Tesla Sues Michigan For Right to Sell Direct to Consumers

Michigan says Tesla needs franchised dealerships in the state to sell its electric cars.

Posted in News

— Most lawsuits concerning automakers are filed against the automaker, but this time Tesla is the company filing suit, and doing it against an entire state. Tesla is going after Michigan and its regulations that prevent the automaker from selling its cars in the state.

Tesla has been blocked from selling its vehicles directly to consumers in Michigan because of the alleged hold that automakers and dealers have over lawmakers. Michigan is the home of Ford and General Motors, two companies that aren't excited about the prospect of an automaker skipping the middleman (dealers) for sales to consumers.

Tesla has faced other roadblocks to its sales methods in Connecticut, Texas and Utah, all states where consumers have to cross into another state to buy a new Tesla.

Tesla says it tried to work its way through legislative hoops but Michigan legislators wouldn't even hold a hearing about the subject. Tesla says one legislator admitted, “The Michigan dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here.’’

The lawsuit alleges that even requesting to open a repair facility in Michigan has been a nightmare as the automaker has so far waited nine months for a response about the request.

Tesla says its sales model is preferred because the cars are different than standard gas-powered vehicles and consumers should be taught directly by employees of the automaker about how those cars function.

Instead of a simple dealership to buy a car or have it repaired, Tesla wants its facilities to be all-in-one areas to educate consumers about the technology.

The automaker also points out the huge benefit of no inventory as Tesla customers typically customize their cars, then wait for those cars to arrive. Compare that to a large dealership where hundreds of cars sit on the lot waiting to be sold.

Furthermore, dealers increase the price of cars to make a profit above what the manufacturer charged, so Tesla customers won't worry about getting ripped off by a dealer.

Considering it's a federal lawsuit, Tesla could argue that Michigan's law violates other commerce laws, something that if argued successfully could have an impact in other states that block the automaker.

The automaker does have the Federal Trade Commission on its side as the FTC said in 2015 that Michigan should allow the automaker to sell direct to the public.

The Tesla / Michigan lawsuit was filed in the U.S. District Court of the Western District of Michigan.

Missouri Judge Rules Against Tesla

Tesla is also looking at trouble in Missouri after a circuit judge ruled Tesla's license to sell vehicles in the state should not be renewed. The ruling came after the Missouri Department of Revenue was sued by the Missouri Auto Dealers Association alleging the automaker is breaking the law by not selling through licensed franchised dealers.

The judge said selling directly to consumers violates the law, but the revenue department argues the law doesn't require a franchise agreement with a separate entity.

Tesla says the lawsuit is additional proof how auto manufacturers and dealers aren't concerned with helping consumers and that a dealership is nothing more than a middleman in the sales process.

However, the judge says Tesla as a single entity may not manufacture cars for sale in Missouri and possess a Missouri new motor vehicle dealer license at the same time.

Tesla says it will research all legal options to continue to sell its vehicles to Missouri consumers.