Electric carmaker Tesla has filed a dealership application in Michigan. The application is set to challenge the direct car selling ban in the state.

Tesla filed the initial application back in November 2015, seeking permission to open a dealership and a service center in Michigan. The office of the Secretary of State, which handles dealership licenses, reviewed the application and other documents from Tesla.

Fred Woodhams, a spokesman for the agency, says Tesla has applied for a "Class A" dealership license, which means that the company should also have a licensed repair facility. Woodhams says that the decision on Tesla's application can take one or two months.

The carmaker has been pursuing legislators in Michigan to change the law that currently does not allow car companies to sell their vehicles directly to consumers.

In late 2014, the state passed a law that requires carmakers to sell cars only via dealers. However, Tesla sells its cars via company-owned stores and do not involve an intermediary. The rejection of Tesla's application can mean that the electric carmaker will start a legal battle against the existing law.

"Tesla is committed to being able to serve its customers in Michigan, and is working with the legislature to accomplish that. The existing law in Michigan is very harmful to consumers," says a Tesla spokesperson. "Tesla will take all appropriate steps to fix this broken situation."

On Jan. 19, the U.S. Federal Trade Commission sponsored panel discussions regarding retail models in the automotive industry. The discussions focused on the sales model followed by Tesla and Elio Motors, another carmaker hoping to directly sell its cars to customers.

Daniel Goldberg, who is a lawyer at Morgan, Lewis & Bockius LLP, suggests that prohibiting direct car sales can also be challenged as unconstitutional.​

In the past, Tesla hinted that it would consider filing federal lawsuits if individual states will forbid the company to sell cars directly to customers. The carmaker has engaged in battles with car dealers associations in many states. These associations support legislation, which aims at prohibiting direct car sales.

Tesla executives suggest that they want to settle the issue through a clear legislation than in the court.

Currently, Texas and Michigan are among the handful number of states that does not allow direct selling. The laws prevent carmakers from opening their own stores, which would compete with independent dealers. Such competition will potentially cut the commission of dealers and affect the investments made in the car dealers.

Photo: Jeff Cooper | Flickr

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