Rick Snyder Bill Pugliano, Getty Images

Michigan Joins the Fight Against Tesla

The law effectively bans Tesla, which uses a direct-to-consumer business model, from selling vehicles in the state.

Michigan Gov. Rick Snyder on Tuesday signed legislation that prohibits Tesla (IW 500/384) (TSLA) from selling vehicles directly to consumers in the state known as the U.S. automotive powerhouse.

The law, which was passed overwhelmingly earlier this month by Michigan legislators, doesn’t call out Tesla by name but does require that automakers use the state’s existing network of franchise dealers.

This move aligns Michigan with other states like Arizona and Texas that have effectively banned Tesla, which uses a direct-to-consumer business model, from selling vehicles in the state.

Tesla has called the measure a “raw deal” and one that tries to “force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers.”

“In so doing, they create an effective prohibition against Tesla opening a store in Michigan,” the Tesla team wrote in a blog post.

The law also keeps the electric car maker from operating galleries – the company’s informational stores – in the state, Tesla said.

Snyder stressed that the effort only clarifies an existing Michigan law.

“This bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan – because this is already prohibited under Michigan law,” he said in a letter to lawmakers.

“This change would merely allow manufacturers who do not have their own franchised dealers to sell through another manufacturer’s network of franchised dealers. They will be required, just as they are now, to sell through a franchised dealer, and not directly to consumers.”

Robert Atkinson, president of the non-profit Information Technology and Innovation Foundation, called the law “pure protectionism.”

“It is designed to protect traditional automakers by preventing Tesla from effectively expanding its business and increasing market share,” Atkinson said. “It also harms Michigan consumers by restricting choice and reducing access to novel alternative fuel technologies.”

Atkinson said governments should be promoting innovation and helping to foster the creation of new business models.

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