As you’ve probably heard, a new bill which effectively bans Tesla Motors from selling directly to consumers was signed into law by Michigan Governor Rick Snyder. The new law could also prevent Tesla from even opening a gallery in the state.
The part you may not have heard is that General Motors was an outspoken proponent of the bill, urging the Michigan Governor to sign it into law.
The automaker sent a letter to Snyder, stating: “We believe that House Bill 5606 will help ensure that all automotive manufacturers follow the same rules to operate in the State of Michigan; therefore, we encourage Governor Snyder to sign it.”
Obviously, it would be unsafe to assume that this letter in and of itself was enough to push Michigan’s Governor into signing the bill into law; automotive dealers, and even the National Automobile Dealers Association itself, came out as proponents of Bill 5606 – a Bill originally aimed at protecting dealers’ rights to charge whatever additional fees without any limitations from the factory.
But there’s no denying that General Motors’ support (perhaps spurred by pressure from its dealer network?) of the Bill must have had at least some influence on Snyder’s decision to enact it. Other states have enacted (or attempted to enact) similar legislation to stop Tesla Motors from selling direct-to-consumer, a push-back against Tesla Motors that the Federal Trade Commission has called “anticompetitive.”
Comments
At the end of the day a Tesla either has to adopt a dealer model like other manufacturers are required to use in other states. or the all the manufacturers should be able to sell directly. With the times alot of manufacturers came up a dealer network was the best way to sell cars. While times have changed the dealers are now anchors on a sinking ship pulling these large companies down. Either they should be able to cut that anchor or tesla should have to take on one of its own.
I cant get behind an economy that puts tesla above other manufacturers and doesnt require them to follow the same rules other automakers have to follow. Nor should the companies have to follow those rules if tesla doesnt have too.
It’s a sticky situation all the way around. But Tesla should really be worrying about their inevitable collapse of the ever inflating stock price and try making a profit first off the model s first. Tesla is shoulder deep in loans and has yet to start paying that back.
You completely got this backwards!
The new law passed in Michigan has nothing to do with direct sales. Tesla can still sell directly in Michigan. The new law prevents Tesla from setting up a gallery, it also creates a “special status” for car manufacturers who have franchises. Those manufacturers that don’t have franchises under the new law have their 1st amendment right voided. They can’t inform customers, they can’t set up showrooms, they can’t even go to the Detroit Auto show.
How is this FAIR treatment?
Now if you want to talk about making an ideal fair policy. My suggestion is this:
If you have a franchise, you sell through a franchise. If you have no franchise, you sell directly. If you have a franchise and don’t want to franchise, you can either buy back your franchise agreements or no renew your franchises.
This would make it fair for both franchises and manufacturers.
As for your last statement, you are not making sense. So far Tesla stock is doing well. And the Tesla Model S is already very profitable for over a year. Tesla is not in deep loans. Most of their obligations are in stock options. So while they count as debt, they are not really debt to the company.
Perhaps you should do some more research, it IS about direct sales…there was an article about it on CNBC this morning:
“Michigan becomes the fifth U.S. state to keep Tesla from easily selling cars directly to consumers, joining Texas, New Jersey, Arizona and Maryland, according to Tesla.
In all of those states except Michigan, Tesla operates “galleries” where consumers can view Tesla cars but cannot discuss prices, take test drives or order cars.”
They are asking for special treatment when they want to sell cars differently then all other makers who can’t just jettison their dealers at the drop of a hat. Those dealers have invested large sums of money in their businesses and would sue and to end a franchise would be prohibitively expensive…you’re talking, building, land, inventory, ect ect.
You misunderstand the difference between the terms ‘buy’ and ‘sell’. Tesla is not allowed to SELL or SERVICE vehicles in the State of Michigan at all. Customers who live in Michigan are able to BUY Tesla Motors products because of the Constitutional rules of Interstate Commerce. The cars are purchased via the internet from servers hosted in California operated by a company based in California. Michigan has no way, and no right, to stop or halt or prevent that activity. Their laws designed to protect ‘independent franchised dealerships’ specifically state — NOW — that any automobile manufacturer is not allowed to promote the sale of new vehicles EXCEPT through ‘independent franchised dealerships’ — unless it is for sale to a government agency or recognized non-profit group. Tesla cannot actively engage in the process of SELLING.
The problem here is that Tesla was able to sell in Michigan, prior to the revised law being signed by Governor Rick Snyder. At the 11th hour, just prior to a final vote, a part of the bill that was not the official reason for an amendment to existing franchise law was modified, altered, stricken in order to change the scope of the entire section of law. Before, the language said that a manufacturer could not compete against its own franchises, but now it reads that a manufacturer must use franchises. See the difference? Tesla had no franchises to compete against. They had a choice. Then a change was made specifically to remove the element of choice.
The problem here is that Tesla was able to sell in Michigan, prior to the revised law being signed by Governor Rick Snyder. At the 11th hour, just prior to a final vote, a part of the bill that was not the official reason for an amendment to existing franchise law was modified, altered, stricken in order to change the scope of the entire section of law. Because of an obscure provision of parliamentary procedure, it was not necessary for the legislature at large to be made aware that language had been stricken from the document they were about to vote on, even if that meant its entire meaning had been changed. So there was no further discussion, debate, or public comment allowed, requested, or made prior to the final vote. Legislators rightly thought they were just voting on the exact language that had already been approved in committee, but it was something else entirely. Before, the language said that a manufacturer could not compete against its own franchises, but now it reads that a manufacturer must use franchises. See the difference? Tesla had no franchises to compete against. They had a choice. Then a change was made specifically to remove the element of choice.
GM is against the store model….except when it helped them sell Saturns.
As always, dealers offer no value added service and are merely an obstacle between you and your car; an obstacle that demands money to be placated.
To the author, your last sentence was completely inappropriate. I come to this site to get the latest GM news as I have always been a fan of GM and feel they make some of the best and most exciting products in the world. If you want to write about your distaste for GM taking bailout money and being cleansed of legacy costs to become viable, then go write for toyoda http://www.toyotanation.com/.
I agree 100% Joe. Nothing better then an anti GM write on a GM dedicated website.
He’d fit in well at Toyota nation.
Working for an entity doesn’t mean you have to follow it blindly.
But if he wrote for Toyota, he’d be writing for a company didn’t get rewarded financially for building garbage. GM did. The only difference between old and new GM is that they now charge an exorbitant amount of money for said trash (should I pay $25k for a Daewoo Cruze or an AWD Subaru that does everything better? Hmm…)
I own several GM, I would know, you can set your clock by what breaks on them even in normal use and good maintenance. Doesn’t happen on Japanese makes. It’s that easy.
Why should we only look at the good GM has done? Because it makes you feel good? You fan boys don’t releize that GM, Ford, Toyota don’t give a crap about you. The bailout will always be mentioned so deal with it, and so will the record recalls. Ford is still known for the exploding pinto. History is a good thing to look at so you don’t repeat. If the car had an LS based engine you’d be routing for it big time.
To clear things up I drive GM and Ford vehicles and like them, but cain’t stand when people get all bent out of shape when the bailouts or recalls are mentioned.
I cant stand when people need to bring up a bailout in attempt to try to prove a point. This law has absolutely nothing to do with a bailout. Absolutely nothing. Moving the goal posts of a discussion just to throw a cheap shot is something I would expect from a high school newspaper. This article is about the 5606 bill. not a bailout.
Well a lot of people didn’t think they deserved a bail out, but they got it anyway. Some of those people might think that since GM got help maybe Tesla should too? Don’t expect the bailout conversation to ever go away. For the record I’m glad GM got a bailout.
Hmmm… Perhaps because it proves a point? Yeah. I think that’s it. Data, information, and facts, gleaned from historical evidence, can actually PROVE A POINT! That is the essence of debate. Not rolling over like a puppy being petted. Geez.
I’m no longer a fan of GM products – never have been. Have you traveled at all Joe to see the better exciting products being created in the world – hmmmm Audi. GM keeps trying to relive the glory days by constantly remaking their old models. They are failing. Not to mention in a day and age where the US president goes to Europe (they have the most amazing cars) to state that the U.S. has lowered it’s carbon foot print more than any other nation (lies) and then you get GM making it harder for Tesla so sell their very low emission cars?? America is screwed – GM is screwed. Leave while you can.
So what does this so-called “author” think, just because Tesla is a new company that they should get special treatment and not have to sell cars the same way as EVERY other car company in the nation? Really? And that has ANYTHING to do with GM getting a bailout??? Not to mention his article title is pure speculation and could be considered libel. What a total douche
Except the law in Michigan is just the opposite, it gives special treatment to companies who have franchises and strips 1st amendment rights from those that don’t.
Libel? Let’s clear the air. This is an official statement from GM:
“General Motors applauds Governor Snyder’s signing of HB 5606. This will provide stability and support for our dealers, who are focused on delivering a world-class sales and service experience for our customers. Further, it will ensure we compete under the same rules in the marketplace as other automobile manufacturers.”
Deal with it.
Then why did the traditional automobile manufacturers get ‘special treatment’? First, they won the right to allow their horrid ‘independent franchised dealerships’ to absolutely REAM buyers with a ridiculous collection of fees without bounds… Then they were allowed to do a back door, back room, under-the-table, behind the scenes deal that allowed Tesla to be banned from an entire State.
Tesla doesn’t want special treatment. They want the rules put back the way they were before. Because just like everyone else, they had a choice upon entering the Great State of Michigan for the first time to sell their wares: 1) use ‘independent franchised dealerships’; or 2) sell direct. The ‘special treatment’ that was granted in October 2014 now allows the traditional automobile manufacturers, who are trapped in perpetuity by law to always sell through ‘independent franchised dealerships’ to ensure Tesla doesn’t get the CHOICE they were afforded when they themselves mistakenly chose to use franchises.
GM in particular has over 900 locations in the U.S. But every single one of their passenger cars was outsold by the Tesla Model S in 2016, even though Tesla only had less than 100 locations nationwide. That is proof that Tesla’s direct sales method is not only working, but is superior to using franchises. There are literally dozens and scores of Cadillac locations in Michigan you would think they would have some faith in their chosen distribution method against a newcomer like Tesla. If you believe in franchises, prove their worth by defeating Tesla with actual sales, not dirty tricks.
I am tired of all this Tesla BS.
If there want in the game play by the rules and if they want to change the rules then change them for everyone but the dealers will never let that happen.
While I would have no problem with cars being sold direct one company should not be given the ability to do this unless all the others can do so themselves.
The problem is the others are saddles with dealers and really have no choice but to use this system. For a state to let one come in with no dealers puts them at an advantage the others could not join easily or at all.
All I ask for is a level field for all not just one.
Sorry but I am not one that has drunk the Musk Kool Aid. I have no issue with the car and I hope they make it but I am not buying all the hype that Elon dishes out. He likes to think he is a real life Tony Stark but his problem is he lack the Iron Man Suit.
Every car company before Tesla was given a choice to enter sales of new automobiles in Michigan: 1) use ‘independent franchised dealerships’; or 2) sell direct. The ‘special treatment’ that was granted in October 2014 now allows the traditional automobile manufacturers, who are trapped in perpetuity by law to always sell through ‘independent franchised dealerships’ to ensure Tesla doesn’t get the CHOICE they were afforded when they themselves mistakenly chose to use franchises. This was done to block Tesla from having the ability to choose. Because the ‘independent franchised dealerships’ knew that Tesla would NOT choose THEM. Because they aren’t needed to sell at all.
Ford also wrote a similar letter.
I agree the law in Michigan (and most every other state) should be abolished but it is the law of the land. And this minor revision makes sure all play by the same rules. Only fair. Now if you disagree with the rule then get it abolished.
This one word change just tightened up a loophole Tesla has used in other states to bypass the intent of the law already on the books.
” “We believe that House Bill 5606 will help ensure that all automotive manufacturers follow the same rules to operate in the state of Michigan,” GM said in a statement.”
How is it a ‘loophole’ when it was: 1) the law of the land; and 2) was a choice offered to EVERYONE before Tesla? It wasn’t a loophole at all. It was merely ASSUMED that EVERYONE would ALWAYS choose to use ‘independent franchised dealerships’ — simply because EVERYONE always had… But it was ALWAYS a CHOICE before. Now it is a MANDATE, and THAT is not fair. Apparently this means someone never intended for it to be a ‘choice’ to begin with — because the instant it is KNOWN someone intends to pick the alternative, the law was mysteriously changed in a back door, under the table, blindsided fashion, without public discussion, debate, or comment. How is that playing by the rules? How is that at all above board? How can you possibly defend such actions at all?
http://digital.olivesoftware.com/Olive/ODE/DET2/LandingPage/LandingPage.aspx?href=VEROLzIwMTQvMTAvMjI.&pageno=MQ..&entity=QXIwMDYwOA..&view=ZW50aXR5
Get the real story.
And to follow up. GM/Ford? dealers are not worried about Tesla. They are just a bump in the road.
Their fear is the next big thing coming to the US, Chinese marques. Within 10 years the Chinese will be here and if they sell directly to the consumer they can cut their prices even more with out the middle man cost. Maybe order on line and car is delivered to your door and service is at a company service only shop.
While I would welcome this type of sales it would be unfair to marques that are currently FORCED to sell through independent franchises
So true!
Imagine cheap Chinese car from Amazon.
This is a deal were everyone needs to be on the same program. Either let Tesla sell direct and open it up to all or do not open it to anyone.
The only fair thing is a level field for all.
Anyone else note Buffets move to buy up large dealer chains? He is working to dump cheap cars from china on the US market.
It is about as ‘level’ as a baseball field. Where the best odds are 4:9 for the Offense. Usually it is only 1:9. That isn’t fair at all. The traditional automobile manufacturers know full well that their current franchised based distribution network is flawed, dysfunctional, and inefficient. That’s why Toyota and Honda can have their cars in the Top Ten best selling vehicles year in and year out, despite having hundreds fewer locations than Ford, GM, or Chrysler The Japanese had the benefit of seeing how discordant the sales channels were for competitors before setting up their own. And Tesla has the benefit of seeing all of their failures too, along with those of the Detroit Big Three. So, Tesla made the correct decision, to sell direct, because franchises are not needed anymore in this modern world of ours. That is simply good business, and has proven as such. The traditional automobile manufacturers know full well that using ‘independent franchised dealerships’ would be a disadvantage for Tesla, just as would be getting tied to the UAW. They hope those groups would kill Tesla before they could make a real difference, just as they have helped kill off everyone from Tucker and DeLorean to AMC and Fisker.
No one is afraid of the Chinese. BYD is largely owned by Warren Buffet of Berkshire-Hathaway (BRK-A). He has already bought a large dealership chain in the Pacific Northwest. So he is on the same side as the dealerships.
Those who are ‘forced’ to use ‘independent franchised dealerships’ were adults who walked into those arrangements with their eyes wide open and a cadre of lawyers by their side. Tesla has the benefit of seeing the result of their mistakes, and being smart enough to avoid repeating them. The traditional automobile manufacturers knew what they were getting into, but didn’t have the benefit of the internet to promote their products and make it so much easier to sell direct. That isn’t Tesla’s problem. They should not be faulted for the lack of insight or forethought by those who went before them.
Tesla has never asked to destroy the franchise system. They simply don’t want to take part in it. It would be like being told you couldn’t study at college unless you pledged and became a member in good standing of a Sorority or Fraternity. That would be [FARGIN’ BOLSHEVIK]. I’m not much of a ‘joiner’, screw your frats, man! I’m not getting hazed by anybody!
This so-called “author”/total douche is *also* glad that GM was bailed out, for the record. The products that General Motors puts out today are outstanding in terms of performance for the price. But that GM received undeniably preferential treatment from the government automatically weakens anything they might say about what is and isn’t anticompetitive; a government bailout is necessarily anticompetitive.
As for dealerships, there is nothing particularly logical about arguing that an automaker “ought” to sell through franchises. Tesla adopted a new model, and the new illegality of that model places a burden on a small, electric car maker that wouldn’t be large enough to be granted a bailout for a number of years still.
As for the illegality of the galleries in the state of Michigan now, that’s just the absurdity icing on the stupid-cake. Now if you’ll excuse me, I must away in my Japanese econo-box to my other job writing for Toyoda.
I’m with you.
You really have no concept of how things got to this point and why things have not and for the most part can not change easily.
You can not approve one MFG under one rule and then hold the other to a different standard. You either fix the system for all or you make them remain in the same system.
Now it is great if you want to do away with the dealer system but then how do you deal with the loss of investment and employment that would be lost if you change the system?
Also how do you deal with the future price fixing that will go on at the MFG in time. This has happened before and it can happen again. While in the beginning pricing will be lower and competitive but there is nothing in place that would ensure it will remain there. That is why the dealer system was put in place years ago. It was intended to keep the pricing competitive and try to keep the prices lower.
The Auto makers would all love to have direct sales but there is no way the government would cut them free so why do you expect them to agree that it is ok for any new comer to get a break just because they were not forced into the franchise system years ago.
That would be like saying anyone born before 1965 have to continue to pay taxes but those 1966 and later do not have to pay taxes. Reality is they have to be all in or all out and as long as there are a great number of dealers involved I suspect that all MFG will have to remain in including new comers.
It is not fair that Japan has such high tariffs on their cars that few lower priced auto MFG can compete in Japan. But that is the way it is as they are protecting their own market. It too is not going to change.
“You can not approve one MFG under one rule and then hold the other to a different standard.”
Excuse me? Look around. That is precisely what this change to franchise law in Michigan is doing. It created a ‘different standard’ for no reason except to BLOCK Tesla’s advancement. Every manufacturer of automobiles before Tesla was given a choice, to pick franchises or sell direct. None of them were MANDATED to use franchises. Yet, all of them CHOSE franchises. That was THEIR DECISION. It was not decided FOR THEM by THE LAW.
But now, as a special favor to both those traditional automobile manufacturers who are themselves locked in perpetuity to use franchises, as well as to the ‘independent franchised dealerships’ who reasoned correctly that there was no way in [HECK] that Tesla would be stupid enough to make the same choice, the law has been CHANGED [NO, not FIXED] to REMOVE THE ELEMENT OF CHOICE. And that was done specifically to prevent Tesla from making the choice they preferred — to sell direct. GM’s own language indicates that for Tesla to have an ‘advantage’ by NOT using franchises, that effectively means Tesla would be at a DISadvantage by being FORCED to USE franchises. Imposing a disadvantage is not at all fair.
GM, Ford, Chrysler, and all the rest specifically chose the disadvantage, and chose to be chained to it in perpetuity. They figured they would come out on top in the end. It worked fine when GM held 53% of the U.S. market in circa 1975. It had diminished somewhat by 1985 when they only commanded 35% of the market here. And it has practically evaporated with only around 17.3298941% of the U.S. market in 2016, less than a decade after bankruptcy. Trust that if GM still commanded 53% of market share here, and had sold 9,305,716 vehicles in the U.S. in 2016, they wouldn’t give a flaming fig about Tesla. But though they still moved more units than anyone else, they only sold a third of that amount at 3,042,775 and every passenger car in the Cadillac division was outsold by the Tesla Model S. So, yeah… With the impending release of Tesla Model ☰, a car with a base price about half as much, and a whole lot of interest, they certainly are a bit worried, and they should be. But you know what? When it comes to fairness, it is important to make note of integrity, and to promote fairness through fair dealings. And in competition with Tesla, all Cadillac, and GM as a whole, have to do is build better cars. That shouldn’t be too hard for a company that has been around since 1908, right? Tesla is a newcomer, whose first cars hit the road not even a decade ago. Backdoor, back room, under-the-table crony politics should not be necessary to actually compete — that is more the parlance of those who want things to be as unfair as possible.
And if making things ‘the same rules for everyone’ was so important, why weren’t these changes to the law offered in committee or for open debate,wide discussion, and public comment prior to vote? Wouldn’t that be… fair? Surely the individual(s) who crafted this targeted change in law were aware of what it would do, and would be able to defend its merits in open session. Right? It seems more like this was a means to ‘get away with it’. Should those who made such moves succeed in the dark, when they could not do so in the light?
To lend some background information for this continuing debate: previously, the law in the state of Michigan was that an automaker could not sell directly to the customer AFTER that company already had an established dealer network. The thought of a new marque ever becoming big enough to pose a considerable challenge was then-considered unthinkable.
Fast-forward to today, wherein Tesla is gaining steam, but still does not have an established dealership franchise. Of course eventually, a dealer network will likely be a functional necessity for Tesla Motors; there is a reason that dealerships exist, and a vital function that they perform. But at no point prior to the passage of Bill 5606 would Tesla Motors have been violating the law by attempting to sell directly to customers, as that is their prerogative, not being a large enough automaker to yet have an established franchise.
Bill 5606 is steeped in much more controversy, too, regarding the illegality of Tesla opening a gallery (which I think we can all agree is quite preposterous), and the success of the lobbying which persuaded the MI Governor to topple an old law because one possible threat to the big three managed to manifest itself.
Please, keep the debate going; sophisticated arguments like this are paramount to social progress!
Thanks a lot for the attempt at reason. Unfortunately, too many are accepting the ‘spin’ from NADA and ‘independent franchised dealerships’ that Tesla is the one that wants ‘special treatment’ and that Tesla must ‘play by the same rules’ as everyone else. Not enough has been done to point out that it was those guys who changed the rules, without prior warning, open debate, wide discussion, or public comment. Methinks that was not accidental, but certainly purposeful.
I do not think GM is opposed to what Tesla is doing, but that Tesla would be treated differently than everyone else in the market. The key lies in the statement that GM made:
“…automotive manufacturers follow the same rules to operate in the State of Michigan”
….unless the rules change and then I think GM would be fine with doing exactly the same thing that Tesla is doing.