Michigan Closes Loophole To Block Tesla Sales

Oct 22, 2014 02:55 PM EDT | Tim Healey

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Tesla's fight to get a foothold in certain states continues in Michigan.

The company's direct sales model was already forbidden in the state, but Gov. Rick Snyder recently signed a new bill that should spell the death knell for that sales model, at least for now.

A loophole in Michigan's dealer franchise law that was allowed by wording would have been one way for Tesla to get a foothold in the state. The company used a loophole to the same effect in Massachusetts, opening a store despite resistance from traditional new-car dealers.

Unlike most new-car dealers, which are independent of the automakers and act as franchisees, Tesla owns and operates its own stores. Additionally, Tesla stores often look and feel more like shopping-mall retail stores instead of traditional dealerships.

In many states, laws dictate that automakers can't sell cars directly to consumers without doing so through a dealership. Tesla is challenging these laws so it can operate in more places, and dealerships are worried that if Tesla succeeds with its model, other automakers might follow suit.

A Michigan bill that was meant to regulate whether automakers could stop franchised dealers from charging certain fees to customers was later amended to say that manufacturers could only sell through franchised dealers. Tesla ripped the move, saying Michigan was trying to give the company a "raw deal."

The deadline to sign the bill was Tuesday.

Snyder said he encouraged legislators to hold a future discussion on whether the current sales model should be changed.

For now, though, outside observers doubt that the move had anything to do with any entities other than Tesla.

"When no one was looking, the car dealers slipped language into the bill that would strengthen their case against Tesla," Daniel Crane, a University of Michigan law professor who specializes in anti-trust laws and supports a direct-sales model, told Automotive News. "The dealers denied it had anything to do with Tesla. The Governor said this morning that the bill doesn't 'fundamentally change the law' but that it 'strengthened the language.'

"Which is it, Governor? Does the law change anything or not? If it doesn't, why did the car dealers want the changes? Why are you signing legislation that doesn't change anything? We've passed the silly hour--now we're living in la-la land."

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