sell a car to a Michigan resident prior to this agreement?

    Or a “Tesla Michigan” dealer can be physically located in Michigan and sell to a Michigan resident so long as they hand over the keys or sign the paperwork just across the state border?

    What it actually sounds like to me is that Tesla Michigan will have dealers and sell to Michigan residents and make said Michigan residents sign some piece of paper saying that they will take the car out of state for registration (of course they won’t).

    I don’t care one iota about dealer model vs direct-to-customer models. All I ask is that whatever the laws are, nobody gets an exception to them. If Tesla can sell direct-to-customer then everyone else can too. If everyone has to use the dealer model, then Tesla must as well.

    • 0 avatar

      They won’t have to title or register the car out of state. Can’t speak for all states, but Ohio won’t issue a title to a nonresident (even a business or leasing company has to have some kind of Ohio address, i.e. the lessee). Michigan requires a Michigan DL to even renew an existing registration. The “transaction” will take place on paper outside the State of Michigan. That’s all. Lot of winking going on at the Secretary of State office

  • avatar

    So…Tesla hasn’t paid off Michigan legislators sufficiently to let them into the state. Got it. Give it time, though…

    Sorry, I don’t care that the state has the right to do this – their policy is ridiculous, clearly bought and paid for, and succeeds only in screwing over consumers. What nonsense.

    • 0 avatar

      on the other hand, why is it only Tesla deserves an exception?

      • 0 avatar

        Methinks it’s because they came to a settlement.

        If GM and Ford want to do the same, maybe they should try.

        (…I don’t think they really want to try…)

      • 0 avatar

        “on the other hand, why is it only Tesla deserves an exception?”

        Tesla never had a dealership network. The other reason is that the government shouldn’t be involved in telling a business how it should be run unless there is a good reason. The government can set standards, but forcing a particular business model on a company is going too far.

  • avatar
    SCE to AUX

    “sell cars to Michigan customers as long as the sales contract indicates the sale took place in a state other than Michigan”

    These carefully crafted words tell me that Michigan’s Tesla store will legally be an arm of another state’s Tesla store, somewhat like the way an embassy operates. So the paperwork you sign on Michigan soil might say “Tesla of Ohio” as the seller. I can’t imagine anyone has to make a special trip to make this work, or else the agreement is valueless.

    Sales tax always is calculated for the buyer’s home address, not the point of sale, and it can even vary by county within the same state. I’ve done this several times, and it’s not complicated. Dealers are equipped to handle the paperwork of neighboring states.

    • 0 avatar

      It’s an inconvenience, though, and it’s unnecessary.

      • 0 avatar

        That’s whole point though. To make life as difficult for Tesla and its potential customers and existing owners as legally possible.

        • 0 avatar

          Yep, and that’s bought and paid for by Tesla’s competitors. The losers are taxpayers in Michigan who just want to buy a Tesla the same way their neighbors buy a Chevy.

          It’s just wrong.

          Would this kind of garbage would be going on if we either publicly funded elections, or severely limited political contributions? I don’t think so. But we continue to allow our politicians to get bought. And stuff like this – and far, far worse – is the result.

          • 0 avatar

            No no no no no.

            It wasn’t the car companies who had the independent dealer franchise model codified into law, it was the dealer principals themselves. It was all just good-ol-boy local politics blown up. Owners of dealerships were often the wealthiest people in their communities, and they used their influence to curry favor with local and state legislators to get significant protection for them written into law.

            as far as I can tell the sole reason the other car companies are fighting this is because they’re basically saying “why should they get a pass while we’re stuck with it?”

  • avatar

    I see Teslas here on the west side of Michigan… but the lack of a dealership and/or nearby service center has stopped me from looking at their cars. Of course I would only want to buy the most stripped down Model 3, even though I’m not a huge fan of the duck face.

    • 0 avatar

      @divide: “even though I’m not a huge fan of the duck face.”

      The aftermarket has a solution. I’m thinking about it myself.

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