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Is Tesla finally going to start franchising dealerships?

Is Tesla finally going to start franchising dealerships?

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The Detroit News reports that Tesla applied for a dealership license in Michigan last November, citing MIRS. The license, known as a "Class A," is for an applicant that "buys and sells new vehicles under a franchise agreement or a contract with a new vehicle manufacturer," according to the Michigan Secretary of State's paperwork.

Of course, that reads a little oddly considering that Tesla is the "new vehicle manufacturer" in this case — and Michigan banned direct sales of cars to consumers in 2014. This move would appear to be Tesla's latest maneuver to sell cars in a state where it doesn't currently; MIRS says that the license would allow anyone other than Tesla itself to operate the facility, a departure from the direct sales model that the company has used so far. Tesla hadn't responded to a Detroit News request for comment, but the application is currently making its way through the state's approval process.

How would this circumvent the ban?

Tesla's fight to sell cars directly has spanned several years, leading to high drama in a number of states like Texas, New Jersey, and Michigan, among others. It seems harmless enough — other types of business own and operate their own stores all the time — but the company has been hamstrung in states where the dealership lobby is particularly strong. (The basic argument from dealership franchisees is that car companies shouldn't be allowed to devalue their investments in brick-and-mortar shops.)


Currently, Tesla's map of dealerships shows a completely empty Michigan.

As a part of the Class A approval process, the applicant is required to operate its own repair shop within 10 miles of the dealership or have an arrangement with "a registered repair facility" who can handle the work. The News notes that Tesla says a Detroit-area service center is "coming soon," so that could meet the requirement.

Tesla is likely motivated to break into states where it doesn't have a presence, particularly as it nears the announcement of the mass-market Model 3. Michigan, a stronghold of the legacy auto industry, has proven to be one of the harder targets.

Update Feb 2 12:30PM ET: Tesla has released a statement saying that it is using the application as a vector to change Michigan's anti-direct sales laws, not to actually franchise dealerships.