NCPA - National Center for Policy Analysis

Michigan Bans Tesla Sales

October 28, 2014

The state of Michigan has banned the sale of Teslas, a move which will only hurt Michigan residents, writes Jared Meyer of Economics21.

Tesla sells its cars directly to consumers, unlike most car manufacturers which sell their vehicles through dealerships. With such a model, Tesla can reach its consumers directly and avoid price negotiations with dealerships. By banning Tesla's direct sales, Michigan is hurting the state's economy:

  • Teslas can cost over $100,000. Banning the vehicles will undoubtedly cost the state tax revenue.
  • Those who support the Tesla ban claim that it is in the name of consumer safety, but it is really about economic protectionism. Significantly, Meyer points out that General Motors, Ford and Chrysler have spent $34 million on lobbying and political contributions so far this election season. Tesla has spent $8,600.
  • Consumers see higher prices from the dealership model. According to a Department of Justice report, the traditional automobile distribution system is responsible for almost one-third of a vehicle's price. Half of that is due to dealerships.

Meyer writes that the dealership model does have benefits and it can offer consumers flexible prices and a place to service vehicles. However, if the model is superior and more beneficial to consumers, Meyer contends that the state should not have to ban Tesla from using the direct sale model. There are many Michigan residents who may appreciate and prefer the ease of doing business with Tesla directly, writes Meyer. Unfortunately, the new law takes that choice away from consumers.

Source: Jared Meyer, "'Anti-Tesla Bill' Means Economic Loss for Michigan,", October 25, 2014. 


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