After Tesla’s direct selling deal, lawmakers seek to prevent similar companies from following suit

LANSING – The fate of electric car sales in Michigan is in doubt as lawmakers debate a new bill to continue to prevent most electric car makers from selling their cars without a franchisee.

Direct vehicle sales are already banned in Michigan, but a federal lawsuit settled in January between the state and electric car company Tesla has found a workaround.

“It created a problem. It has created a real problem to have an unregulated, unlicensed group of car sales companies competing with us and our manufacturers, ”said Kurt Berryman, director of legislative affairs for the Michigan Auto Dealers Association.

Under the agreement with the state attorney general, Tesla can service, sell, and deliver vehicles in Michigan, but must use a subsidiary. Vehicles must also be titled in another state and then transferred to Michigan. Prior to the settlement, Tesla vehicles had to be purchased outside of Michigan and picked up out of state.

The bill is intended to remove any ambiguity that any other automaker besides Tesla can sell its vehicles without a franchised dealer, said the sponsor of the bill, Rep. Jason Sheppard R-Temperance. He said that by codifying the settlement with Tesla, the state can also give people a place to go if something goes wrong with the sale of their vehicle.

“It’s kind of his own island, just sitting there,” Sheppard said of the current situation with Tesla. “By codifying the language of the regulation in law, you can then create some consumer protection for people who buy a vehicle through it.”

State law requires an indirect sales model for new car sales. This means that a manufacturer must contract with third parties to establish franchises. Then these franchises sell the cars to consumers.

During a heated discussion at a House Government Operations Committee hearing on the bill, House Minority Leader Christine Greig, D-Farmington Hills, called the Franchise Act obsolete.

“I just don’t understand how this model you’re proposing makes sense in a Michigan free market,” Greig said before voting against withdrawing the bill from committee.

Greig pointed out that a lot has changed in the 30 years since the law was passed.

“We didn’t have autonomous vehicles,” she said. “We didn’t have consumers buying direct for all kinds of things. This is part of an evolution of markets and consumer demands.

The bill received widespread criticism in a committee hearing on September 25, with six people speaking in opposition and two dozen submitting cards in opposition on behalf of universities, groups environmental and automotive manufacturers.

General Motors opposes the bill because it names a manufacturer, Tesla, as having an exception to the rules and regulations that everyone must follow.

“The package that we have to comply with when it comes to sales is a big package. A competitor has a few pages. We don’t think that’s fair,” said Brian O’Connell, regional director of government relations for the United States. States at General Motors. “The system has to change.

Environmental groups fear the bill will limit the ability of small electric vehicle companies to sell their cars in Michigan, as well as the ability of Michigan residents to purchase electric vehicles.

“Transportation emissions are the biggest source of carbon emissions now,” said Charlotte Jameson, program director for the Michigan Environmental Council, in an interview. “Unless we really start tackling transport emissions, we cannot solve the climate crisis. “

Electric car makers say this bill would effectively prevent them from selling their cars in Michigan. Even companies like Rivian, which are headquartered outside of Detroit, would not be able to sell or service their cars in the state, company vice president of public policy James said. Chen.

Rivian uses a direct sales model because “We believe this approach best fits our business model which relies on a direct relationship with our customers for seamless interactions,” Chen said.

He said the bill would upset Rivian’s plan to grow and invest in Michigan.

“This bill discourages economic growth and investment in the state at a time when new jobs and investment should be welcome,” he said.

Sheppard said the bill does not change the direct selling ban already in place in Michigan. On the contrary, the bill makes it clear that the settlement agreement with Tesla only applies to Tesla, and the settlement does not give an open door to other manufacturers.

“Nothing has changed in the law. So they would just go get a reseller license like everyone else has to, ”Sheppard said. “There is nothing that has changed.”

The bill was passed out of committee and awaits a full vote in the State House.

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