LANSING -- The fate of electric car sales in Michigan is up in the air as lawmakers debate a new bill to continue to prevent most electric car manufacturers from selling their cars without a franchise dealership.
Direct sales of vehicles are already banned in Michigan, but a federal lawsuit settled in January between the state and electric car company Tesla, carved out a workaround.
“This has created a problem. This has created a real problem to have an unregulated, non-licensed group selling cars, competing with us and our manufacturers,” said Kurt Berryman, Director of Legislative Affairs for the Michigan Auto Dealers Association.
Under the settlement with the state Attorney General, Tesla can service, sell, and deliver vehicles in Michigan, but they have to use a subsidiary. The vehicles also have to be titled in another state and then transferred to Michigan. Before the settlement, Tesla vehicles had to be purchased outside of Michigan and picked up out of state.
The bill seeks to clear up any ambiguity that any other car manufacturer besides Tesla can sell their vehicles without a franchise dealer, said bill sponsor, Rep. Jason Sheppard R-Temperance. He said by codifying the settlement with Tesla, the state can also give people a place to go if something goes wrong with the sale of their vehicle.
“It’s kind of its own island, just sitting out there,” Sheppard said of the current situation with Tesla. “By codifying the settlement language into law you then can create some consumer protection for people that are purchasing any vehicle through that.”
State law requires an indirect sales model for new car sales. This means a manufacturer must contract with outside parties to establish franchises. Then those franchises sell the cars to consumers.
During a heated discussion during a House Government Operations committee hearing on the bill, House Minority Leader Christine Greig, D-Farmington Hills called the franchise law outdated.
“I just don’t understand how this model you’re proposing makes sense in a free market in Michigan,” Greig said before voting against moving the bill out of the committee.
Greig pointed out that a lot has changed in the 30-years since the law was enacted.
“We didn’t have autonomous vehicles,” she said. “We didn’t have consumers buying direct for all sorts of things. This is part of an evolution of the markets and of consumer demands.”
The bill received a lot of criticism during a Sept. 25 committee hearing, with six people speaking in opposition, and two dozen people submitting cards in opposition on behalf of universities, environmental groups, and vehicle manufacturers.
General Motors opposes the bill because it singles out one manufacturer, Tesla, as getting an exception to rules and regulations that everyone else must follow.
"The packet that we must comply with in regards to selling is a big packet. One competitor has a couple pages. We don’t think that’s fair,” said Brian O’Connell, Regional Director, State Government Relations at General Motors. “The system needs to change.”
Environmental groups are concerned the bill would limit the ability of smaller electric vehicle companies to sell their cars in Michigan, as well as limit the ability of people in Michigan to buy electric vehicles.
“Transportation emissions are the largest source of carbon emissions now,” said Charlotte Jameson, program director for the Michigan Environmental Council, in an interview. “Unless we really start to tackle transportation emissions, we can’t solve the climate crisis.”
Electric car companies say this bill would effectively prevent them from being able to sell their cars in Michigan. Even companies like Rivian, which are headquartered outside of Detroit, wouldn’t be able to sell or service their cars in state, said the company’s vice president of public policy, James Chen.
Rivian uses a direct sales model because, “We believe this approach best fits our business model which relies on a direct relationship with our customers for seamless interactions,” Chen said.
He said the bill would upend Rivian’s plan to grow and invest in Michigan.
“This bill discourages economic growth and investment in the state at a time when new jobs and investments should be welcomed,” he said.
Sheppard said the bill does nothing to change the direct sales ban already in place in Michigan. Rather, the bill makes it clear that the settlement agreement with Tesla only applies to Tesla, and the settlement does not give other manufacturers an open door.
“Nothing has changed in the law. So they would just go get a dealer license like everyone else has to,” Sheppard said. “There’s nothing that has changed."
The bill was voted out of committee and is waiting for a full floor vote in the state House.
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