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Tesla Motors Files Lawsuit Against Michigan: It Really Wants To Sell Electric Cars In The State, But Not Through Dealers

23 September 2016, 11:55 am EDT By Aaron Mamiit Tech Times
Tesla Motors has filed a federal lawsuit against Michigan that claims to declare the "anti-Tesla" law of 2014 as unconstitutional. If the company succeeds, there will be a significant impact not just in the state but across the United States.  ( Spencer Platt | Getty Images )

Tesla Motors filed a federal lawsuit against the state of Michigan, claiming that a law put into place in 2014 that prevents automobile manufacturers to sell cars directly to customers is unconstitutional.

The lawsuit, which named Michigan Gov. Rick Snyder, Attorney General Bill Schuette and Secretary of State and Chief Motor Vehicle Administrator Ruth Johnson as defendants, is challenging the "anti-Tesla" law that requires car companies to sell their vehicles only through independent, franchised dealerships.

The specific law being targeted by the lawsuit is Section 445.1574 of the code of Michigan, which prohibits selling new vehicles directly to customers unless the buyer is a nonprofit organization or a local, state or federal government or agency.

The lawsuit is seeking for two things, the first one being the declaratory judgement that the direct car sales ban in the state is unconstitutional, and the second one being a permanent injunction on state officials from once again enforcing the law.

Tesla Motors filed for a dealership application in Michigan early this year, as it looked to challenge the state's ban on direct car sales. The application was denied earlier this month, with Tesla Motors still not receiving an update on a separate application to have a vehicle repair facility in the state registered.

Tesla Motors executives have previously suggested that the company wants the issue to be settled through clear legislation instead of through lawsuits. With the rejection of the company's dealership application in Michigan, it seemed that Tesla Motors had no other choice.

According to University of Michigan law professor Daniel Crane, Tesla Motors resisted filing a lawsuit, as it was the company's last resort.

Crane added that if the anti-Tesla law would be ruled unconstitutional, it would have a significant impact not just in Michigan but on all dealers across the United States.

Until now, the company has been tackling challenges against its direct sales model separately in states which have prohibited it. Specifically, these states in addition to Michigan are Connecticut, Missouri, Texas and Utah.

A federal court ruling, if it would be in favor of Tesla Motors, would singlehandedly solve all of the company's problems on states preventing the implementation of its direct sales model. University of Richmond constitutional law professor Carl Tobias thinks that the company has a strong argument and can possibly win the case, but it will depend on the judge and what Tesla Motors can prove.

Tesla Motors has repeatedly defended the need for a direct sales model for its electric vehicles, due to the public remaining largely unfamiliar with the technology. The retail operations of the company have been designed to address consumer concerns on electric vehicles and showcase the products and services of Tesla Motors, which are things that dealerships might not be able to do.

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