Tesla has been fighting to sell cars using its direct sales model in Michigan and other states for years. Now, Tesla is taking Michigan to court over it, filing its first federal lawsuit to try and overturn the state’s direct sales ban, Bloomberg reports.
But being able to sell in Michigan isn’t the only thing at stake. If the court finds the ban unconstitutional, it would pave the way for direct sales in all states. Tesla is hoping the federal court rules in its favor so that it can more easily move its entry-level Model 3, for which it has already accepted more than 300,000 reservations.
“States can regulate business but can they do what they appear to be doing here, keeping Tesla out?” Carl Tobias, a professor of constitutional law at the University of Richmond, asked Bloomberg. “It’s not a frivolous claim. They have a strong argument, but it depends on the judge and what they can prove.”
Tesla operates in 23 states, in addition to the District of Columbia. The automaker has faced opposition in many states, but so far Michigan, Texas, Connecticut, and Utah are the only ones that won’t grant it a license to sell cars directly. In a statement, Tesla said local auto dealers and manufacturers have “made clear that they would oppose any law that would allow Tesla to operate in Michigan.” It’s for this reason that Tesla is taking things higher up.
The lawsuit calls the 2014 amendment to the Michigan law regulating auto manufacturers, distributors, wholesalers, and dealers “anti-Tesla.” The suit further alleges the amendment, signed by Michigan Governor Rick Snyder, was designed to favor franchise dealers as well as the automakers based in the state. Michigan also has yet to approve Tesla’s request to register a repair facility, which the lawsuit claims the automaker has been waiting more than nine months to hear about. Currently, Tesla owners living in Michigan have to drive to Ohio, either to Cleveland or Columbus, for service.
The suit is being reviewed by the Michigan attorney general as well as the National Automobile Dealers Association. If Tesla’s lawyers can convince the judge that the ban is unconstitutional, it opens the door for direct sales in more states. If not, then it’s back to square one. The feds have sided with Tesla in the past, so that should give the automaker some hope. Last year, the Federal Trade Commission urged Michigan to end its direct sales ban because it dissuades competition.
Source: Bloomberg
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