LANSING, Mich. — Gov. Rick Snyder on Tuesday signed a law clarifying that automakers can only sell through franchised dealers, a move electric car maker Tesla Motors said puts Michigan in the “rare minority” of states to ban stores where consumers can buy vehicles directly from manufacturers.
Snyder, who had been under pressure from Tesla to veto the bill backed by mainline auto companies and their dealerships, said it was approved 38-0 by the Senate and 106-1 in the House.
“The bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan,” the Republican governor said in a letter to lawmakers. “That is because this is already prohibited under Michigan law.”
The previous law prohibited an automaker from selling new vehicles directly to retail customers except through its franchised dealers. The new law removes the word “its,” which Tesla officials said was a last-minute, monopolistic strike at their upstart company that has no traditional dealerships.
“Why would they make a change if it had no legal import?” Diarmuid O’Connell, Tesla’s vice president for business development, said of modifications initiated in the Senate on Oct. 1. The legislation began as an effort to bar automakers from interfering with dealers’ document preparation fees.
O’Connell said while a dealership system has merits and relieves automakers of carrying inventory and helps them expand territory quickly, Palo Alto-based Tesla is still in the early stages.
“We are selling product in a certain segment, not the high-volume segment,” said O’Connell, who warned that another change to the law will make it harder for Tesla to even open non-sales galleries in the state.
Snyder, citing a legal analysis from GOP Attorney General Bill Schuette’s office, contended that the new law merely appears to let manufacturers without their own franchised dealers sell through another carmaker’s network of dealers. He urged the Legislature, however, to engage in a “healthy, open” discussion in the 2015-16 session about whether the business model in Michigan is working.
“We should always be willing to re-examine our business and regulatory practices with an eye toward improving the customer experience for our citizens and doing things in a more efficient and less costly fashion,” Snyder wrote.
Palo Alto-based Tesla has said it expects to be able to build 100,000 vehicles annually by the end of 2015, up from 35,000 this year. Detroit-based General Motors and the Detroit Regional Chamber of Commerce said the law will ensure all automakers follow the same rules to operate in Michigan.
AutoTrader.com senior analyst Michelle Krebs said the issue is broader than Tesla.
“Automakers and dealers worry that foreign automakers will enter the U.S. — perhaps from China — and set up operations that skirt franchise laws by having factory-owned stores. Existing automakers and their dealers fear that would put them at a competitive disadvantage and open the flood gates to even more such operations,” she said in a statement.
