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Tesla challenges Michigan's auto dealer culture in court

Sep 24, 2016

Tesla’s legal challenge to Michigan’s dealer franchise laws exposes the hypocrisy of the state’s theoretically enlightened take on the transforming auto industry. Enlightenment has its limits.

Here’s the epicenter of the U.S. auto industry, the repository of enormous engineering talent, falling all over itself to lead the autonomous-vehicle bandwagon to master mobility to beat Silicon Valley at its own game.

And then the state’s power structure invokes decades-old dealer laws to block upstart Elon Musk from selling his pricey rides directly to buyers. No wonder dealers and their allies in some legislatures across the country are twitchy.

The dealers worry the mogul’s radical idea could disrupt the system we’ve known all our lives. They say it would open an automotive Pandora’s box, delivering monopoly pricing, reduced competition and all sorts of related uglies.

Worse, if Musk gets his way in Michigan, what’s to stop Detroit’s automakers from moving to directly sell their metal to would-be buyers? Or gutting a century-old dealer ecosystem that forged a powerful business lobby and created a lot of millionaires along the way?

Plenty, if the experience of other states is any indication. Tesla sells directly in 23 states and the District of Columbia. But the Palo Alto-based automaker has been unable to secure a license to sell in Michigan, Texas, Connecticut and Utah.

Are dealer networks in other states around the country in free-fall? Nope. Neighboring Ohio has revised its franchise laws to allow Tesla to sell in the state, even as the laws limit its outlets. And other states allow Detroit’s California nemesis to open galleries outside existing franchise laws.

If Musk would let them, more than a few dealers would gladly sign up to sell Tesla models in the heart of the Detroit industry because they’re capitalists first. Who wouldn’t want to franchise a brand that can announce its new Model 3 and collect nearly 400,000 deposits of $1,000 each. That’s more than a year before the models are promised to ready for sale.

Look, Michigan wants to have it both ways. It wants to be the vanguard of a new, quick, technology-leading auto industry capable of attracting top talent and claiming leadership as a mobility hub. And it wants to use the power of state law to protect a politically connected system that is deeply rooted in communities here and nationwide.

But can it be both? This isn’t as clear-cut a dispute as either side would have us believe — not if you accept the proposition that the industry will change more in the next five years than it’s changed in the past 50.

Should the retail end of it all be immune to similar, tech-fueled change because, well, that’s the way it’s always been? The short answer is no. A compromise that embraces competition is preferable to wielding political clout to stop it. Plus, the optics stink.

If tweaking industry convention by selling directly to customers is one way to win, Musk’s Tesla evidently is happy to oblige. Now it’s Michigan’s turn to shape an automotive future grounded in its past.

Daniel Howes is a columnist at The Detroit News. 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.