House strips vehicle sales bill of Tesla provisions before sending to Senate

Beth LeBlanc
The Detroit News

Correction: An earlier version of this story initially included information from an older version of the bill passed Wednesday. Instead of enshrining in law Michigan's January settlement agreement with Tesla, the bill appears to counteract elements of the settlement.

House lawmakers on Wednesday struck key language from a bill that would have enshrined a carveout for Tesla in Michigan's ban on direct vehicle sales. 

Instead, lawmakers passed a bill 65-39 that appears to counteract Tesla's January settlement with the state by banning vehicle manufacturers from directly or indirectly owning a motor vehicle repair or service center. 

The allowance for indirectly owned motor vehicle service or repair facilities in Michigan was a key provision of the state's January agreement with California-based electric automaker Tesla over Michigan direct vehicle sales ban. 

The legislation, which still needs Senate approval and the governor's signature, would appear to supercede the January settlement between Tesla and Michigan's Democratic attorney general and secretary of state. 

The bill specifically would ban the direct or indirect ownership of a motor vehicle service and repair facility, with the exception of a facility to repair manufacturer-owned vehicles or fleet vehicles. 

House bill 6233 initially included language that enshrined in law the terms of an agreement between the state and electric car company Tesla Inc., but that language was struck in an amendment approved by the state House Wednesday evening shortly before the chamber voted.

It is not clear why the Tesla-specific language and other provisions of the legislation were excluded. 

Bill sponsor Rep. Jason Sheppard, R-Temperance, did not return requests for comment.

In 2016, Tesla challenged the state's ban on direct sales, which requires companies to sell cars through franchises — as Detroit's automakers do — instead of directly to consumers. 

A Tesla store in Cherry Creek Mall in Denver.

In January, the state settled with Tesla and allowed it to sell cars to Michigan customers if the sale, on paper, took place outside the state. It allowed Tesla Michigan, a subsidiary, to own and operate service and repair facilities in the state — a huge win for the company after its Michigan customers had been forced to travel outstate for service.

House Minority Leader Christine Greig, D-Farmington Hills, attempted to offer a substitute to House Bill 6233 on the floor Wednesday that was adopted before it was voted on a second time and failed. 

Greig said her substitute would offer a limited number of licenses that could be used by electric car companies. She said the current legislation did nothing to solve the underlying issues with the state law that prompted the litigation.

"It does not solve the problem that we have with the lawsuit with Tesla," Greig said. "It opens up the state to additional litigation, which costs taxpayer dollars. And it also is a very anti-market approach to vehicle sales."

Tesla had been barred from direct sales or vehicle service in Michigan directly to customers since October 2014, when Republican former Gov. Rick Snyder signed a bill into law that he said "clarifies and strengthens” an existing statute that prohibited direct sales of new cars to protect dealers.

General Motors Co. and Ford Motor Co. supported the so-called “anti-Tesla” bill that was initiated by the Michigan Automobile Dealers Association, legislation that state officials insisted was not anti-Tesla.

Prior to the January agreement allowing Tesla to make direct sales to Michigan customers, Tesla owners had to go to Cleveland, Columbus, Toledo or Chicago to purchase or receive service. And the company's galleries in places like Troy's Somerset Collection were barred from assisting in any sales, test drives, price discussions or paperwork.