Michigan is closing the door behind Tesla on direct sale, leaving Rivian, Lucid, and more behind

Michigan, the home state of the US auto industry’s big three, is making sure that it is closing the door behind Tesla on direct sale as Rivian is about to follow in its footsteps.

In many ways, Tesla has opened doors for new EV startups in the auto industry.

There are some intangibles like changing consumers’ psyche on buying a car from a startup without a long track record, and in some clear and concrete ways, like helping change regulations to allow direct sales of vehicles without having to go through the old franchise dealer model.

Michigan has been a battleground for Tesla on that front.

There are several states where Tesla has been banned from selling its vehicles directly to customers due to misused old laws meant to protect car dealers, and Michigan has stood out among those states.

It is the home of the US auto industry, and some of those automakers are rumored to have been involved in trying to stop Tesla from selling in Michigan.

A change to the law in 2014 prohibited direct sales from automakers, which was blocking Tesla from obtaining a dealership license and selling cars in the state.

After trying to change things at the legislative level in 2016, Tesla filed a lawsuit against the state, claiming that the ban on direct sales violates commerce laws, and that it was pushed by car dealers and GM in an attempt to block the electric automaker at the last hour.

It has since been a long legal process, during which Tesla tried to prove that lawmakers were influenced by car dealers to specifically prevent Tesla to sell vehicles direct to consumers in the state.

Earlier this year, Tesla reached a settlement with the state of Michigan to allow direct sales and service of vehicles through some official loopholes.

They didn’t officially allow Tesla to get a dealer license, but they are allowing Tesla to sell and service customers in Michigan through legal loopholes, like registering cars from another state for deliveries and having a wholly owned subsidiary perform service.

The fact that the state just made the loophole official as part of the settlement deal over Tesla’s lawsuit gave some doubts about other companies being able to use them.

Sure enough, now the state legislature is considering a new law that would close the loophole to any other automaker following in Tesla’s footsteps.

Bloomberg reports:

A bill introduced in the Michigan legislature last week would block any manufacturer other than Tesla from selling cars to customers without a dealer as an intermediary and from owning and operating service and repair facilities. It could come up for a vote as soon as Tuesday, according to a Rivian official.

James Chen, Rivian’s vice president of public policy and Tesla’s former top lawyer, commented:

This is a bull’s eye on Rivian and Lucid and any EV manufacturer that would come in after Tesla does. Auto dealers are protecting a monopoly through legislation.

The Michigan Auto Dealer Association (MADA) is backing the new bill.

Terry Burns, executive vice president of MADA, says that the agreement with Tesla didn’t change the law and the new bill is clarifying that:

That settlement was based on a clear set of specific facts for a specific time.

If the bill is adopted, it would block any new automotive company that never had any franchised dealer and therefore can’t unfairly compete with them, to sell vehicles directly to consumers in the state.

Electrek’s Take

This is so dumb. The “clear set of specific facts for a specific time” that the dealers mention is Tesla’s lawsuit with the state.

That’s the “specific fact” — the state wanted to end Tesla’s lawsuit because it made Michigan look very bad — like they are being controlled by auto dealers and legacy automakers.

I can’t really blame Tesla for taking the deal instead of pushing the lawsuit all the way through.

They take what they can get, and they have succeeded in pushing legislative changes in other states that are going to be useful for EV startups coming after them.

It’s just that Michigan is not one of them, and now Rivian, Lucid, and others are going to have to do it again.