Michigan Governor Rick Snyder yesterday signed a bill to ban car manufacturers from selling directly to customers within the state. The law is meant to ensure competition and fair trade between car manufacturers and dealerships.
Though not openly referring to Tesla Motors as the cause for this update to the law, it is fairly obvious to all that Tesla has caused the need for reinforcement of the existing bill. The bill, ‘HB 5606’ protects franchised dealers by regulating the fees that automakers are allowed to charge dealers.
Tesla’s sales are primarily online, direct to the customer in question. The advantage of this from Tesla’s point of view is that it safeguards the pricing of their products and gives them full control over distribution.
Tesla claims that this is necessary because of the nature of electric cars still being seen as an alienated product, something that requires their expertise in order to fully explain to the buyer all the necessary information. Not to mention that they are luxury cars and therefore potential sales for each vehicle are vitally important to the company’s success.
There are two sides to this discussion and it’s bound to have its opposing views as well as its supporting views. But the state of Michigan was almost entirely in favor of the law to essentially ban Tesla, with a house vote of 106-1, and senator’s votes of 38-0.
GM has also jumped on the bandwagon in support of the cause, releasing a statement praising the decision because it would “ensure that all automotive manufacturers follow the same rules”.
Tesla hit back at these remarks (which, though GM isn’t for one minute being accused of supporting the bill in order to purely spite Tesla, it seems fairly obvious that GM will feel quietly self-satisfied about their biggest electric vehicle rivals ‘speed bump’ for future sales within Michigan) with: “What’s good for GM’s customers is not necessarily good for Tesla’s customers,” and, “What’s good for gasoline cars is not necessarily good for electric cars.”
Another debatable side of the argument is that not all consumers enjoy the negotiation side of dealing with dealerships. Haggling has long been part of the dealership process, securing the best price with other essential or non-essential add-ons, but surveys show that many buyers feel cheated after having bought from dealerships, even if it may not be the case taking in to consideration their purchase.
Having a set price from an online retailer such as Tesla means that the company can charge whatever they please, and essentially cutting out ‘the middleman’ and therefore saving themselves and the consumer money. Though admittedly, if you can afford $100,000 for a car, you probably aren’t too strapped for cash anyway.
Michigan joins a small number of states that have banned Tesla’s sales approach, including Texas and New Jersey as of April next year. It will be interesting to see if other states follow the same route in order to protect
their franchised dealerships.