Tesla sues Michigan, challenges law requiring dealer sales

Tesla operates through a direct-sale model, selling its electric cars through company-owned showrooms and dealerships, TechCrunch notes.

Shares of Tesla Motors (TSLA) were sliding in early afternoon trade on Thursday after the company filed suit with the Western District Court of MI to earn the right to open a dealership in the state, Fortune reports. It seeks a court order barring the state from enforcing its ban.

Some states have approved Tesla selling directly to customers.

While Tesla has been striving to gain the regulatory approval for several years, the battle came to a halt earlier this year when MI asked the company to provide proof of operating via a third-party dealer, which is completely against Tesla's sales and service approach.

In other states, Tesla sells its vehicles directly to consumers, but that is illegal under MI law, which requires a dealer to have a contract with an auto manufacturer.

Tesla, which is based in Palo Alto, said it prefers that legislation be enacted to lift the ban on direct sales but was told by legislators in June that no hearing will be held.

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The California automaker named Michigan Gov. Rick Snyder, Secretary of State Ruth Johnson and Attorney General Bill Schuette in a lawsuit filed in federal court. The Michigan Automobile Dealers Association didn't immediately return a call.

"The lawsuit was filed less than a week after Johnson rejected Tesla's application for dealership and service facilities in Grand Rapids", the Free Press said. It has not yet decided on Tesla's bid to register a vehicle fix facility in the state, which is home to the Detroit Three carmakers. Tesla, unlike other automakers, sells its cars directly to consumers through company-owned stores in other states.

To buy a new Tesla now, Michiganders must go to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis, where the automaker operates its galleries. General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV have operated under franchise laws that have been on the books for decades and were originally put in place to prevent manufacturers from opening stores that would compete directly with mom-and-pop dealers.

The automaker sues the state runners after the final verdict on September 15 that MI law states the automakers are forbidden to conduct the direct sales model. "Rather than try to compete with Tesla, some of these well-connected players have tried to block Tesla from local markets altogether by lobbying state legislatures for protectionist legislation". So you're not going to be here.


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