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Sunday, 22 November 2015 22:51

Tesla continues push for retail presence in Michigan

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Michigan law prevents automakers like Tesla from selling their vehicles directly to consumers at company-owned storefronts. The electric vehicle maker wants to find a compromise with state lawmakers to begin selling vehicles in the state, where 55 of its suppliers are based and where it operates Tesla Tool and Die. In May, Tesla made the first acquisition in its corporate history when it bought the former Riviera Tool in Cascade Township. Michigan law prevents automakers like Tesla from selling their vehicles directly to consumers at company-owned storefronts. The electric vehicle maker wants to find a compromise with state lawmakers to begin selling vehicles in the state, where 55 of its suppliers are based and where it operates Tesla Tool and Die. In May, Tesla made the first acquisition in its corporate history when it bought the former Riviera Tool in Cascade Township. COURTESY PHOTO

Tesla Motors Inc. wants to strike a compromise with lawmakers so it can begin selling its electric vehicles in Michigan using the same direct-to-consumer model it’s deployed in 25 other states.

Despite working with dozens of Michigan-based suppliers and operating its own tool and die shop outside of Grand Rapids, the Palo Alto, Calif.-based Tesla currently is prevented by state law from selling its vehicles directly to consumers.

The policy clarifying state law on the direct-to-consumer sales model passed with near unanimous support in the state Legislature and was signed into law by Gov. Rick Snyder in October 2014. As a result, Michigan customers need to travel to Chicago or Cleveland to reach the nearest Tesla store.

The company is ready and willing to open storefronts in Michigan if it is allowed, according to James Chen, Tesla’s vice president of regulatory affairs and associate legal counsel. Tesla officials have floated the idea of opening a limited number of storefronts — possibly between five and 10— as a compromise.

“The company is about innovation and trying to innovate not just in California, but in Michigan as well,” Chen said in an interview for Midwest Energy News.

Speaking in Lansing on Nov. 10 about the company’s future in Michigan, Chen said Tesla has invested in the state despite not being able to sell its vehicles here.

Tesla works with 55 different suppliers in Michigan to provide parts for its vehicles, including the Model S sedan, Chen said. The automaker also made a direct investment in the state in May when it acquired the former Riviera Tool LLC in Cascade Township, which it’s since rebranded as Tesla Tool and Die.

“There’s very much a Michigan tie-in here,” Chen said.

Observers say Michigan is a tough market for Tesla to break into given the presence of the Big Three automakers in Detroit and a strong franchise car dealer lobby in Lansing.

“We have to ask ourselves: Is America a place where we’re going to protect and isolate incumbent companies only or foster and encourage innovation?” Chen said.

“Michigan is very much a state that does encourage innovation. That said, could it do better? Yes. The obvious and glaring example is with our direct consumer business being prohibited by law. That should change. But it’s not to say Michigan as a whole is unfriendly.”

When asked about the Legislature’s actions last October, executives at General Motors reportedly said at the time that Tesla should have to play by the same rules as the other automakers that can’t sell directly to customers in the state.

Aaron Zeigler, president of Zeigler Auto Group in Kalamazoo, emphasized that lawmakers did not write a new law banning Tesla from selling cars here, but rather further clarified what’s allowed under existing state law.

“There has always been a ban on direct retail sales,” Zeigler said. “Tesla wants the state to rewrite the law to suit their needs and no one else’s. I don’t think it’d be good to rewrite a law for one company.”

Zeigler added that it’s important for dealerships to have relationships with consumers, which creates a system for keeping down the costs of vehicles.

“I know that — as a consumer — if you want to buy a Ford, for example, you want 10 different guys fighting for your business,” he said. “There’s no concern that Tesla would sell cars in Michigan. They are welcome to do that. But you can’t completely rewrite the laws for one company.”

Chen countered that “it’s ironic as heck” for automakers’ saying Tesla should have to play by the same set of rules.

“The rules they play by were made because back in the day, they made a business decision to go with franchise dealers. The rules said they got to make that choice,” he said. “The rules then should allow us to make that same choice, not constrain us to one business model or another.”

He added that Tesla’s business shouldn’t fit in the same box as other carmakers. For example, the company last year produced 35,000 vehicles, compared to the tens of millions made by legacy automakers.

Also, consumers aren’t as familiar with electric vehicles as they are with models powered by traditional internal combustion engines, which allows Tesla employees — who are paid salaries, not on commission — to serve as better educators about the cars than third-party dealers, Chen said.


An ‘economic additive’

Chen said the company has spoken with Gov. Snyder over the past year about possibly revisiting the state’s ban on direct car sales to customers.

In a statement, a Snyder spokesperson reiterated the governor’s message from last year.

“When Gov. Snyder signed the bill in 2014, he told lawmakers that he is open to discussing the current business model of car dealership networks and determining whether that model works best for consumers. He believes we always should be willing to re-examine our business and regulatory practices with an eye toward improving the customer experience for Michigan residents and doing things in a more efficient and less costly fashion,” spokesperson Dave Murray said in an email.

The Legislature isn’t likely to revisit the issue this session, which wraps up next month after a break for Thanksgiving and deer hunting through the end of November.

In May, the Federal Trade Commission sent a letter to state lawmakers encouraging them to reconsider the state’s policy because it amounts to “protectionism” and is “likely harming both competition and consumers,” according to the Detroit News.

Chen said ultimately, the company’s limited size isn’t going to threaten auto dealers anytime soon.

“Here’s the thing: Tesla coming into the state doesn’t mean dealerships will shut down,” Chen said. “For every single state where we have stores, which is close to 25 now, no dealer has ever had to lay off employees because Tesla came in. This is an economic additive to the state.”

Read 4818 times Last modified on Sunday, 22 November 2015 22:55

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