Tesla’s Michigan dealership license at a standstill, considers suing the state

Interior of the Cleveland store as line filters in.

Tesla first applied for a car dealership and repair license in Michigan over 6 months ago. The automaker reapplied again 3 months ago and the license still hasn’t been approved and the application is at a standstill at the Secretary of State’s Office.

The company appears to be at an impasse, Detroit News reports:

“In the most recent development, the Secretary of State’s Office put the automaker’s applications for dealership and service facilities at a standstill by requesting two weeks ago that the applicant submit proof it is a franchised dealer. If it doesn’t, the state will not rule on Tesla’s applications.”

The word “franchise” is the problem here. The application was made by the company and the state is aware of it. While a new bill that would allow Tesla to own a car dealership in the state has been proposed, the company didn’t have a good experience with the legislative process in Michigan before and it is now considering to bring the matter to the courts.

Tesla General Counsel Todd Maron said this week:

“It is a very important state. Whether it’s through the Legislature or the courts, one way or another, we’re determined to do whatever we need to do in order for justice to prevail and serve our customers in Michigan.”

In October 2014, Michigan Governor Rick Snyder signed a bill, which was initiated by the Michigan Automobile Dealers Association, to “clarify” an existing law banning automakers from owning or operating car dealerships in the state, ultimately forcing them to go through a third-party franchise model.

The latest legislative effort has been proposed by Rep. Aaron Miller, R-Sturgis, in February and it would undo the law passed in 2014. His bill 5312 would allow automakers to directly sell vehicles to consumers. Miller’s proposal is purely based on a free market idea:

“We have all these stores that supply direct, I think the same should apply to autos,” he said. “I advocate for them to sell by their business model. If it’s really a bad business model, let them fail.”

Detroit News obtained documents and emails from 2014 through early 2016 and describes a “standoff between Tesla and the state”:

“The state has required Tesla to resubmit dealership and service applications as well as additional information at least four times since the company submitted its initial application in November. The state spent nearly six months reviewing the applications even though the company said from the start it wanted to directly sell to consumers.

Documents and emails show that information requested by the state has mainly been procedural, such as the company having to apply for a minimum of two dealership licenses and having all applicants submit fingerprint scans and five-year employment histories.”

After going through similar issues in other states like Connecticut, North Carolina and Utah, a recent report suggests that Tesla might be looking into bringing the issue before a federal court, instead of the state by state battles it has been fighting for a while now. Tesla’s legal team led by General Counsel Todd Maron is said to have been studying a 2013 federal appeals court ruling in New Orleans that made it legal for a monastery in Louisiana to sell monk-made coffins directly to customers without having to go through a funeral home or having a funeral director’s license.

Tesla is drawing similarities with its own business model as an automaker selling cars directly to customers without going through dealerships.

Featured Image: Interior of the Cleveland store as line filters in during Model 3 reservation day, Mach 31, 2016 – by Jon Jivan

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