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Tesla loses protections in latest Michigan bill to ban direct sales

Tesla and the state's attorney general previously struck a deal to open a back door, but Michigan's House of Representatives has closed it.

Tesla Alaska Testing Facility
Surely, Tesla isn't happy about this.
Nick Miotke/Roadshow

Tesla will likely gear up for a major legal fight with the state of Michigan, as the state's House of Representatives closed a back door that would allow the electric carmaker to continue delivering cars in the state directly, the Detroit News reported Wednesday. Under Michigan's dealership franchise laws, no company may sell vehicles directly to consumers, which had long been a thorn in Tesla's side -- until this past January.

Tesla and the state's attorney general agreed to a settlement that would essentially grandfather Tesla's process into law, while banning other startups from doing the same. The settlement said Tesla could deliver cars in the state of Michigan as long as the sale occurred outside of the state on paper. Before then, soon-to-be owners needed to travel to a neighboring state to take delivery. The bill would also prohibit these companies from directly or indirectly owning a vehicle repair or service center, as part of current franchise laws.

But the Republican-controlled legislature struck the settlement language from a final bill that passed the House in a 65-39 vote on Wednesday. The bill explicitly bans all automakers from the practice. It now heads to the state Senate for passage and would then need a final signature from Democratic Gov. Gretchen Whitmer. 

Tesla does not operate a public relations department to field requests for comment.

The implications of the bill would have major consequences for other startup automakers, such as Rivian and Lucid. The former told Roadshow earlier this year that the bill "means that Rivian, a company with a substantial presence in Michigan, would be barred from taking care of its own customers in a state where the company has invested substantial capital and created hundreds of jobs to help lead electric vehicle adoption from Michigan." At the time, it also called out the hypocrisy of grandfathering in Tesla while giving a cold shoulder to others. That's not the case any longer, with the settlement language out the window in this latest version of the bill.

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