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Michigan's law banning Tesla sales is an innovation killer

Sep 23, 2016

How’s this idea: In an effort to please an old-fashioned, shrinking industry, we outlaw efforts to sell a new product in an innovative way?

Instead, we’ll make anyone who wants this product drive to Chicago or Cleveland to buy it.

That ought to help Michigan become economically competitive again.


If that sounds sarcastic, you’re right.

What I am talking about is the electric car manufacturer Tesla, which sells sleek, beautiful and expensive vehicles that are gradually catching on.

They want to sell cars in Michigan.

Governor Rick Snyder ... then betrayed his own principles by signing the bill.

But two years ago, automotive industry lobbyists successfully got the Legislature to pass a bill designed to prevent Tesla from doing so. That’s because Tesla sells its vehicles to consumers directly, eliminating franchised dealerships that add another layer of cost.

Governor Rick Snyder, who ran for office pledging to make Michigan more open to innovative ways of doing business, then betrayed his own principles by signing the bill.

Not much of this was made at the time. But now, the California- based company is fighting back.

Yesterday, Tesla filed a lawsuit against the state, naming Governor Snyder, Secretary of State Ruth Johnson and Attorney General Rick Schuette as defendants.

And how this plays out could be highly significant for the retail automotive industry.

Opponents of Tesla have sometimes billed this as a consumer protection issue. If the automaker was selling cars without any servicing or warranty contracts, that might have merit.

But that’s not the case at all.

Tesla actually asked the state for permission to open a dealership in Grand Rapids, complete with service facilities, but the Secretary of State’s office turned Tesla down. That’s because the dealership wouldn’t have a specific conventional contract with an auto manufacturer.

Do you think the average consumer cares, as long as he or she can get their cars serviced? Of course they don’t. Nor are they necessarily thrilled at having an extra layer of cost added by forcing them to dicker with a salesman in a dealership.

But the established automakers don’t want their way of life threatened. And they are especially worried now that Tesla is about to come out with a car priced at around $30,000, far less than before.

According to the Detroit Free Press, 400,000 people have sent in deposits to reserve one of these cars.

Now, I personally don’t think I would buy a Tesla, at least not yet. Their cars have been plagued by a host of mechanical problems, although none as devastating as the ignition switch scandal at GM. But this is not a sufficient reason to prevent Tesla from being here.

Daniel Crane ... called that "an embarrassment for the state of Michigan and democracy."

When the governor signed that anti-Tesla bill two years ago, Daniel Crane, a University of Michigan law professor specializing in intellectual property and antitrust matters, called that “an embarrassment for the state of Michigan and democracy.”

He was right, of course. The smart thing would be for the Legislature to legalize Tesla sales. Representative Aaron Miller, a Republican from Sturgis, has introduced a bill that would do so. But that would require rational behavior on the part of our lawmakers.

The state, however, is likely to eventually lose an expensive court battle, which will meanwhile cost the state potential business and jobs.

Common sense really isn’t a very common thing.

Jack Lessenberry is Michigan Radio's political analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.