Tesla direct sales ban in Michigan called 'corrupt politics at its worst'

Tesla Motors was banned from selling cars directly to buyers online in Michigan thanks to a bill signed Tuesday by state governor Rick Snyder. Michigan joins a handful of states, including Texas, where cars may only be sold through independently owned franchised dealers, a blow to Tesla's business model. 

As expected, Michigan Governor Rick Snyder yesterday signed a bill that bans Tesla Motors from selling its electric cars directly to buyers online in the state.

The bill removes one word--"its"--from existing state franchise law, which had originally been enacted to prevent franchised dealers from competition by the automakers whose cars they sell.

Tesla has no franchised dealers to protect, but dealer lobbyists across the country have had considerable success in changing these laws state by state to make Tesla's online sales model illegal.

Last week, the bill was called "corrupt politics at its worst" by Daniel Crane, a law professor at the University of Michigan, in an article in The Detroit News. The last-minute amendment, he said, represented “a real travesty.”

The governor's office issued a video press release stating that the bill "clarifies and strengthens" existing law "about direct auto sales" in the state.

The release stresses the bill's bipartisan support and the lopsided votes for it, and said that public reaction against it was based on a "misunderstanding" of its impact--because such direct sales had already been prohibited.

The Republican governor also noted that there had been a great deal of public commentary about the bill.

And he noted that he had attached a letter saying he supports and encourages "open discussion" of such laws to ensure that Michigan is viewed "as a state that's open to products and services from all over the globe" to determine "what could be the best answers for Michigan citizens."

The bill in question, HB 5606, was originally passed to regulate fees that automakers may charge dealers; its backer said it provided additional protection to franchised dealers and consumers from price gouging by carmakers.

When it passed in the Michigan House in September, it did not include the anti-Tesla modification.

The Michigan Senate passed a modified version of the bill October 2, and that version was then passed by the House the same day.

With no opportunity for public comment on that change, the bill caught Tesla by surprise.

Last week, the company Tesla published a blog post on the Michigan legislation urging supporters to contact the governor--to little avail, it appears.

An article this morning in The Detroit News this morning noted that General Motors had backed the bill and urged Governor Snyder to sign it.

The company that makes the range-extended electric Chevrolet Volt and Cadillac ELR issued a statement praising the bill, which it said would "ensure that all automotive manufacturers follow the same rules" for selling cars in Michigan.

Tesla responded with a statement blasting GM.

"What's good for GM's customers is not necessarily good for Tesla's customers," it said. "What's good for gasoline cars is not necessarily good for electric cars."

Michigan joins a handful of states, including Texas, where it may only sell cars through independently owned franchised dealers.

Customers who wish to buy Tesla electric cars must thus buy them online, have them delivered in other states, and then register them in their home state.

Many U.S. consumers remain unaware that dealer lobbyists have made it illegal for Tesla to deliver cars in their states that the company has sold online to buyers, just as consumer electronics and most other goods are sold.

The U.S. Department of Commerce has criticized those state laws; Tesla, for its part, calls them "harmful to consumers."