Michigan Bans Direct Tesla Car Sales, But Made Money Trading Its Stock

The state of Michigan profited last year from trading shares of an automaker that isn’t even allowed to sell vehicles here.

The state’s pension funds realized $22 million in gains on Tesla when they liquidated their final holdings during the second half of 2016. Yet current laws regulating the relationships between automakers and dealers prohibit the company from directly marketing its vehicles in Michigan.

Michigan Department of Treasury spokeswoman Danelle Gittus said the state sold Tesla to lock in investment gains, and to meet regular pension system cash flow needs. She said $22 million was the sum total of the gains realized through various purchases and sales of Tesla over a few years and that the state owned approximately 269,000 shares when it exited the position.

The department chose not to comment on any conflict of interest related to the state’s profits from Tesla shares.

An August 3, 2016, filing with the U.S. Securities and Exchange Commission showed that Michigan pension funds held 339,623 shares of Tesla, at the time valued at $72.1 million. A November 2, 2016, filing indicated that the state had sold all its shares.

Tesla has unsuccessfully lobbied the Michigan Legislature to change the law that bans its direct-to-consumer sales model here. A bill introduced in the state House in 2016 would have allowed it on a very limited basis but never got a hearing. Now Tesla has sued the state in federal court for prohibiting automakers from selling directly to consumers rather than through a dealer.

For many years, Michigan and many other states have enforced protectionist laws like this one that benefit new car dealerships in various ways. One way is that manufacturers may only sell and service cars through franchised dealers located in the state.

In 2014 the law was amended in a way that made it even harder for Tesla to sell here. The company uses a direct manufacturer-to-consumer sales and service model that eliminates the need for extensive and costly dealership networks.

In a statement, a Tesla spokesperson said the electric car manufacturer prefers to work with legislators to change the law. So far its efforts have been unsuccessful.

“As one leading legislator told Tesla: The local auto dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here,” the statement said.

The electric vehicle company has a gallery in Somerset Mall in Troy where customers can view vehicles but not purchase them.