Tesla sues MI, challenges law requiring dealer sales

The automaker sues the state runners after the final verdict on September 15 that MI law states the automakers are forbidden to conduct the direct sales model.

The California automaker named Michigan Secretary of State Ruth Johnson, Michigan Attorney General Bill Schuette, and Gov. Rick Snyder in its lawsuit filed in in federal court.

Under Chief Executive Officer Elon Musk, Tesla eschews the traditional franchise dealership model, saying that electric cars - as a new technology - are best sold to consumers directly from the manufacturer.

It was denied because the company's business model of selling its vehicles directly to consumers is illegal under MI law, according to a final decision and order released Thursday by state officials.

The Michigan Department of State last week denied Tesla's application for a dealer license to sell to consumers, citing the law, which is backed by big auto companies and their dealerships. MI is among Connecticut, Texas and Utah in terms of states where Tesla can't sell cars directly to consumers.

Snyder spokesman Ari Adler said he does not comment on pending lawsuits. MI serves as an important battleground as Tesla fights for the right to sell directly across the entire country, which could become increasingly important as the automaker attempts to fulfill its 500,000-unit sales goal in the next few years.

Tesla now operates stores in 23 USA states and the District of Columbia and 20 other countries.

Not only did the state bar the company from selling its vehicles itself, it also did not allow Tesla to service vehicles owned by the residents of the state. And while there was a chance Tesla might appeal the ruling, it instead sued the state of MI in federal court.

The state has prevented Tesla from operating through the direct-sales ban and by rejecting Tesla's application for a vehicle dealer license, according to the lawsuit. House Bill 5312 - offered this year by state Rep. Aaron Miller, R-Sturgis - would lift the direct-sales restriction on Tesla.

However, the Michigan Automobile Dealers Association, which represents dealers statewide, counters that dealerships benefit consumers. But Michigan is one of four states which has blocked Tesla from opening stores. The automaker has said 373,000 customers have paid to reserve Model 3 cars. To buy a Tesla now, Michiganders have to drive to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis, where the automaker operates galleries, mostly in upscale shopping malls.