Tesla Defeated By Michigan Governor Rick Snyder

With a wave of his pen just earlier today, Michigan Governor Rick Snyder dealt a huge blow to Palo Alto-based electric car company Tesla Motors, signing legislation into effect that would ban the automaker from selling its wares directly to the customer without a franchised dealership network.

Traditionally, Tesla has refused to abide by the standing third-party dealership model, instead opting to open stores and galleries nationwide. Months of heated debate precipitated today’s bill-signing, with plenty of argument both for, and against.

Supporters of the legislation include current dealer franchise-operators, who insist that selling directly to the customer without a dealership network undermines how they themselves have been selling cars for decades. The big three don’t appreciate the Tesla Motors model either, as it enables them to maximize profits by omitting the middleman.

Even NADA has come out against Tesla’s method of selling directly to consumers, saying that it allows for price-fixing, and robs the consumer of their bargaining power.

But Michigan is just joining a growing number of states which have passed controversial legislation to bar the automaker from its current method of sales. Opponents of the legislation that just passed include the Federal Trade Commission, which argues that such laws are just plain anticompetitive, and are simply targeting the small automaker to protect bigger, more established marques from the challenge that Tesla might present.

Many of the galleries that Tesla Motors keeps open cannot sell cars directly; consumers can instead opt to order the cars online. But according to Tesla General Counsel Todd Maron, the legislation just passed even bans Tesla from having galleries here in Michigan to display the cars and communicate directly with customers.

Governor Snyder insists that even prior to this bill, it was illegal to sell new cars directly to the consumer in the state of Michigan, and that the bill only extends this ban to call for a dealership network explicitly. But the mere existence of the bill – not to mention the sneaky, last-minute additions it received before being passed by the Senate – certainly seems indicative that the new legislation will be much more consequential.