Michigan officials have officially rejected Tesla Motors’ bid to open retail stores, once again sending a message to the upstart automaker that it is not welcome in the state.
Any Michigander who wants to buy a Model S or Model X will have to drive to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis where the Palo Alto-based Tesla operates galleries, mostly in upscale shopping malls.
While the nation’s Big 3 automakers are all based in Michigan, Tesla, with its long-range electric cars, has become one of the most watched automakers in decades because of its success from its base in California’s Silicon Valley.
Tesla wants to sell its high-end battery-powered cars directly to consumers without a franchised dealer, much like Apple sells its products. It submitted an application for a dealership license in the fall of 2015 with a plan to open a retail gallery in Grand Rapids, Mich.
In a Sept. 7 hearing, a panel of administrative law examiners heard arguments. On Thursday they issued their findings rejecting the license for Tesla.
“The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles,” said Gisgie Gendreau, spokeswoman for Secretary of State Ruth Johnson, in a statement. “Tesla has told the department it does not have one, and cannot comply with that requirement.”
The Model S and Model X are priced between $75,000 and $115,000, but late next year Tesla intends to launch a new Model 3 that will be priced about $30,000 after federal tax credits. The company has received about 400,000 deposits of $1,000 each from consumers who want a Model 3.
The Michigan Freedom to Buy Coalition, which was formed earlier this year, has been offering rides to journalists and community leaders in Tesla vehicles to raise public support for direct sales shops that would bypass dealer franchise laws.
Earlier this year, State Rep. Aaron Miller, R-Sturgis, introduced a bill that would lift the direct-sales restriction.
“We’d like to raise awareness and hopefully something can be done legislatively,” Jeff Timmer, a spokesman for the group, said Thursday. “They see the car, they understand it was built in America.”
Dealers, through their lobbying arm, the Michigan Automobile Dealers Association, said they support the existing law, and make a case that dealerships benefit consumers by limiting harmful monopolistic practices and increasing competition among car sellers.
Tesla’s website lists about 90 retail sites in 24 states and the District of Columbia, and 25 of those are in California.
In October 2014, Michigan Gov. Rick Snyder signed a law that bars Tesla from selling cars directly to consumers by requiring all automakers to sell through a network of franchised dealers.
Tesla, in a statement, said after the law took effect, “As part of the process of challenging the legality of that law, Tesla applied for a license in Michigan. Tesla will continue to take steps to defend the rights of Michigan consumers.”
In his opinion, the administrative law examiners wrote that Jonathan Chang, Tesla deputy general counsel, never provided a contract showing that it was a factory representative or distributor to a franchised dealer.