Tesla Motors Vs State of Michigan: Tesla Pulls in Allies From Familiar and Unusual Places, Applies For Class A Dealer License

If you were one of the many folks to visit the 2016 North American Auto Show in Detroit, Michigan earlier this year, you’d have seen plenty of automakers working hard to promote their cars in the place many associate with being the heart of the U.S. auto industry.

Tesla Motors, the Californian electric automaker keen to disrupt the status quo in Detroit and the country’s fourth largest automaker, was not. And while Tesla’s official reason for not being in Detroit was that it didn’t have a new model to promote ahead of the Model 3’s planned March debut, many in the automotive world posited that Tesla’s absence from Detroit was because of the pro-dealership auto franchise law that prevents it from selling cars directly to customers within the state.

Tesla isn't giving up on its goal of selling direct to customers in MIchigan

Tesla isn’t giving up on its goal of selling direct to customers in MIchigan

That’s because Michigan, like twenty or so other states in the U.S., has an auto dealer franchise law that requires automakers to sell their cars to customers via licensed, independent franchised auto dealerships, not direct to customers through company-owned stores (as Tesla prefers to do). As with other states in the union with pro auto dealer legislation, Tesla has been working hard to get the statue changed, lobbying lawmakers and campaigning hard for its right to sell direct to customers. At the same time, pro-auto dealer legislators have been tightening up the law to prevent Tesla from getting anywhere near close to owning and operating its own store legally within the state.

Unlike other states, where Tesla was able to change legislation in its favour, Michigan’s legislators have been a tough nut to crack. Undeterred, the Californian automaker now appears to have changed tactics, applying for the standard “Class A” auto dealer license, the very same type of license that franchised auto dealers must have to trade in the state.

Tesla isn't about to open a franchised dealership: it's just testing the rules.

Tesla isn’t about to open a franchised dealership: it’s just testing the rules.

That’s according to The Detroit News, which reported earlier today that Tesla applied for a “Class A” auto dealership license to sell new and used cars in the state of Michigan. The information comes courtesy of Mirsnews (subscription required) which claims that the application was made back in November 2015, and requires any successful applicant have its own service facilities attached to the dealership.

Initially, The Detroit News posited that Tesla might be looking for a way to have a former employer own and operate a Tesla franchise with the strict behavior and operation of the third-party franchised Tesla store being carefully spelled out in an official franchise agreement. At first, it seemed like a plausible enough explanation were Tesla the kind of automaker with no further tricks up its sleeve.

But as those who follow Tesla Motors will know, the Californian automaker likes to test the boundaries and rules that affect its operation. Like a clever teenager unhappy with some draconian edict from a parent, Tesla studies the rules carefully — then finds a way around the problem, turning the rule to its favor.

And that’s exactly what appears to be happening in the case of the Michigan “Class A” auto dealer license application. With a prohibitive law in front of it, Tesla says it filed the application — a decision on which is due shortly as a way to help it figure out why it can’t apply for an auto dealer license in Michigan.

“As recently amended, current Michigan law prohibits Tesla from being able to license its own sales and service operations in the state,” a Tesla spokeswoman told Transport Evolved in an email this afternoon. “Submission of the application is intended to seek the Secretary of State’s confirmation of this prohibition. Once confirmed, Tesla will review any options available to the Company to overturn this anti-consumer law.”

Tesla also has other allies in the state -- some from unusual places.

Tesla also has other allies in the state — some from unusual places.

But Tesla’s application for a “Class A” dealer license isn’t the only thing going on in Michigan right now when it comes to trying to gain the permissions Tesla needs to sell direct to customers within the state.

Alongside its application for a dealer license, Tesla has been working behind the scenes with The Freedom To Buy Coalition, a conservative organization made up of what some may assume unlikely bedfellows of an automaker usually associated with liberal pro-choice movie stars and tech entrepreneurs. Members include the Michigan Christian Coalition, a traditional right-leaning organization which helped provide much-needed votes on many traditionally conservative ballot issues over the years. As with many similar organizations, the Michigan Christian Coalition is a fan of small government and free-market economics. And that means deregulating the auto franchise industry.

“Consumers want more choices and more convenience,” said Michigan Christian Coalition Chairman Keith den Hollander in a recent public statement. ““They don’t want to be forced by the government to buy their cars from a certain type of monopoly retailer.”

Then there’s Mick Yuille, a 22-year old graduate of the University of Michigan. As Teslarati reports, the Michigan native recently launched a petition to call on the Michigan legislature to repeal its recent law banning Tesla from selling direct to customers within the state, which itself was a clarifying amendment to a preexisting 1981 law.

Under existing state law, he has until June 1, 2016 to collect more than 252,000 signatures on his petition. If successful, his proposal — to repeal the law — will go in front of lawmakers this session. If the legislature decide to act against his petition, Yuille can then see his proposal become a ballot question this November.

For now, the state of Michigan may be far from happy about Tesla’s attempts to sell direct to consumers within the state. And with the legislature’s support from the automotive giants that contribute greatly to the state’s tax coffers, we’re hardly surprised. But with a three-pronged approach, we think it’s only a matter of time before Tesla is allowed to sell to customers within the state.

And if its attempts fail, we think it will only be a matter of time before the U.S. Supreme Court hears a case on the matter.


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