Can Dealers Compete With Tesla’s Federal Government Support?

Tesla Motors just received more support from the Federal Trade Commission (FTC). In an 11-page letter, the FTC pushed for changes to Michigan franchise laws. Michigan effectively prohibited Tesla’s direct-to-consumer sales back on October 21st when Michigan governor Rick Synder signed HB 5606 into law. Dealers can do a lot to oppose Tesla, but how are they supposed to compete with federal government support?

Tesla received a loan from the department of energy in January 2010 for $465 million dollars. This loan came at a time when Tesla was struggling and founder Elon Musk had just invested $35 million of his own dollars into the company. However, with the government loan, Tesla built a factory and moved toward success. To Tesla’s credit, they’ve paid that loan back early. While the days of Tesla’s government loans are gone, the days of Tesla receiving support from the government are apparently still here.

Michigan state senator Darwin Booher, requested comment from the FTC on Michigan House bill 268 and they responded. HB 268 would loosen laws to allow direct-to-consumer “autocycle” sales in Michigan. An autocycle is what Elio is trying to make and sell without dealers. The response from the FTC was an 11-page letter. In that letter, the FTC outlined their support for direct-to-consumer auto sales and the unnecessary nature of the dealership model. The letter reads in part, “In our view, current provisions operate as a special protection for dealers – a protection that is likely harming both competition and consumers.” The FTC made it clear that they aren’t taking a position on whether or not a dealership is the best distribution model for automakers. However, the letter pushed to allow consumer choice and explained that the current law was harmful. Another part of the letter reads, “We urge the legislature to consider abandoning the direct sales prohibition in Michigan’s existing law, and instead permit manufacturers and consumers to reengage the normal competitive process that prevails in most other industries.”

NADA disagrees. NADA spokesman Jared Alllen told the Detriot News, “The data proves that price competition by auto dealers lowers car prices for consumers, often by $500 or more per car. More dealers means more places for consumers to shop, and real-world evidence proves how that translates into lower prices.”

What do you think? The FTC didn’t mention Tesla outright in their letter like they did in their last defense of the automaker, but if the Michigan bill was modified to help direct to consumer sales, it would benefit Tesla. What could this government support mean for Tesla Motors? Do you think that eventual federal direct sales laws will overturn dealer group efforts at a state level?