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Tesla takes government officials to court over prohibition of direct sales and service

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Its usually government officials taking corporate entities to court however, Tesla has just shown us that the law works both ways. The company has filed a lawsuit with the Western District Court of Michigan which contests its right to sell and service its cars directly to consumers in the state — something which is being opposed by the government officials of the state of Michigan.

The lawsuit doesn’t just involve Tesla, but has much wider implications. The sale of cars in the US, works at a fundamentally different level from that in say, India. In many US states, the sale and servicing of cars is done through a franchise dealership model where licensed third-parties handle the actual sales of cars from auto manufacturers.

So basically, once the car has been manufactured and delivered to the retailer, its his job to sell and service it. Tesla has been contesting the usual order of things and had even applied for a dealership license last month, which unfortunately, was rejected — bringing the company’s attempts to have a greater control over the sale and customer relationships processes, to a stop.

That doesn’t mean that Tesla doesn’t have any showrooms in the country. Indeed it does — many of them. However,  it is not allowed to sell its vehicles directly through these showrooms — which is kind of foolish. Instead, the company must rely on online sales and deliver the ordered product to customer doors. The showrooms meanwhile, serve merely as places which can be visited by potential customers. to know more about their chosen products and perhaps take a round in it.

However, the situation is even worse in Michigan where Tesla isn’t even allowed to open a dealership. Yup. The Michigan governing and regulatory bodies have chosen to keep the company from even operating a dealership of any kind — something which is pretty ironic considering that Michigan is widely known as the home of automotive manufacturing prowess, an industry which is seeing various revolutions brought about by Tesla.

Meanwhile, the Michigan Secretary of State, Attorney General and the Governor himself have all been named in the lawsuit has having had a hand in passing the law which keeps Tesla from operating its stores in the state. The company wants a jury trial which can reach a decision as soon as possible. The company may also be looking at changes in those sections of the law, which prevent it, and other manufacturers, from providing direct sales and services to the customers.

Stay Tuned!


A bibliophile and a business enthusiast.

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