Michigan denies Tesla dealership license

Michael Wayland
The Detroit News

State officials have officially denied Tesla Motors Inc. a dealership license to sell its all-electric vehicles in Michigan.

Tesla CEO Elon Musk speaks during an event to launch the new Tesla Model X Crossover SUV on September 29, 2015 in Fremont, California.

The license was denied because the company’s business model of selling its vehicles directly to consumers is illegal under Michigan law, according to a final decision and order released Thursday by state officials. The state requires a dealer to have a contract with an auto manufacturer — not act as both.

The final ruling — signed Monday by hearing officer Jay Thomas Todd — follows a Sept. 7 hearing regarding Michigan’s intention to deny the license to the Palo Alto, California-based electric vehicle manufacturer. Attorney John J. Bursch, a former Michigan solicitor general, represented the company at the hearing, according to the state.

“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 Michigan Department of State Communications Director Gisgie Dávila Gendreau in an email. “Tesla has told the department it does not have one, and cannot comply with that requirement.”

The state will continue to review a used car license for Tesla.

Tesla has been in a multiyear battle to sell its vehicles directly to consumers in Michigan. The fight came to a standstill earlier this year when the state asked Tesla to supply proof it operates through a franchised dealer, which it does not.

Under the Administrative Procedure Act, Tesla may appeal the decision to Circuit Court.

A Tesla spokeswoman said the company "will continue to take steps to defend the rights of Michigan consumers," however declined to provide specifics on its future plans in the state.

"At the urging of local car dealers and GM, Michigan law was changed two years ago to prevent Michigan consumers from buying cars from a Tesla store within the state," said the spokeswoman in a Thursday night email to The News. "As part of the process of challenging the legality of that law, Tesla applied for a license in Michigan."

Tesla general counsel Todd Maron told The Detroit News in May that if the application was denied, the company would either take the state to court or attempt to change the state’s laws through legislation.

Rep. Aaron Miller, R-Sturgis, introduced House Bill 5312 in February that would allow Tesla and other companies to directly sell vehicles to consumers, however it has sat stagnant.

“The discussion’s not over but for this session I think we’ve reached that point of no progress,” Miller told The News on Thursday. “ I think the clock is going to run out on us.”

The bill will expire at the end of the year. Miller said he continues to disagree with the law, but wouldn’t commit to reintroducing the legislation if it expires.

“I still believe in the issue but I haven’t thought about next year yet,” Miller said. “We’ll wait and see on that.”

Gov. Rick Snyder signed a bill banning automakers from selling vehicles directly to customers in October 2014. The legislation had been approved overwhelmingly by both houses and was backed by Michigan’s new-car dealership lobby. The law closed a loophole that Tesla has used in other states to maintain company-owned retail stores and bypass the dealership route.

The governor said then that the law “clarifies and strengthens” an existing long-standing law that prohibited direct sales of new cars in Michigan. Previous state law prohibited automakers from selling new vehicles directly to retail customers except through its franchised dealers; the revised law removed the word “its,” which Tesla executives said was a last-minute strike at their company.

Before the amendment, Tesla believed it had a right to open a dealership in the state. It argued that the earlier law involved car manufacturers with franchised dealers, which Tesla does not have.

Tesla previously said it applied for the Michigan dealership license to confirm the “anti-consumer” law.

General Motors Co. and Ford Motor Co. supported the so-called “anti-Tesla” bill that was initiated by the Michigan Automobile Dealers Association in 2014.

Some states — including New Jersey, New York, Ohio and Pennsylvania — have passed legislation that clarifies Tesla’s ability to operate, but at the same time limits the number of dealer licenses or stores Tesla can operate.

In other states, including Texas and Virginia, Tesla has worked with regulators to open “galleries,” or stores, without dealership licenses. Buyers can get information and see or test-drive Tesla vehicles but not purchase them.

Those in Michigan wanting to purchase a Tesla may do so through the company’s website, and either pick it up at a certified Tesla store or have it delivered. The closest stores to Detroit are Cleveland and Columbus.


(313) 222-2504

Twitter: @MikeWayland

Staff writer Melissa Burden contributed.