A view of the 2009 Tesla Roadster plug, during a show of various company’s models of hybrid, alternative fuel and electric vehicles outside the Russell Senate Office Building, in anticipation of the April 22 celebration of Earth Day. (Photo by Scott J. Ferrell/Congressional Quarterly)
Tesla Motors lost a crucial legislative battle in Michigan on Tuesday when Republican Gov. Rick Snyder signed a bipartisan bill that would prevent the electric vehicle manufacturer from selling its cars outside of a dealership network. It is already illegal to make direct sales of any new automobile but the new law, supported by General Motors, will explicitly require manufacturers to sell through auto franchises.
Elon Musk, Tesla’s founder, has been fighting to sell his cars directly to consumers but so far more than half of all states have laws on the books similar to Michigan’s that protect their automobile franchises from direct sales competition. The California-based company has been selling its cars through galleries in 23 states, mainly along the east and west coasts. And in the states where they can’t sell directly, they take orders online.
Snyder, a governor known for his championing of entrepreneurship, drew charges of hypocrisy and took criticism from several quarters, including from supporter and Detroit billionaire, Dan Gilbert. Gilbert decried the role lobbying played in the decision and added, “To me you have to have a philosophy and you have to stick to it and you can’t let your personal circumstances compromise that.”
Adam Jonas, auto analyst with Morgan Stanley, thinks that this is just the beginning and that a broader debate on the national level is due. In a client note mentioned in the Detroit Free Press, Jonas wrote, “As Tesla grows in significance and expands its sales network, we expect more debate at the Federal level on the double standard in the application of dealer franchise laws. It’s only a matter of time before something gives. We expect that in the next two to three years, this could likely mushroom into a national issue. We believe these laws exist to support the weakest link in the network.”