MI Eases Tesla Sales Restrictions

Jan 22, 2020

Attorney General Dana Nessel and Secretary of State Jocelyn Benson have reached a settlement with the electric carmaker Tesla that will make it easier for Michigan customers to buy their vehicles.

WKAR’s Scott Pohl discusses the deal with Matt DeLorenzo, senior managing editor at Kelley Blue Book. He says Tesla had essentially been banned from doing direct sales in Michigan before this agreement.


MATT DeLORENZO: This new agreement takes some of that away. You can legally buy the vehicle, own and operate it and get it serviced, in in Michigan. But, there's still some general stipulations, like the contract itself has to be executed in a state outside of Michigan, so I don't know how that is going to work. Also, once that contract is executed, then you have to do a transfer of title to Michigan, so there's going to be a little bit extra paperwork involved as opposed to buying a car from a dealer in the state.

SCOTT POHL: It sounds to me like this will save people who want to own a Tesla from having to leave the state to do it. They'll be able to actually buy a vehicle in Michigan, they'll have to work in conjunction with some sort of operation in another state for the title, and then bring that transfer to Michigan.

DeLORENZO: Right. Tesla does have a gallery in Michigan where they were allowed to demonstrate the car. They couldn't discuss any sales or lease programs, but most of Tesla sales are online anyway. When you go on the site, they have your basic vehicle configurator, and then the pricing and all that other stuff, and you can execute the sale online. The thing is you no longer have to physically go out of state to complete the deal.

I envision what will happen is that people will be buying the vehicle online, Tesla will now be able to actually service and deliver the vehicles within the state through a subsidiary company that will be set up to run those operations and then you can take delivery in Michigan.

POHL: Vehicle service, I understand, has been available in Toledo. That might change to then.

DeLORENZO: Yeah, these new service and delivery facilities will be owned by a subsidiary of Tesla. Again, what Michigan wants is sort of that arm's length between the consumer and the manufacturer that currently exists with the franchise system. By having this subsidiary actually being the company that delivers and services the vehicles, they have reestablished sort of that arm's length relationship. That's a little bit more in line with the franchise system.

MICHIGAN AUTODEALERS

The dealers are very protective of the system of their business and they're going to be watching everything closely. Matt DeLorenzo, Kelley Blue Book

POHL: Have we heard any reaction yet from Michigan dealers or from the Big Three?

DeLORENZO: No, we haven't. The dealer association that pushed for this, they're very protective of the franchise system. Anything that's out of that system is seen as a threat. I think this mitigates it a little bit but doesn't eliminate it completely. I think there's nothing they can do about it, but they're closely watching this and other new ways of getting vehicles in customers hands that may somehow affect their business models. In California for instance, a lot of the dealers are pushing back against the Volvo subscription program, saying that the online sales takes away a sale that they may have been able to do through this subscription, so there's a lot going on right now.