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January 23, 2020 11:30 AM, EST

Tesla Clears Road for Rivian, Others to Sell EVs in Michigan Without Dealers

Tesla vehicles stand at a Tesla Surpercharger station in California in October 2019.David Paul Morris/Bloomberg News

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Tesla Inc.’s legal victory to sell its electric vehicles in Michigan without dealers could clear a path for other carmakers to follow.

As long as it complies with a few unrestrictive legal technicalities, the electric car maker is free to deliver Model 3, S and X vehicles directly to customers and service them through a subsidiary, the state ruled Jan. 22. While Michigan will consider other businesses’ approaches on a case-by-case basis, as long as a manufacturer doesn’t have an existing dealer network, it could follow in Tesla’s footsteps, according to Kelly Rossman-McKinney, a spokeswoman for the attorney general.

That’s significant for electric-car upstarts including Rivian Automotive Inc., the truck and SUV maker that raised almost $3 billion last year from the likes of Amazon.com and Ford Motor Co. The Plymouth, Mich.-based company planning to start selling its R1T pickup and R1S SUV late this year is waging the same costly legal battles state-by-state that Tesla faced in its early days.

“Having settled on these terms with Tesla, it would seem legally very difficult for the state to deny a similar arrangement to any other company situated like Tesla,” Daniel Crane, a University of Michigan law professor who specializes in antitrust and regulatory issues, wrote in a blog post after the settlement was announced.

Rivian declined to comment, as did the Michigan Automobile Dealers Association. Other new entrants planning to sell cars directly to consumers include Lucid Motors, which has said it aims to start production of its Air sedan late this year, and Byton Ltd., which is targeting 2021 for the launch of its M-Byte SUV.

Federal Fight

Tesla secured a victory in Michigan after filing a federal lawsuit against the state in 2016 challenging its ban on direct-to-consumer car sales. The attorney general’s office insists the accord doesn’t jeopardize existing state franchise laws, which prevent manufacturers from opening stores that would compete with dealers.

Michigan ruled that sale contracts Tesla signs with Michigan consumers will have to indicate that the transaction took place elsewhere. But customers won’t actually have to leave the state to complete the contracts, so the stipulation amounts to a paperwork requirement.

The decision isn’t a slam dunk for Tesla because Michigan’s ruling fell short of setting a national precedent, according to Patrick Anderson, principal of an eponymous consulting firm that has assisted dealers in other state battles over franchise laws.

Easier Service

Existing Tesla owners in the state, who until now have had to travel to Ohio and other states to have their cars repaired, are poised to benefit from the ruling.

Robert Vogt, an automotive engineer living in Ann Arbor, said Tesla used to pick up his Model S and haul it more than 50 miles to work on his car in Toledo and would drop off a loaner car for him. But that stopped last summer, when Model 3 deliveries surged and started taxing the company’s mobile-service support network.

“I have a service light on mine that just popped up, and I’m trying to figure out how to get that dealt with, because I’m not going to Toledo,” Vogt said. “If they had a service place in Ann Arbor, that would be totally fine; I would be happy to take it there.”

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