Tesla Takes Fight on Sales Ban to Home Turf of Detroit Three

  • Executive cites frustration with Michigan in Detroit speech
  • Electric-car maker filed federal lawsuit to allow direct sales

Tesla Motors Inc., which last week sued the State of Michigan for the right to sell cars without using franchised dealers, said it will keep battling in court to open company-owned stores in any state that bans the practice.

Tesla will continue to pursue applications in states such as Virginia to sell vehicles however it sees fit, Diarmuid O’Connell, the electric-car maker’s vice president of business development, said after a speech at a mobility conference held outside Detroit. In a federal lawsuit, Tesla said it was stymied in Michigan because of the sway traditional automakers and dealers hold over the state’s legislature.

“We filed the federal suit out of frustration that we couldn’t get a hearing in the state,” O’Connell said during his speech. “The governor said he would help us. That turned out to be a wonderful and empty gesture.”

Michigan is home to the headquarters of General Motors Co., Ford Motor Co. and major operations for Fiat Chrysler Automobiles NV. GM has played a role in fighting Tesla in states like Virginia and Indiana to stop it from selling cars without opening franchised dealerships. Prohibitions against Tesla’s company-owned retail stores are happening because dealers have strong lobby efforts in state capitols around the country, O’Connell said.

Michigan Governor Rick Snyder “remains open-minded and willing to work with Tesla on this issue while upholding state law,” Josh Paciorek, his deputy press secretary, said in an e-mailed statement.

Application Denied

Tesla filed two applications in Michigan, one to sell and one to repair its cars, in November 2015, according to the lawsuit filed in Grand Rapids. After nine months of discussions with state officials, the Michigan Department of State scheduled a hearing indicating an intent to deny the dealer license, the lawsuit states. An administrative officer sustained the denial on Sept. 12, “in effect ruling that a vehicle manufacturer cannot sell new vehicles directly to consumers,” the suit said.

States like Michigan that fight its retail strategy will go to the back of the line for factory locations as sales grow, O’Connell said after the speech.

“We need to expand our manufacturing footprint,” O’Connell said. “A state that doesn’t allow us to engage in our core business of selling and servicing cars is a poor candidate.”

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