Tesla files lawsuit against Michigan's ban on selling cars directly

author: Elena   

Claire Pu

By Claire Pu

Electric car giant Tesla filed a lawsuit last Thursday to sue the Michigan state government as a "last resort" after years of battle to sell cars directly to consumers. This suit will involve dealership networks and whether the traditional monopoly practices should embrace new changes.

Less than a week ago, Michigan Secretary of State Ruth Johnson rejected Tesla's application for dealership and service facilities. As issue is proof that Tesla is a franchised dealer. Tesla, unlike other automakers, sells its cars directly to consumers through company-owned stores in other states.

"The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles," Johnson said in a statement.

It was a final decision in a process that started back in Oct, 2014, when a last-minute wording change in state franchise law led the rejection of electric-car giant's ability to sell cars directly to users.

The change ensured that the sole legal way to buy cars in Michigan is to do so from a franchised third-party dealer. Therefore when Tesla submitted an application for a dealership license in fall 2015 with a plan to open a retail gallery in Grand Rapids, Michigan, it was then denied.

Last Thursday Tesla Motors sued the state of Michigan, challenging its franchise law as unconstitutional, ac-cording to The Detroit News.

"Tesla Motors brings this lawsuit to vindicate its rights under the United States constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla owned facilities in the State of Michigan," Tesla says in its complaint.

"Particularly egregious protectionist legislation was passed by the Michigan Legislature in 2014, the Michigan Legislature quietly enacted an outright ban on Tesla's direct-to-consumer sales model, effectively giving fran-chised dealers a state-sponsored monopoly on car sales within Michigan."

Some lawmakers have urged the state to change the legislation, saying that people should be able to freely sell goods, just like Apple can sell its iPhone product in online store. They support Tesla's position that it has a right to sell vehicles in Michigan without interference from dealerships. A bill was introduced in the state legislature that might lift the direct-selling ban on Tesla.

However, the Michigan Automobile Dealers Association, which represents dealers statewide, counters that dealerships benefit consumers.

"For consumers, new-car franchises create intra-brand competition that lowers prices; generate extra account-ability for consumers in warranty and safety recall situations; and provide enormous local economic benefits, from well-paying jobs to billions in local taxes," according to the National Automobile Dealers Association.

Tesla currently operates stores in 23 states and the District of Columbia. To buy a Tesla now, Michiganders have to drive to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis, where the automaker operates gal-leries, mostly in high-end shopping malls.

Sources from: USAToday, Greencarreports

Elena