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Michigan Becomes Fifth State to Thwart Direct Tesla Sales

In other news, Daimler is selling its four-percent stake in the electric carmaker.

Reuters / Lucy Nicholson

Michigan Gov. Rick Snyder signed a bill on Tuesday that will keep electric carmaker Tesla Motors from selling its cars directly to consumers in the state, home to the biggest U.S. automakers.

Snyder said in a letter to members of the state House of Representatives that the measure merely “clarifies” existing law prohibiting direct manufacturer-to-consumer retail sales. Those sales, he said, must be made through franchised dealers.

Michigan becomes the fifth state to keep Tesla from easily selling cars directly to consumers, joining Texas, New Jersey, Arizona and Maryland, according to Tesla.

In all of those states except Michigan, Tesla operates “galleries” where consumers can view Tesla cars but cannot discuss prices, take test drives or order cars.

Michigan has gone a step further, said Diarmuid O’Connell, Tesla vice president of business development, and will not allow even the informational galleries.

Tesla, which has challenged some of the long-held conventions of auto industry, wants to set up its own sleek stores rather than sell through a franchised dealer network.

The Michigan measure, which passed 38-0 in the state’s Senate and 106-1 in the House, does not mention Tesla by name. But, O’Connell said, the legislation clearly is addressed at the company.

O’Connell said the bill was pushed through the legislature without chance for public debate because well-connected auto dealers did not want a public airing of the state’s policy.

O’Connell and Tesla General Counsel Todd Maron said they were pleased that Snyder, in his letter to state legislators, said, “A healthy, open discussion can and should be had over whether the current business model in Michigan should be changed.”

Maron said the company has the option to sue Michigan but can also wait until the next full legislative session for a public debate on the issue.

“We expect to be back in Michigan very, very soon to have an open debate,” said Maron, who added that in other states where such debates have taken place, Tesla has won.

“Usually when this debate takes place in public, the right outcome happens,” said Maron.

Detroit-based General Motors on Tuesday said it supported the new measure to “help ensure that all automotive manufacturers follow the same rules.”

Tesla has 54 galleries and stores in 21 states.

In other news, Daimler announced on Tuesday that it was selling its four-percent stake in Tesla, booking a $780 million windfall.

In a statement, Daimler Chief Financial Officer Bodo Uebber said, “We are extremely satisfied with the development of our investment in Tesla, but it is not necessary for our partnership and cooperation. For this reason, we have decided to divest of our shares.”

The sale of Daimler’s stake in Tesla will result in a cash inflow of around $780 million, boosting earnings before interest and taxes by a similar amount for 2014. Proceeds from the sale will be used to strengthen Daimler’s operational business, the Stuttgart-based automaker said.

A cooperation agreement to supply Mercedes-Benz cars with Tesla battery technology is unaffected by the sale, Daimler Chief Executive Dieter Zetsche added.

“Our partnership with Tesla is very successful and will be continued,” said Zetsche.

(Reporting by Bernie Woodall and Edward Taylor; editing by Jonathan Oatis and G Crosse.)

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