Michigan Senate Bill 5606, a bill designed to give Michigan auto dealers the right to tack on additional fees when selling cars, has been officially signed into law by state Governor Rick Snyder.
In addition to paving the way for a more costly and complicated car-buying process for Michigan residents however, the bill also modified existing statue to make it illegal for automakers to sell cars directly to customers within the home state of Motor City, making Michigan the latest state in the U.S. where Tesla is effectively banned from selling its luxury plug-in cars direct to its customers.
With only one vote against it during its passage through the lower and upper houses, the bill — backed by the Michigan Automobile Dealers’ Association and General Motors — means that auto dealers in the state can now add additional fees to the purchase price of any new car they sell. But by removing one single word from the text of the bill — the possessive pronoun ‘its’ — those in the state legislator also banned any sort of direct-sales that Tesla is so famous for.
The fact that the bill’s sponsors included General Motors — the company responsible for making the Chevrolet Volt, Spark EV and Cadillac ELR — hasn’t gone unnoticed.
Unlike other automakers, Tesla sells its electric cars direct to customers online and through its Tesla Stores. Styled on the same retail model as Apple’s popular Apple Stores, Tesla Stores are usually located in high-traffic areas like shopping malls or high streets, where people can come in, browse, buy merchandise and ask about Tesla ownership without feeling the usual pressure of a more traditional automotive-dealer car buying experience.
Because Tesla stores are owned and operated by Tesla directly, it’s easier for Tesla to ensure that the quality of service being offered at each store is consistent with its own high standards. Similarly, Tesla-owned service centres allow Tesla to keep servicing and overheads low while ensuring a high level of customer service. But while Tesla-owned stores and service centres are better for Tesla and its customers, many in the traditional auto dealer industry say that Tesla’s business model risks jobs, decreases customer choice and threatens the status quo.
The flip side, argues Tesla, is that powerful auto dealer associations are now targeting it with the same level of protectionism that they were once set up to prevent.
In signing the bill yesterday, Governor Rick Snyder said in an official YouTube video released on the topic that he believed the bill’s almost unanimous support signalled that singing it into law was the correct thing to do, but acknowledged that the bill itself has proven very controversial among residents of the state who support Tesla’s direct-sales model.
“A number of people have a concern [that this bill] will limit the number of products coming into Michigan,” Snyder said. “But first of all, based on our research, it doesn’t change current law at all. It merely strengthens existing language and it had very strong legislative support…I believe it was appropriate to sign it.”
To appease those who had called on him to veto the bill however, Governor Snyder said he would be open to changing the law at a future date.
“Given all the concerns mentioned by people, I’m also putting a letter with my bill signing saying that I would be open and actually encourage discussion to make sure that Michigan is viewed as a state that’s open to products and services from all over the globe,” Governor Snyder said. “And I hope they’ll take up that concern and have a discussion in the future about what could be the best answers for Michigan’s citizens.”
Obviously, Tesla and its supporters, as well as electric car advocates around the world, are disappointed by the passing of SB 6505 into law. But given Tesla’s tenacity and its incredible expansion, not to mention the high numbers of Michigan-based suppliers it uses to supply parts for its Model S electric car, we think Tesla is far from down for the count in its ongoing battle with auto dealers and legislators.
For the meantime though, Michigan joins the growing list of U.S. states where Tesla is prohibited from owning and operating Tesla Store. Instead, Tesla will have to be content with opening Tesla Galleries in the state, where people can visit to find out information about electric cars and discuss generic plug-in car topics with staff but won’t be able to place an order for a car, discuss buying a Tesla Model S, or even arrange a service.
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