Ever since Tesla broke into the market in 2014, a state-by-state battle has been waged across the country over state motor vehicle franchise laws that restrict a manufacturer's right to sell cars directly to consumers. Tesla has led the charge for direct distribution, arguing that selling electric vehicles through franchised dealers is not a viable option. Dealers have resisted Tesla's efforts, arguing that mid-20th century protection laws prohibit direct sales and service.
Tesla has won many of these battles — whether in court, state legislatures or motor vehicle commissions — and is now selling directly in many states. However, with a host of new EV manufacturers coming to market, the issue is now much larger than Tesla. New entrants such as Rivian, Lordstown Motors and Lucid Motors also plan to sell directly to consumers and argue that their right to do so is vital to their market access.
A recent skirmish in the Michigan legislature highlights the dynamic nature of the political battles over direct sales. Dealers supported a bill that would have codified a January settlement between Tesla and the state that allowed Tesla to sell and service cars (with a few formal hoops to jump through), but prohibited direct sales by other EV manufacturers. The bill passed a House committee but, with strong opposition from environmental, free-market and consumer groups, thus far has not reached a vote in the House.
Something interesting happened during the latest Michigan battle. Ford Motor Co. and General Motors, which have mostly backed dealers to date, switched sides and opposed the dealers bill. One could chalk this up to opposition to a Tesla-specific carve-out, but GM made clear that it opposed the direct-sales prohibition even beyond the Tesla carve-out. Further, the UAW opposed the bill as well. Have we reached a political tipping point?