Tesla’s direct-sale loophole in Michigan is safe for now

The bill to close Tesla’s direct-sale loophole in Michigan didn’t receive a vote in the state’s Senate before the end of the 2020 session.

That keeps the loophole safe for Tesla and other new electric automakers who plan to use it for now.

Michigan has been a battleground for Tesla when it comes to the right to sell and service its vehicles.

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 against their own automakers, and Michigan has stood out among them, as it’s the home of the US auto industry.

A change to the law in 2014 prohibited direct sales from automakers that blocked Tesla from obtaining a dealership license and selling cars in the state.

For the better part of the last decade, Tesla has been fighting the state and local car dealership association for the right to operate their own sales and services in Michigan through lobbying efforts and later a lawsuit.

Earlier this year, Tesla finally reached a settlement with the state of Michigan to allow direct sales and service of vehicles. Michigan didn’t officially allow Tesla to get a dealer license, but it is allowing Tesla to sell to and service customers’ cars in Michigan through legal loopholes, like registering cars from another state for deliveries and having a wholly owned subsidiary perform services.

However, earlier this year, Electrek reported that the state legislature introduced a new bill that would make sure no other new automaker would get access to that loophole.

This became a problem for companies like Rivian and Lucid who also never had a franchise dealership and thought they should be treated like Tesla.

Additionally, the car dealer association pushed for a last-minute change in the new bill earlier this month that resulted in even closing the loophole for Tesla,who just obtained the right to sale and service its own cars after years of legal battle.

The Michigan House approved the bill before sending it to the State Senate, but the session ended without the bill going to a vote in the Senate.

Therefore, the loophole is still safe for Tesla and even new automakers like Lucid and Rivian, but the issue could be revisited during next year’s session.

A Lucid representative commented that the company is moving ahead with its planned retail and service presence in the state:

We expect this issue to continue to be deliberated when the legislature starts its session next year. Even so, we remain confident that state leaders will make the right decisions for their constituents and to encourage economic growth. For those reasons, we did not slow our efforts to establish a strong presence in the state of Michigan. This includes a service center in Coldwater that is near opening with additional retail and service locations planned in the future.

As for Tesla, the automaker quickly opened a sale and service center in Michigan following the settlement, and it should be able to keep operating the center for the near future.