Michigan, the home of the Motor City, does not allow the direct sale of automobiles without the use of a franchised dealer.
For most automakers, this is no problem. For a manufacturer like Tesla, who embraces a direct sales model, it’s a bit of a “raw deal.”
Let’s explain the dealer/automaker relationship first. Dealership networks are technically separate entities from the manufacturers themselves, thus creating a middleman between company and consumer.
That dynamic adds costs, which Tesla avoids by retailing directly. Unfortunately, this process is illegal in 26 states including Texas, New Jersey, Virginia, and Michigan.
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On Tuesday, Michigan Governor Rick Snyder reaffirmed his state’s position by signing House Bill 5606 (now known as Public Act 354) into law. The law now prevents automakers from regulating what fees its dealerships can charge to their customers.
Tesla rallied against the issue, claiming the bill’s verbiage would lock the company out of the state.
“By striking a single, but critical, word from MCLA 445.1574(14)(1)(i), the law governing franchise relations in Michigan, the dealers seek to force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers,” the brand said in a release. “In so doing, they create an effective prohibition against Tesla opening a store in Michigan.”
Snyder was quick to point out that although the bill does clarify the legislation’s implications, it doesn’t drastically change the state’s stance.
“Based on our research, [HB 5606] doesn’t change current law at all,” the governor said in a video statement. “It merely strengthens existing language, and it had very strong legislative support.”
Snyder is correct. In the state Senate, the bill was approved 38-0. In the House of Representatives, it passed 106-1.
