Michigan, the birth place of the three biggest and oldest auto brands is pushing back against the car brand Tesla and its direct consumer business model.
The state bill 5606 that would ban Tesla car sales in America’s largest auto manufacturing state has passed thorough both chambers of Michigan’s legislature branches and now awaits Republican Governor Rick Snyder’s decision. The law would allow Michigan to ban automakers from selling cars to the public without using a third-party franchised dealership. Franchised automobile dealers argue that laws were passed over the years to protect automakers from gaining too much economic clout.
“States are fully within their rights to protect consumers by choosing the way cars are sold and serviced,” Charles Cyrill, a spokesman for the National Automobile Dealers Association, said to Bloomberg. “Fierce competition between local dealers in any given market drives down prices both in and across brands. While if a factory owned all of its stores, it could set prices and buyers would lose virtually all bargaining power.”
Tesla’s business model has been clashing with states who insist on protecting franchised-dealers. Texas, New Jersey, Maryland, Virginia and Arizona have made strong stances against Tesla, banning the companies direct electric vehicle sales. In these states, the company is allowed by law to have galleries, but employees are prevented from discussing pricing and the reservation process. This includes any discussion on financing, leasing, or purchasing options. Also, galleries cannot offer test drives. In contrast to these anti-Tesla states, Pennsylvania reached a compromise with Tesla’s new automobile distribution in August.
Governor Snyder has until Oct. 21 to decide on the legislation.