Tesla pushes boundaries of Michigan’s direct sales law and opens showroom in the state

Michigan is the home state of the Big Three automakers and the most populated state in the US that still doesn’t have a Tesla store or service center. For that, you can thank a law backed by GM and local dealerships that prohibit automakers from operating car dealers in the state.

Tesla has been trying to open a store and service center in Michigan for the better part of the last 3 years, but it wasn’t able to get around the law, which is why it sued the state earlier this year. While the case is in court, Tesla went ahead and opened a showroom in Troy yesterday – something that pushes the boundaries of Michigan’s direct sales law.

The showroom is located inside the Nordstrom store in the Somerset shopping mall and it’s part of the expanding partnership between Tesla and the department store.

The automaker first opened a small retail gallery in the Nordstrom store at The Grove in Los Angeles earlier this year and last week, it opened a second location on the other side of the country in Charlotte, North Carolina.

While the fact that Tesla is opening a car showroom inside a Nordstrom department store is certainly an interesting strategy, that’s not what is most interesting about the location.

Michigan’s direct sale law is among the most strict in the US. Tesla is not even allowed to offer service to its owners (over 400 of them), who have to travel to neighboring states or use Tesla Rangers (Tesla’s mobile repair service) to have their vehicle serviced.

In other states where Tesla is not allowed to sell directly to customers, like Texas, the automaker is still able to operate service centers and showrooms where the company can show the vehicles and talk about them to customers, but for anything related to the buying process, employees refer customers to Tesla’s website where they can order it or to out-of-state retail locations. The company calls those locations “galleries”.

Tesla didn’t venture into those kinds of galleries in Michigan until now because again, Michigan’s direct sale law is more archaic/restrictive. For example, Tesla is not allowed to give test drive to customers even if they don’t talk about buying the vehicle. A group of Tesla owners formed an association in Michigan and started giving test drives to potential customers in order to promote new legislation to allow Tesla to sell its vehicles in the state. Since they are not working for Tesla, they are technically allowed to give someone a ride a talk about the car.

The company is approaching the new location in Troy has a marketing tool and it went out of its way to make sure it isn’t perceived as a store. They actually added ‘Not For Sale’ signs around the vehicle in the showroom to emphasize that.

While it’s unlikely that the state can do something to stop Tesla at this location since it amounts to the company having an advertising space, it certainly pushes the boundaries of the law in Michigan. Maybe the state can take example on Virginia where Tesla recently won a battle against the local dealership association before the state DMV for the right to open its own store in Richmond.