Tesla Continues To Fight With Car Dealership Cartels

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Chris White Tech Reporter
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Public officials stymied Tesla Motors’ attempt to open direct-to-sales dealerships in Michigan, prompting concerns the move was meant to protect the state’s car dealership cartel.

The decision to deny the electric vehicle maker a shop in the state forces customers to travel to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis to pick up a Tesla vehicle.

Tesla has been pushing to hock its expensive electric vehicles directly to consumers without a franchised dealer. It submitted an application for a dealership license in 2015 with a plan to open a retail gallery in eastern Michigan. The application was rejected.

“The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles,” Gisgie Gendreau, spokeswoman for Michigan Secretary of State Ruth Johnson said in a press statement. “Tesla has told the department it does not have one, and cannot comply with that requirement.”

Michigan’s new law comes on the heels of similar moves by other states.

A Missouri court on Sept. 7 effectively decided Tesla can own and maintain showrooms in the state but can’t sell cars directly to consumers at those locations.

Tesla can still sell its vehicles to Missourians online, according to the terms of the judgment. While these kinds of restrictions are the norms for most states, the California-based company is still barred from selling vehicles direct to consumers at all in six states.

Five other states have banned Tesla direct sales and four have imposed nasty restrictions or have similar legislation pending.

Dealers in New Jersey, for instance, claimed that Tesla’s direct sales distribution model is a monopoly, whereas dealerships are a mandatory customer convenience for handling the predictably high volume of automotive recalls.

The dealership cartel’s argument, though, is complicated by the fact that Tesla competes against several electric vehicles on the market — i.e. the Chevy Volt, Toyota RAV4 EV, Ford Focus Electric, the Nissan Leaf, and Honda Fit EV.

Tesla has 90 retail sites in 24 states and the District of Columbia, with 25 of those located in the company’s home state, California.

The company appears un-phased by the bad news, telling reporters that it will continue to push to set up new car dealerships throughout the country.

“As part of the process of challenging the legality of that law, Tesla applied for a license in Michigan,” the company said in a statement following passage of the law. “Tesla will continue to take steps to defend the rights of Michigan consumers.”

Lawmakers are coming around on the direct-to-sales model, too. Republican Rep. Aaron Mills of Michigan introduced a bill earlier this year essentially lifting the direct-sales restriction.

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