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Tesla And Michigan Reach Settlement For Direct Delivery To Customers

Neer Varshney

Electric vehicles maker Tesla Inc. (NASDAQ: TSLA) has reached a settlement with the state of Michigan in a 2016 lawsuit the company filed against the state's governor and other officials for an "anti-Tesla" law.

What Happened

The Palo Alto-based automaker can now deliver its vehicles directly to the customers in the state, Bloomberg reported on Tuesday.

The vehicles will still need to be titled in another state, but can then be transferred to the state, people familiar with the matter told Bloomberg.

Tesla will also be able to operate service centers in the state through a subsidiary, the publication noted.

Why It Matters

The Michigan law forbids direct manufacturer-to-customer sales in favor of franchised dealerships.

The big three automakers including Ford Motor Company (NYSE: F), General Motors Company (NYSE: GM), and Fiat Chrysler Automobiles N.V.'s (NYSE: FCAU) United States subsidiary, all headquartered in Michigan, were reported to have lobbied for the 2014 law that restricts Tesla's ability to sell in the state.

The Elon Musk-led company has challenged the law in a federal court in 2016, arguing that no dealer's rights are violated since the company never had any dealers, to begin with.

Tesla customers so far faced particular difficulties in getting the Tesla vehicles they purchased outside of the state fixed. The cars had to be towed to Tesla's service center near the Michigan border in Ohio.

The electric vehicles maker faces similar challenges in Texas and Connecticut.

Price Action

Tesla's shares closed 7.19% higher at $547.20 on Tuesday, as New Street Research raised Tesla's price target to $800.

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