Tesla Motors Inc (TSLA) Faces Legal Challenges About Direct Sales in Michigan

Tesla Motor (TSLA)

The youngest automaker in the United States, Tesla Motors Inc (NASDAQ:TSLA) had a setback in the direct sale of its electric cars in the market after a legislation blocking the company from selling cars directly to the customers was passed through the state legislature in Michigan. The legislation would become a law after being signed by the state governor.

The legislation is waiting for a signature from Rick Snyder, Governor, to become a law and Snyder has until October 21 to either sign or veto this bill. The deputy press secretary for the governor, Dave Murray, said, “Many bills came over as the legislature finished the session, and the governor is doing due diligence by examining all of them.”

Tesla Motor (TSLA)

Earlier, Elon Musk, CEO and co-founder of Tesla Motors Inc (NASDAQ:TSLA), said that the sophisticated nature of Tesla’s cars requires specialized knowledge and explanation, which is best done by company’s employees. As of now, the company operates its showrooms and takes car orders online. However, the opposing dealers said that this approach could set a precedent over the way cars have been sold in the state for past several decades.

Michigan is not the only state where the company is facing these issues considering that it is uptight with dealer associations in New Jersey, Georgia, New York, Missouri, Pennsylvania, and even Ohio.

Diarmuid O’Connell, VP business development at Tesla, expressed his surprise over the fact that the bill was ready for processing this year and that too under its current form. While talking about the dealers, he added,

“Dealers, under the cover of darkness, are foreclosing that debate, I can only assume because they don’t like their prospects in the public debate that we seek.”

On the contrary, the decision is welcomed by the NADA, National Automobile Dealers Association, as the institution is in support of the dealer-franchised model and has nearly 16,000 new-car dealers under its flag. A spokesman for NADA, Charles Cyrill, said,

“Fierce competition between local dealers in any given market drives down prices both in and across brands. While if a factory owned all of its stores, it could set prices and buyers would lose virtually all bargaining power.”

This article has been written by Prakash Pandey.

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