Michigan Gov. Rick Snyder signed a bill that effectively bars Tesla Motors Inc.’s direct-sales model in the state.
While Tesla’s model was already prohibited in Michigan, the wording of its franchise law left an opening that the automaker could potentially exploit it as it has in Massachusetts, where dealers unsuccessfully tried to stop it from operating a store there. That potential loophole is now closed.
“It wasn’t the Tesla bill,” Snyder told reporters after he signed the legislation. “It was a reaffirmation of strengthening existing Michigan law.”
Snyder said in a letter to lawmakers that an open discussion should be had on whether the current retail model should be changed. He urged the legislators to make this discussion a top priority in their next session.
“We should always be willing to re-examine 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,” Snyder wrote in the letter.
There was no immediate comment from Tesla, but Daniel Crane, a University of Michigan law professor who specializes in anti-trust laws and believes in direct distribution, said in a statement that the signing of the bill was an “embarrassment.”
“When no one was looking, the car dealers slipped language into the bill that would strengthen their case against Tesla,” Crane said. “The dealers denied it had anything to do with Tesla. The Governor said this morning that the bill doesn’t ‘fundamentally change the law’ but that it ‘strengthened the language.’
“Which is it, Governor? Does the law change anything or not? If it doesn’t, why did the car dealers want the changes? Why are you signing legislation that doesn’t change anything? We’ve passed the silly hour — now we’re living in la-la land.”
In the days leading up to the decision on H.B. 5606, Tesla and CEO Elon Musk turned to social media to rally support. In addition, several Tesla suppliers in Michigan sent letters to Snyder urging him not to sign the bill.
The electric-vehicle manufacturer contested a last-minute amendment to the bill that it said would cement the “broader retail monopoly” of dealerships. In a blog titled “A Raw Deal in Michigan” posted last week, Tesla says Republican state Sen. Joe Hune added new language to the bill using a method that stopped lawmakers and the public from knowing what was going on or allowing debate.
On the flipside, the Michigan Automobile Dealers Association has maintained that Tesla is welcome to do business in the state.
“It’s the way the system works. I don’t think anything was sneaky,” Terry Burns, executive vice president of MADA, said last week. “The process is the process.”
General Motors said that it supports the legislation because it helps ensure that all auto manufacturers follow the same rules to operate in the state.