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On Thursday, Tesla filed a lawsuit against three Michigan officials (PDF)—Secretary of State Ruth Johnson, Attorney General Bill Schuette, and Governor Rick Snyder—on the grounds that the state is violating the electric vehicle company’s right to sell Teslas directly from the manufacturer instead of through a dealer.
Section 445.1574 of Michigan’s code prohibits any auto manufacturer from being able to “Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency.”
Tesla’s complaint claims that this law violates “the Due Process, Equal Protection, and Commerce Clauses of the Constitution as applied to Tesla, by prohibiting Tesla from selling its vehicles directly to consumers and by precluding Tesla from performing service and repairs within the State.”
The lawsuit comes after Michigan rejected Tesla’s bid to become a licensed vehicle dealer in the state earlier this month.
Tesla claims that it submitted its application, as well as an application to register a vehicle repair facility, nine months ago.
The company says it has still not heard back on the status of the vehicle repair facility license.
Texas, Connecticut, Utah, and recently Missouri all join Michigan among the states that don’t allow Tesla to sell directly to its customers.
In those states, Tesla has more limited “showrooms,” but potential customers have to go online to buy a car.
Tesla has consistently rejected the notion that it ought to license third-party dealers to sell and repair its cars. “Selling a Tesla car is very different from selling a traditional, gas-powered car,” the company wrote in its complaint. “The public remains largely unfamiliar with, and often skeptical of, electric vehicle technology.
Accordingly, Tesla’s retail operations are tailored to address the concerns of consumers considering the transition to electric vehicles, as well as to showcase Tesla’s products and services.”
By contrast, Tesla wrote, “Independent dealers typically rely on fast, high-volume sales at the highest negotiable price, and [they] frequently pressure customers to purchase add-ons and services that they do not want or need.”
Auto dealer associations have argued that the franchise model allows consumers to benefit from intra-brand competition, that is, dealers of similar cars compete with each other in a way that’s theoretically beneficial for the consumer.
Tesla argues that this business model can’t work because the list price on the Internet for a Tesla is the same as the price a franchisee would pay for the car, so the consumer would buy a Tesla online all the time and Tesla’s hypothetical franchises would never make any money.
In its complaint, Tesla wrote that it met with Michigan’s franchised dealer association and Michigan legislators in June to find a compromise to the state’s rules about manufacturer car sales. “At that meeting, Tesla was informed that the local Michigan dealers and manufacturers categorically oppose Tesla’s entry into the Michigan retail and service market and that, without the support of those groups, the Legislature simply would not pass legislation that would allow Tesla to operate,” Tesla wrote. “In the words of one legislator who attended the meeting: The Michigan dealers do not want you here.
The local manufacturers do not want you here.
So you’re not going to be here.”
Ars contacted the Michigan Automobile Dealers Association for comment, but we have not received a response.