Tesla : What Will The New Legislative Session In Michigan Mean For Electric Vehicle Manufacturers?

The Michigan Legislature ended its session on December 31 without passing a bill that would have dramatically altered the landscape for electric vehicle manufacturers looking to sell and service vehicles in that state. The changes to that bill in the final months of 2020, however, could be a harbinger of things to come for electric vehicle manufacturers in Michigan as the legislature begins its new two-year session on January 13, 2021.

Prior to 2020, the Michigan Motor Vehicle Franchise Act already prohibited vehicle manufacturers—including electric vehicle manufacturers—from selling any new motor vehicle directly to a retail customer other than through franchised dealers. H.B. 6233 as originally introduced in September 2020 would have amended the statute to broadly define the terms “sell” and “selling” to mean “to engage in the business of buying, selling, trading, leasing, or exchanging, or offering, negotiating, or otherwise attempting to buy, sell, trade, lease, or exchange a new motor vehicles,” including but not limited to “ordering, discussing financing, or offering test or demonstration drives for a new motor vehicle.” The bill also would have added language declaring it unlawful for a vehicle manufacturer to “directly or indirectly own” a motor vehicle repair facility in Michigan.

H.B. 6233 declared that it would apply to “all manufacturers” once enacted, but included an explicit carveout for “[a] manufacturer that entered into a joint stipulation and motion for entry of dismissal on January 22, 2020, in Tesla, Inc. v. Jocelyn Benson.” This oblique reference to Tesla would have codified the terms of the settlement of hard-fought litigation between that manufacturer and the state, in which the state ultimately agreed that Tesla could—without running afoul of the existing dealer statute—own one or more facilities in Michigan to educate consumers about Tesla products and facilitate out-of-state transactions for the sale of Tesla vehicles; deliver new Tesla vehicles from out of state to Michigan customers; and own a subsidiary that itself could own and operate one or more vehicles repair facilities.

On December 2, 2020, a substantially different bill emerged from the Michigan House of Representatives. As passed, H.B. 6233 contained a narrower definition of “sell” and “selling,” eliminating from that definition any reference to “ordering, discussing financing, or offering test or demonstration drives for a new motor vehicle,” suggesting that any company can engage in these activities without violating the dealer law. The bill still contained a prohibition against manufacturers “directly or indirectly” owning a vehicle repair facility, although it added an exemption for a fleet repair facility if requested by the fleet owner. The bill as passed also eliminated the carveout for the “manufacturer that entered into a joint stipulation and motion for entry of dismissal on January 22, 2020, in Tesla, Inc. v. Jocelyn Benson.”

Ultimately, the Michigan Senate did not take up the bill before the legislative session expired on December 31, 2020, leaving intact both the Michigan Motor Vehicle Franchise Act and the state's agreement with Tesla. Although not parties to the Tesla settlement agreement, other electric vehicle manufacturers would have a strong argument that equal protection and due process considerations require that they should likewise be entitled to structure their operations in a manner similar to those of Tesla without running afoul of state law. This fragile balance for electric vehicle manufacturers could be upended, however, if the current session of the Michigan Legislature decides to take up the unfinished work of the prior session.

Originally Published by Seyfarth Shaw, January 2021

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Mr Brandon Bigelow
Seyfarth Shaw LLP
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