Want a Tesla? Start Voting
In a letter explaining his decision to sign a law banning Tesla's direct-sales model from his state, Michigan Governor Rick Snyder made it clear that he has nothing against the California-based electric-vehicle maker. "It appears that there has been a fair amount of misunderstanding over one aspect of this legislation," Snyder wrote. "This bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan. That is because this is already prohibited under Michigan law."
If there's any misunderstanding of Snyder's position, it's because he has staked out some highly tenuous middle ground. And no wonder: Snyder is stuck in some swirling political tides, with little to gain from taking either side of the debate over the future of auto retail.
In most states, the opposition to Tesla's direct-sales retail model is spearheaded by the new-car dealer lobby, a powerful force in its own right. Michigan's automakers -- the state's biggest economic drivers -- have jumped on the dogpile. General Motors, the largest of these companies, came out in favor of the new bill just hours before Snyder signed it, arguing that it would "help ensure that all automotive manufacturers follow the same rules."
Snyder clearly faces huge pressure from his state's automakers, but the political implications are not that simple. Tesla's battle against the franchise dealership system has attracted the interest of various free-market thinkers, making the company something of a surprising cause célèbre. With the United Autombile Workers union organizing against Snyder for his passage of Michigan's new "right to work" law, Snyder can't afford to alienate his free-market base by getting tough on Tesla -- especially at the bidding of GM, whose massive government bailout makes it a less-than-ideal champion of the even playing field.
But the controversy over direct sales isn't nuanced enough to allow Snyder any real middle ground on policy, leaving him only rhetorical battles to win. "It wasn't the Tesla bill," Snyder told reporters. "It was a reaffirmation of strengthening existing Michigan law." But although he is in favor of reaffirming Michigan's dealer-franchise law, Snyder was deliberately ambiguous in his letter about franchise law more broadly, arguing:
A healthy, open discussion can and should be had over whether the current business model in Michigan should be changed. The discussion should consider, first and foremost, what is best for Michigan consumers, for expanding economic activity, and for innovation in our state. We should always be willing to reexamine our business and regulatory practices with an eye toward improving the customer experience for our citizens and doing things in a more efficient and less costly fashion. I urge the Legislature to engage in this discussion and to make it a top priority in its next session.
But as University of Michigan Law School professor Daniel Crane has pointed out, this is the same legislature that sneaked the anti-direct-sales language into an unrelated bill, passing it almost unanimously and without debate. The idea that this body will take Snyder up on his offer to re-examine the law it just reaffirmed and have a public discussion about breaking down the franchise monopoly is laughable.
Snyder's pro-consumer rhetoric is at odds with his closing of the loophole that allowed Tesla to begin direct sales in Massachussetts, proving that consumers face huge political obstacles in getting the new business models they crave. Like so many innovations, from alternative energy to autonomous cars, Tesla's direct-sales model will not simply win out because consumers demand it. Rather, consumers must move beyond voting with their pocketbooks and push governments to serve them, not the interests of established automakers. Though consumers wield immense power in choosing which cars to buy, establishing new rules requires old-fashioned political engagement. As Snyder's cynical move proves, consumers must organize to protect their goals or risk losing automobiles' bright future to the automakers that stubbornly embrace the status quo.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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