On Tuesday, Michigan governor Rick Snyder signed legislation that all but stops Tesla from selling cars in the state. The legislation doesn’t specifically name Tesla, but the state has now effectively shut down the methods by which Tesla sells its cars–meaning either Tesla will have to change its ways, or forgo any sales in Michigan. (A third option, a lawsuit, is always possible.)
Unlike most car companies, Tesla operates its own dealerships–an arrangement many of its competitors aren’t pleased with. That’s caused a state-by-state fight over the issue, and on Tuesday, Michigan weighed in. According to the Detroit Free Press, the law, which was supported by rival automakers like General Motors, requires all carmakers to distribute vehicles in the state through franchised dealerships. (Tesla does not yet have a store in the state, but was planning to open one.)
Dealerships are a smaller part of Tesla’s business. In most cases, Tesla sells its electric vehicles–like the Model S, and soon, the auto-pilot-capable Model D–directly to customers online. But Michigan already had laws in place forbidding an auto company’s direct sales of cars online.
That leaves Tesla with no current options. As the Free Press notes, Tesla’s sales methods have been irking the auto industry:
Dealers have tolerated and learned to cooperate with online car shopping services such as Edmunds.com and TrueCar.com. But a manufacturer who bypasses the traditional franchise system to sell directly, either in physical stores or online, is a threat, even a low-volume automaker like Tesla.
Tesla has been selling through stores or galleries mostly in upscale shopping malls along the east and west coasts and in Pennsylvania, Ohio, Indiana and Illinois. The company’s website shows a network of 60 locations in 23 states, but some of those can’t sell directly. The company takes orders online. That approach undermines how franchisees have sold vehicles for decades, and they are fighting to stop Elon Musk, Tesla’s cofounder and CEO, from establishing his own retail model.
Many states have similar laws in place, which is why Tesla is challenging the dealership model on an individual state-by-state basis. So far, Texas and Arizona have banned Elon Musk’s preferred direct sales model, while Massachusetts, Minnesota, and New York recently reversed course and allowed Tesla to sell via its storefronts. A Tesla representative told the paper that the company does not yet know if it will file a lawsuit against the state of Michigan.