Tesla lobbies for inroads in Michigan

Melissa Burden
The Detroit News

Acme — Tesla Motors Inc. plans to “fight hard” to land a deal with state politicians and dealers so it can sell vehicles and service cars in Michigan.

“We’ve got a rabid fan base here who are buying cars everywhere else in the U.S. and bringing them here, having them drop shipped here,” Diarmuid O’Connell, vice president of business development for Tesla, told reporters at a meeting of industry insiders at the Grand Traverse Resort Tuesday.

“We can’t even have service here, which is incredible. It’s just incredible that in a free market of this sort and in a car culture like Michigan that we’re being held at a distance.”

The Palo Alto, California-based maker of electric luxury vehicles, was blocked in those when Gov. Rick Snyder in October signed a bill banning automakers from selling vehicles directly to customers in Michigan. That closed a loophole Tesla had used in other states to operate company-owned retail stores, bypassing the traditional dealership structure. The stores closest to Michigan are in Chicago, Cleveland and Columbus.

The previous state law prohibited an automaker from selling new vehicles directly to retail customers except through its franchised dealers. The revised law removed the word “its,” which Tesla officials called a last-minute strike at their company, which doesn’t have dealerships.

O’Connell said he is having conversations with stakeholders during his trip to Michigan.

Meetings with dealers, automakers, legislators and officials from Snyder’s office have been ongoing, Jim Chen, Tesla’s vice president of regulatory affairs said Tuesday.

“We have been meeting throughout the entire year,” said Chen, who said he was in Michigan a week ago. “It’s something we’re continuing to work on.”

Chen said Tesla wants to invest in Michigan. He said the company works with more than 50 Michigan-based suppliers.

“We’re trying to work something out with everyone,” Chen said. “At the end of the day, legislation is all about compromise.”

But O’Connell recognizes there are dealers and even other car companies that see Tesla as a threat.

“There are incumbent interests that would love to see us slow down,” he said at the Center for Automotive Research’s annual Management Briefing Seminars Tuesday. “GM has entered into a lot of the state legislative fights that we’ve had to basically cap or prevent us from operating.”

General Motors said in a statement that it welcomes all competitors, but that “we just think everybody should have play by the same rules.”

5-10 stores sought

Tesla has a few proposals it is considering for Michigan, O’Connell said.

“A solution that has worked in other states, where there has been a concern amongst the dealers or GM that we were going to change the world by selling directly, is that we get allowance to open a certain number of stores,” O’Connell said.

O’Connell said Tesla likely would be happy with more than five but fewer than 10 stores in Michigan.

Snyder last year urged the Legislature to discuss during the 2015-16 session whether the automotive sales model in Michigan is working. The Federal Trade Commission urged the Michigan Legislature this year to reconsider its ban on direct sales by Tesla and other automakers. Three senior FTC staff members said in the letter that the ban amounts to “protectionism” for dealers, and is “likely harming both competition and consumers.”

3rd-quarter plans

Chen said Tuesday that it sells cars in about 20-plus states. Five states — Arizona, Texas, Michigan, Connecticut and West Virginia — ban direct sales.

The carmaker has about 300 customers in Michigan; Previous Polk registration data Tesla provided said it had more than 270 vehicles registered in Michigan, but the company thinks more are here now.

Tesla is expected to launch the Model X SUV during the third quarter, and the Model 3 is on track for 2017. The company has said it expects to deliver about 55,000 Model S and Model X vehicles this year. Additional sales markets such as Michigan could help it get to that goal.

Tesla is set to report its second quarter earnings Wednesday, after the stock market closes for the day at 4 p.m. The automaker, which has been a Wall Street darling, closed at $266.28 per share Tuesday, up $6.29.

Recently, Tesla opened a supercharging station in Grand Rapids and it also has one in St. Joseph. It plans to open one in Ann Arbor soon and in Cadillac by the end of year, Chen said. The carmaker has 209 supercharging stations in the U.S. and 478 globally.

O’Connell said he is open to working with other automakers and having business discussions on others using Tesla’s supercharging stations in the future.

“We’re interested in advancing the technology, getting the cars out on the road,” he said.