Tesla Sues For Right To Sell Own Cars


Tesla is suing Michigan state officials for the right to sell cars directly to customers. It’s the first time it’s explicitly challenged existing laws that mandate third-party dealers, something Tesla says is outdated.

Many states have laws which ban manufacturers selling directly to customers rather than through franchised dealers. The most common argument for such laws is that it creates competition between dealers on price and service, avoiding the risk of manufacturers effectively holding a monopoly on selling their models.

Tesla disagrees in both practice and principle. In practice it says its business is different to ordinary gas cars because selling electric vehicles involves educating buyers on the technology rather than just promoting an individual model. On principle it says cars shouldn’t have a special exemption from the idea of free trade and points to the way Apple is perfectly at liberty to open its own stores selling its gadgets.

While Tesla has previously taken the issue to court in several states, in those cases it was suing for the right to be authorized as an auto dealer (which could then stock Tesla vehicles.) Those cases usually end up with the court saying the state was correct to reject the dealership license because the laws require a valid contract between a dealer and manufacturer, something that’s not possible when one company plays both roles.

Now Tesla is expressly challenging the legality of the law itself in Michigan. It says the law breaches measures in the Fourteenth Amendment. Although the amendment was mainly about establishing equal protection under the law in the wake of the abolition of slavery, Tesla is arguing that it is not getting the same legal rights and protection as manufacturers from other industries.

It’s also pointing to the constitution’s ‘Commerce Clause’ which previous cases have interpreted as meaning states can’t pass laws that unfairly restrict interstate trade. One law professor told the Detroit News that Tesla could argue the Michigan law unfairly favors dealerships based in the state.