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Tesla's Sales Model Could Get It Banned In Michigan

Michigan governor Rick Snyder is considering a bill passed by the state's legislature that would ban Tesla's direct-to-consumer sales model.
Posted at 2:14 PM, Oct 19, 2014

Electric car manufacturer Tesla is asking consumers to fight a bill passed by the Michigan legislature earlier this month.

Michigan Governor Rick Snyder has until Tuesday to sign a bill that includes an amendment many believe is directed at Tesla's business model.

CAROLYN CLIFFORD VIA WXYZ"An amendment added to the bill earlier this month bars auto companies from selling to consumers. The luxury electric brand is the only major company that operates that way."

The issue stems from Tesla's unusual sales model.

The company has galleries, usually located in shopping malls, where potential customers can learn about the cars. Vehicles are then purchased using a computer connected to the Tesla factory in California. 

And here's the rub: other automakers are prohibited from this type of direct-to-consumer sale under franchise law in almost every state, having instead to sell through licensed dealerships.

Tesla contends it is exempt from Michigan's franchised dealership law because it's never had a dealership in the state. The amendment barring direct-to-consumer sales would change that. 

In a blog post, Tesla accused auto-dealers of adding the amendment at the last minute, claiming: "The dark-of-night tactics highlight the dealers concerns that their arguments don't stand up well to public scrutiny...No consumer unaffiliated with dealers would ever want this."

A spokesperson for the Michigan Automobile Dealers Association, which had a hand in attaching the amendment, denied it was intended to block Tesla from selling in the state, telling The Detroit News"We would expect if Tesla wanted to operate in the state of Michigan that they would follow the laws."

Tesla has fought similar legal battles before.

In 2013, a similar bill was dropped by the North Carolina Houseafter winning unanimous approval in the Senate.

In Massachusetts, the company won a Supreme Judicial Court case brought by the state's Automobile Dealers Association in 2012 claiming Tesla's gallery violated state law barring car manufacturers from owning dealerships.

And the company has encountered problems in Missouri, Texas, and New Jersey as well.

A representative from Tesla said that while the company intended to enter the Michigan market, the bill "forecloses that opportunity in a very definitive way." Gov. Snyder has not said whether or not he will veto the bill. 

This video includes images from Getty Images.