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Tesla wins a sales work-around in Michigan as it passes a $100-billion valuation

Tesla
Electric-car maker Tesla will be allowed to bypass laws in Michigan that prevent auto manufacturers from selling directly to consumers.
(Christophe Ena / Associated Press)

Tesla Inc. prevailed in a years-long battle to compete with General Motors Co. and Ford Motor Co. on their turf, with the state of Michigan allowing the electric-car maker to bypass laws against auto manufacturers selling directly to consumers.

While Tesla customers’ sales contracts will have to indicate the transaction took place elsewhere, the requirement is merely a matter of paperwork. The electric-car maker will be allowed to deliver its Model 3, S and X vehicles to buyers without them having to leave the state.

The stipulation, confirmed Wednesday by Michigan Atty. Gen. Dana Nessel, is a major victory for Tesla and a blow to dealers and auto manufacturers that have tried to stymie the company in states across the country. It adds to positive momentum that sent Tesla’s market capitalization past GM and Ford’s combined earlier this month. The maker of the Model 3 eclipsed Volkswagen AG on Wednesday to become the second-most valuable carmaker in the world, behind Toyota Motor Corp.

The electric-car maker’s shares soared as much as 8.6% on Wednesday to a new intraday high of $594.50, and closed at $569.56, up 4%. At that price, Tesla’s market capitalization was roughly $102.7 billion, exceeding Volkswagen’s $99.4 billion and trailing only Toyota Motor Corp.

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The $100-billion threshold will trigger a huge payout for Chief Executive Elon Musk if he can sustain the feat for months.

Musk’s pay package is believed to be the largest executive compensation deal in history. At stake for Musk is 20.2 million options that could ultimately net him more than $50 billion if all targets are met, according to Tesla’s estimates. He gets no salary or bonuses.

On paper, the first chunk of the award would net Musk about $346 million. But both Tesla’s six-month trailing share price average and its 30-day trailing average must exceed $554.80 before the first tranche of options is released.

Tesla filed its federal lawsuit against the state of Michigan in 2016. The following year, the company opened a gallery — where it has showcased its vehicles, but until now has been unable to sell them — at a high-end mall in the Detroit suburb of Troy, Mich. Owners in the state had to travel to Cleveland or Columbus, Ohio, to have their vehicles worked on until the company recently opened a service center in Toledo, near the Michigan border.

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The attorney general’s stipulation also allows Tesla to now indirectly own service centers in Michigan through a subsidiary. Musk said in July that expanding Tesla’s repair facility network is key to growing sales.

“You’ve got to have service, you have to have the supercharging and charging all sorted out, good consumer financing, and then the price must makes sense,” Musk said on an earnings call. “Any place where those four things are true, our sales are great. So we’re rolling out service centers like crazy.”


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