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Tesla Sues Michigan, Claims State Operates A Car Dealership Monopoly

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Tesla Motors filed a lawsuit against Michigan officials Thursday after the company was banned from selling vehicles in the state.

The California-based automaker is suing Michigan Republican Gov. Rick Snyder, Secretary of State Ruth Johnson, as well as Attorney General Bill Schuette for the right to build direct-to-sell car dealerships in Grand Rapids, Michigan.

The lawsuit is part of an ongoing battle between the electric vehicle maker and state car dealership associations that protect traditional car dealerships from competing with unorthodox auto-manufacturers.

The case comes shortly after the secretary of state rejected Tesla’s application for dealership in the eastern part of Michigan — a 2014 state law requires a car dealer to have a contract with an already established car manufacturer.

The decision to deny the electric vehicle maker a shop in the state forces customers to travel to Chicago, Cleveland, Columbus, Cincinnati or Indianapolis to pick up a Tesla vehicle.

Michigan’s rejection of Tesla comes on the heels of similar moves by other states.

A Missouri court on Sept. 7 effectively decided Tesla can own and maintain showrooms in the state but can’t sell cars directly to consumers at those locations.

Dealers in New Jersey claimed in 2014 that Tesla’s direct sales distribution model is a monopoly, whereas dealerships are a mandatory customer convenience for handling the predictably high volume of automotive recalls.

The state’s contention is faulty considering the fact that Tesla competes against several electric vehicles on the market — i.e. the Chevy Volt, Toyota RAV4 EV, Ford Focus Electric, the Nissan Leaf, and Honda Fit EV.

Altercations between Tesla are likely to ebb, as the company continues to ramp up production on its Model 3, which is priced at $30,000 and scheduled to hit the market in 2017. The company has received about 400,000 deposits of $1,000 each from consumers who want the new model.

The company alleges in its complaint that the Michigan dealership association acts as a state monopoly.

“Tesla Motors brings this lawsuit to vindicate its rights under the United States Constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla owned facilities in the State of Michigan,” the Tesla said in its complaint.

Tesla is asking a federal judge to declare that the law violates the company’s rights to due process and equal protection under the 14th Amendment to the U.S. Constitution.

“Particularly egregious protectionist legislation was passed by the Michigan Legislature in 2014,” the company’s complaint reads.

Free market groups scorched the law keeping Tesla out of the state.

Jarrett Skorup, a policy analyst with Michigan-based Mackinac Center for Public Policy, told reporters that citizens should be able to freely sell their goods without being hassled by state bureaucrats. He supports Tesla’s position and believes it should be able to sell vehicles without interference from dealerships.

The Michigan Automobile Dealers Association, on the other hand, claims that dealerships benefit consumers by establishing brand loyalty that allows dealerships and manufacturers to compete, ultimately lowering car prices.

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