Tesla determined to break into Michigan auto market

Tesla Motors Inc. is lobbying in Lansing for the right to sell and service its luxury electric vehicles in Michigan.

The company has been trying for several months to win over legislators, dealers and automakers. Tesla has offered a number of test-drives to educate lawmakers and other state officials about its cars.

“There doesn’t seem to be much interest from not only the dealers, but manufacturers like GM that want to continue to shut us out of the market entirely,” said Jim Chen, Tesla’s vice president of regulatory affairs, in a recent phone interview.

While there is no bill currently in the works to allow Tesla to sell in Michigan, the Palo Alto, California-based manufacturer isn’t giving up. It plans to continue to attempt to sway legislators, Gov. Rick Snyder and others into the next year, said Will Nicholas, Tesla’s government relations manager.

“We have the majority of next year to lobby, discuss and debate the merits of what we think is a co-existence of our business model in the state of Michigan,” Nicholas said.

A year ago, Snyder signed a bill banning automakers from selling vehicles directly to customers in Michigan. The legislation, which was backed by the state’s new-car dealership lobby, closed a loophole Tesla had used in other states to operate what it considers company-owned retail stores that bypass traditional dealer franchise structures. Previous state law prohibited automakers from selling new vehicles directly to retail customers except through its franchised dealers; the revised law removed the word “its,” which Tesla executives said was a last-minute strike at their company.

In October 2014, Snyder encouraged the Legislature to engage in a “healthy, open” discussion in the 2015-16 session about whether the business model in Michigan is working. When questioned by a Detroit News reporter during a recent media event, Snyder would not say if he’d support Tesla’s direct sales model in Michigan.

“I think that’s something that has to go through the legislative process first, and I will look at it as it goes through that process,” he said.

State Sen. Darwin Booher, R-Evart, introduced a bill in April that seeks to allow direct sales of three-wheeled “autocycles” to consumers in Michigan, which would aid a company called Elio Motors Inc. Booher said in a recent telephone interview that his bill, currently in the Senate’s economic development committee, has nothing to do with Tesla.

“There has been discussions that Tesla would like to do something within this bill, but I’m not interested in that,” Booher said. “I’m interested in dealing with my constituents.”

He added, “I’m not interested in getting into battle over Tesla.”

Booher said he thinks Elio Motors’ enclosed three-wheel vehicle — to be built at General Motors Co.’s former Shreveport Assembly and Stamping Plant in Louisiana — will be a big seller. Joel Sheltrown, vice president of government affairs for the company, is from Booher’s district.

The Federal Trade Commission earlier this year, in a 10-page letter to Booher, urged the Michigan Legislature to reconsider the ban on Tesla and other automakers from directly selling to consumers. The agency said the ban leads to “protectionism” for dealers and is “likely harming both competition and consumers.”

The issue will be the subject of a Mackinac Center for Public Policy forum Dec. 2 in Lansing. The forum will be led by Dan Crane, associate dean for faculty and research and a law professor at the University of Michigan. He is expected to lay out why the companies should be able to sell directly.

While Tesla has fine vehicles, it should have to follow the same laws as other automakers, said Terry Burns, executive vice president of the Michigan Automobile Dealers Association in East Lansing.

“They’re an automotive manufacturer, and the Michigan law says that manufacturers need to use dealers in order to sell vehicles. That’s Michigan law,” Burns said. “We would welcome Tesla here. But we would think that as with all the other businesses that come into Michigan, they would want to follow the law.”

In 2014, when the law was signed, Ford Motor Co. applauded Snyder’s action and said it would provide a “level playing field” for auto manufacturers. GM in a statement has said it welcomes all competitors in Michigan, but that “we just think everybody should have to play by the same rules.”

Burns said Michigan law and its dealer system have served the state and Michigan consumers well. He said there are likely dealers who would be interested in working with Tesla here.

Roger Penske, who owns dealerships in other states, said he believes Tesla should work with dealers, rather than trying to go around them: “If you look over the history of automotive manufacturers who wanted to sell direct or own their own dealerships, it’s been a failure,” he told a Detroit News reporter. “Tesla should just put their arms around many of us who can represent the car, service the customer — and they could worry about other customers.”

Tesla estimates it has more than 400 customers in Michigan who have had to drive to neighboring states or to Ontario to buy a car — or have purchased them online. Stores closest to Michigan are in Chicago and surrounding suburbs; Indianapolis; and in Ohio, near Cleveland and in Columbus. The company has retail stores or galleries in 25 states, plus the District of Columbia.

The automaker earlier this year bought Riviera Tool LLC in Cascade Township near Grand Rapids, and renamed it Tesla Tool and Die Factory. The supplier was slated to finish out work with other customers and then focus on Tesla’s tool and die needs. The company said the acquisition would help it bring capabilities in-house and aid in vehicle production. Chen said Tesla is considering expanding that facility.

Tesla also has opened four superchargers, or fast charging stations for Teslas, in the state and has a Detroit service center listed on its website as a probable location if it gets the go-ahead in Michigan.

Tesla launched the Model X SUV during September. The mass-market Model 3 electric car, which will sell for about $35,000 — half the cost of Tesla’s Model S — is expected to be unveiled in late March, with production expected by the end of 2017. The company has said it expects to sell 50,000 to 52,000 cars this year.

Whether Tesla will be able to sell its new vehicles in Michigan is still unclear.

Said Tesla’s Chen: “We’re an American company that is building cars in the United States that is using over 55 Michigan suppliers — that is spending over $120 million in parts and components from Michigan suppliers to build American-made cars. Why shouldn’t we be allowed to sell in Michigan?”

Staff Writer Michael Wayland contributed.