Legislation pending in Michigan that would limit direct vehicle sales in the state has narrowed to remove an exemption for Tesla, a change that major automakers say softened their earlier opposition to the bill.
Its chances of passing, however, are not certain in the waning days of Michigan's two-year legislative term. The amended bill passed the state House this month, but it was pulled from consideration in a state Senate committee this week. The Michigan Senate has no plans to extend session days beyond Dec. 17, a spokeswoman for the Republican Senate majority leader told Automotive News, nor has the chamber made a final decision on whether the bill will come up for a vote.
Bills not passed by the end of the year are considered dead and must be reintroduced in the new term that starts in January.
If the narrower version is signed into law, opponents say it leaves Michigan vulnerable to more litigation — both from Tesla and from startup electric vehicle makers that want to follow Tesla's direct-sales path.
"If this is such a great solution, why is it being rammed through during a lame-duck [session], rather than having this done out in the open with all of the stakeholders at the table?" Jim Chen, Rivian's vice president of public policy, told Automotive News. "This smacks of secret deals, last-minute pushes, to basically shut out a company with a substantial Michigan presence and who wants to invest in Michigan."
House Bill 6233 was introduced in September, backed by Michigan's franchised auto dealers, to codify an agreement between Tesla and the state of Michigan this year that resolves a federal lawsuit the company filed in 2016 against the state's direct-sales ban. The stipulation allows Tesla to operate galleries in Michigan, though the vehicle title must be transferred in another state. The agreement also allows Tesla to operate service centers indirectly through a subsidiary.
Terry Burns, executive vice president of the Michigan Automobile Dealers Association, did not return calls seeking comment this week about the revised bill.
Gov. Gretchen Whitmer's office this week said she was reviewing the amended bill.
Automakers, including General Motors and Ford Motor Co., opposed the bill when it was introduced. They argued the legislation would give a single company, Tesla, a different set of rules. Startup EV companies, seeing a path in the lawsuit agreement allowing them to follow Tesla's model, also opposed the bill.
The Tesla-specific language was removed from the bill before it passed the House last week.
The Alliance for Automotive Innovation, which represents automakers including Ford and GM, told Automotive News it now has taken a neutral position on the bill after provisions for Tesla and another affecting warranty reimbursements were removed.
An alliance spokesman did not respond to a question asking whether the group asked lawmakers to remove the Tesla carve-out. But GM, Ford and the UAW all worked to convince state legislators to exclude Tesla's exemption, a move that would generate enough votes in the House to pass the bill, The Detroit News first reported Thursday night, citing sources.
A Ford spokeswoman declined to comment, deferring to the alliance. Representatives for GM and Tesla did not respond to messages from Automotive News.
GM told The Detroit News that the carmaker also has taken a neutral stance on the revised bill, adding, "As we work towards our all-electric future, we support a level playing field that works for customers, dealers and automakers."
GM and Ford both have partnered with EV startups as the automakers accelerate their electrification strategies. Ford last year invested $500 million into Rivian, while GM recently revised a partnership with electric truckmaker Nikola Corp. that focuses on fuel cell technology. Those investments are part of a larger backdrop of industry electrification, with nearly 100 new models expected from automakers in the next few years.
Automakers' EV plans have come with some consternation from franchised dealers. About 150 U.S. Cadillac dealers have elected to take buyouts from the brand rather than invest hundreds of thousands of dollars on chargers and tooling that will be needed to support the introduction of electric vehicles, starting with the Lyriq in 2022. And GMC is taking more control over sales of the upcoming Hummer electric pickup — while it will be sold through franchised dealerships, retailers initially will receive the truck if customers choose their store while reserving online through the brand's website.
Burns told Automotive News in September that "we stand on the same position we've always stood on, and that is, for the last 30 years, every other manufacturer in the world that sells vehicles here uses the franchise system."
State Rep. Jason Sheppard, a Republican who sponsored the bill, did not return multiple messages seeking comment.
State Rep. Christine Greig, the Michigan House Democratic leader, proposed an amendment she said would have offered a limited number of licenses after seeing how other states handled the direct-sales issue. It failed on the floor.
The revised bill "still left the state vulnerable — in my opinion, anyway — to lawsuits, so what was the purpose?" said Greig, who voted against the bill. "It wasn't solving any problems other than to make sure that Michigan didn't move forward as the market changed."
Of removing the Tesla provision, she added: "I think that was just more palatable to the manufacturers that already had the dealer franchise model and were in the EV space."
Provisions defining what constitutes a sale and prohibiting auto manufacturers from directly or indirectly owning a service center remain in the revised bill.
Daniel Witt, head of public policy for Lucid Motors, said the company believes the state's stipulation with Tesla "gave us some clear direction" about how it could operate under a direct-sales model in Michigan. Lucid plans to begin production of its Air electric sedan in the spring.
If the bill is adopted in either form, "all options are on the table, litigation being one of them," Witt told Automotive News. "I think there's a very reasonable case to be made about the constitutionality of this legislation and the issue on the whole."
Dan Crane, a professor at the University of Michigan Law School, told Automotive News the rewritten bill "would blow up the Tesla settlement" and create grounds for a constitutional challenge.
Tesla's legal agreement with the state is based on the interpretation of Michigan's dealer franchise law as it existed at the time, Crane said. That agreement would remain the status quo should the bill in its current form not be adopted.
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Michigan bill removes Tesla exemption from direct-sales ban - Crain's Detroit Business
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