Tesla Motors Inc. (TSLA) Using New Tactic To Fight Direct Sales Ban

Tesla Inc (TSLA) Store in Southern California

Tesla Motors Inc has been banned in Michigan from selling its vehicles directly to the customers. For this reason, it has filed a federal lawsuit over the practice on the home turf of General Motors and Ford, so as to create pressure on the state to overturn the ban, says a report from Bloomberg.

A changed approach from Tesla

 Tesla Motors Inc , so far, was following the approach of challenging prohibitions of its sales model state-by-state until now. A federal court ruling on the constitutionality of the ban will have national implications, notes the report. Tesla says that the grip of automakers and dealer’s on the legislature in Michigan has stymied it. Other such states are Texas, Connecticut and Utah.

Tesla Motors Inc. Store in Southern California (TSLA)

In a statement on Thursday, the EV firm said it has always preferred to solve this problem legislatively. But, its really unfortunate that if Tesla is allowed to operate in Michigan under any law, then the local auto dealers and local manufacturers will oppose it, the EV firm said. “Given their position, the leadership of the Michigan legislature recently informed Tesla that it will not even hold a hearing to debate the issue.”

Carl Tobias – a professor of constitutional law at the University of Richmond – said, “States can regulate business but can they do what they appear to be doing here, keeping Tesla out? It’s not a frivolous claim. They have a strong argument, but it depends on the judge and what they can prove.’’

Tesla fighting anti-Tesla’ amendment

In 2014, an amendment was passed by Michigan in its law regulating motor vehicle distributors, dealers, wholesalers and manufacturers. Michigan Governor Rick Snyder signed the bill, which was an ‘anti-Tesla’ amendment, designed to favor the state’s automakers and franchise dealers, said the company in the suit.

Further, the lawsuit states that the state has put restrictions on Tesla to operate through direct-sales ban, and has also rejected Tesla’s application for a vehicle dealer license. In the complaint, Tesla’s lawyer – John Bursch – said it had been more than nine months since the EV firm filed its initial application, but the state hasn’t ruled on its request to register a vehicle repair facility. For getting their vehicles serviced, Tesla owners in Michigan are required to travel to Cleveland or Columbus or Ohio currently.

Tesla Motors Inc does not get into dealerships, instead it operates stores in retail locations that are highly visible and where foot traffic is high. General Motors, Ford Motor and Fiat Chrysler are three major automakers that have operated under franchise laws that were there in the books for decades, and had been put in place originally to prevent manufacturers from opening stores that would compete with mom-and-pop dealers directly.

Michigan Attorney General Bill Schuette and The National Automobile Dealers Association are reviewing the lawsuit.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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