Why Can't Elon Musk's Tesla Crack the Home of General Motors?

Some of the Tesla drama coming out the state of Michigan, explained. 

by Sam Blum

A lot about Tesla defies automotive tradition, including the company’s direct-to-consumers sales model, which has sparked the ire of the car dealer associations, in addition to state governments, throughout its young, dramatic life. Ground zero is Michigan, where laws keep Elon Musk from selling his cars there.

But Tesla has its advocates in the state, like University of Michigan law professor Dan Crane, who spoke at length Wednesday about the laws at a public forum, condemning their “protectionism for auto dealers.”

“Restricting the ability of manufacturers to find effective ways to get into the market…is bad for innovation,” Crane said.

Musk has shared some incisive remarks about the ADA in the past, even going as far to say that the organization is “perverting democracy,” in March of 2013.

But Musk’s invectives haven’t stopped the special interests from taking shape in several states — namely Michigan — to make sure that Tesla can’t sell its cars directly to consumers.

In October 2014, Michigan Governor Rick Snyder signed a law that completely nullified direct Tesla sales, as well as direct automotive sales of any manufacturer, in the state. The legislation was (shocker) backed by General Motors, the largest auto manufacturer in the United States.

The Tesla ban, while tough for the company, is compounded by a seemingly inconsequential bill that’s currently floating its way through Michigan’s Senate Economic Development Committee. It allows for direct sales of three-wheeled “autocycles,” which are chiefly made by a company called Elio Motors.

So, why Tesla’s out, these are in:

Elio Motors is allowed to sell direct to consumers in Detroit, while Tesla is not. 

Elio Motors

Many critics see the bill, authored in April by state Senator Darwin Booher, as unfairly incentivizing the Arizona manufacturer, which offers the newfangled vehicles for the paltry starting price of $6,800.

Booher has said that his bill doesn’t apply to Tesla even in the slightest sense, saying that he’s “not interested in getting into battle over Tesla.” And yet:


Oh: Elio’s production facility in Louisiana is owned by General Motors, and the company officially launches in 2016, when it will deliver a reported 41,000 pre-order vehicles to customers by mid-year.

Additionally, the Federal Trade Commission issued a letter denouncing the Michigan laws last May, which said the legislation was “likely harming both competition and consumers” across the state:

“Competition is at the core of America’s economy, and vigorous competition among sellers in an open marketplace gives consumers the benefits of lower prices, higher quality products and services, and greater innovation.”
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