Is Tesla Opening Dealerships?

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Tesla Model X

Tesla if fighting a state-by-state battle to sell its cars without dealerships. CEO Elon Musk believes dealerships aren’t in the best interest of consumers, prefering a direct sales model, but he has never ruled out the possiblity. Now, Tesla has applied for a dealership license in the state of Michigan in the face of state laws prohibiting the direct sales model.

According to The Detroit News, Tesla submitted the application back in November and sent follow-up information in support of that application over the last few weeks. The Secretary of State said everything is still being reviewed with a decision expected in the next couple of months.

As it stands, Tesla can’t sell cars at all in Michigan due to legislation signed by the Governor. It bans the direct sales model in favor of the traditional dealership model that other automakers use. Unsurprisingly, dealerships are aggressively fighting Tesla to make sure the new sales model doesn’t catch on and give automakers any ideas about changing the current system.

Tesla insists that the dealership model isn’t good for consumers. Musk says direct sales offers a better experience for customers and that there’s no reason for them to open dealerships. He also believes dealers are especially bad choices for electric vehicle sales since they have zero incentive to promote new electric technology over gas engines.

Tesla is aggressively fighting legislation that bans their sales model with varying degrees of success. There have been wins, losses, and even compromises that allow them to open showrooms, but only sell online and then deliver cars to those customers.

If Tesla’s application is approved, then they would be able to sell both new and used cars in the state of Michigan, with certain stipulations. Class A dealership licenses require companies have either their own repair facility or an established relationship with a licensed facility. Tesla will also need to adhere to various local laws regarding dealerships.

Currently, Michigan residents have to cross state lines to buy a Tesla. The company estimated that over 400 people have driven to other states, Canada, or purchased online. There’s a market there, but dealers are making it as hard as possible for Tesla to reach.

The Federal Trade Commission is on Tesla’s side, sending a 10-page letter last year encouraging the Michigan Legislature to reconsider the direct sales ban. They believe it will lead to protectionism and that it harms competition. So far, Michigan politicians haven’t listened, leaving Tesla with little choice.