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Tesla said Governor Christie’s administration has "gone back on its word"

Tesla Motors has been trying to push its direct sales model into various U.S. states, and while it saw a bit of success with New Jersey, a new state rule could destroy Tesla's plans. 

According to Tesla, New Jersey Gov. Chris Christie’s administration recently proposed a new rule that requires that a person have a franchise agreement with an auto manufacturer in order to be granted a license to sell. 

This is a problem for Tesla, considering it already operates two stores in New Jersey and had plans to open more. It's possible that Tesla could have to stop selling its all-electric Model S and any future vehicles in these stores and instead use them as showrooms where customers can look, but not buy. 

"Unfortunately, Monday we received news that Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature," said Tesla in a statement. "The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey. This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state.

"Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market."

Tesla CEO Elon Musk and President Barack Obama

Tesla has been in a battle with many states regarding its direct sales model. The issue is that auto dealerships feel Tesla's new sales model threatens their network, which many other automakers rely on. If other automakers were to follow Tesla's example, it would put the dealerships in a bad spot. The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers, and that it will continue to defend franchise and consumer laws in the states.
Tesla CEO Elon Musk, on the other hand, believes that auto dealerships don't do a very good job at selling specialty cars like Tesla's high-end electric vehicles (Roadster, Model S). Hence, he's looking to run his own Tesla stores around the U.S. where he believes his cars will get a fair shot at being sold. 
However, the problem for Tesla is that auto dealerships have much deeper pockets -- meaning that they have a lot more to spend on lobbying, and lawmakers will surely side with them when money is involved. 
In fact, auto dealers spent $86.8 million on state election races across the U.S. between 2003 and 2012. They also spent $53.7 million on federal campaigns. Tesla, on the other hand, has spent less than $500,000 on both state and federal politics. 
Tesla has gone head-to-head with many other states that are protecting auto dealerships, such as Massachusetts, Ohio and New York. 
Just last month, it was reported that Ohio Sen. Tom Patton (R-Strongsville) backed a new bill called Senate Bill 260, which aims to prevent Tesla and any other automaker from "applying for a license to sell or lease new or used motor vehicles at retail." Tesla opened its own stores in both Cincinnati and Columbus, as Ohio's current laws allow the automaker to do so. However, Senate Bill 260 would certainly put a stop to it, unless existing stores opened before the bill are deemed safe. 
What's interesting is that Patton received at least $42,825 between 2002 and 2013 from state and national auto dealership owners, employees, and political action committees. 

Source: Tesla Motors

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I call Bull Sh_t on NADA
By GotThumbs on 3/11/2014 12:55:28 PM , Rating: 2
The National Automobile Dealers Association (NADA) said that dealerships are necessary to ensure competitive prices for customers

This is why I have never purchased a new car and why I do not trust dealers.

Buying direct from factory is always cheaper.

Dealers can still be service stations but forget about all the commissions. Just look at the newer/larger dealer stores. Of course there is lots of profit from owning a dealership and forcing consumers to buy through the NADA network.

RE: I call Bull Sh_t on NADA
By Solandri on 3/11/2014 1:42:36 PM , Rating: 2
Just because someone is making a profit does not automatically mean he is increasing prices. The arbitrage that makes the economy work means that any time there is an inefficient distribution or allocation of resources, there is an opportunity for someone to make money. They make money, but by improving the distribution of products, they actually decrease average prices for the end buyer (fewer unsold goods returned, fewer goods need to be re-shipped to a different location, goods arrive to the end buyer more quickly, and for car dealerships in particular the end buyer can test drive the product to make a better decision on which product best suits his/her needs).

I think times have changed enough that a good argument can be made that car dealerships are not needed as much. But don't make the mistake of thinking that someone making a profit is automatically increasing your prices. The economy would grind to a halt if that were the case.

RE: I call Bull Sh_t on NADA
By Mint on 3/12/2014 3:14:26 AM , Rating: 2
It is true that middlemen don't always increase prices over direct sales.

However, it is also true that mandatory middlemen will give you prices greater than optional ones.

RE: I call Bull Sh_t on NADA
By Dr of crap on 3/12/2014 12:57:19 PM , Rating: 2
While I do not disagree with you, I do have a question -
Where do the middleman, from any industry, make/get there money from to operate their business?

It has to be from increasing the price from what they are paying the producer, and then selling to the consumer.

Where else does their profit come from??
Econ 101 anyone?

RE: I call Bull Sh_t on NADA
By Reclaimer77 on 3/12/2014 1:06:07 PM , Rating: 2
It has to be from increasing the price from what they are paying the producer, and then selling to the consumer.

That's would be true in a world where price margins don't exist and everything was sold at cost.

As I've already pointed out, an example of this would be Wal Mart. They are a "middle man" between the manufacturers and the consumer. Yet they leverage such massive buying power, manufacturers accept less profit margins leading to lower prices for the consumer.

RE: I call Bull Sh_t on NADA
By senecarr on 3/13/2014 10:19:33 AM , Rating: 2
This is another time of when I dislike people who think Econ 101 teaches you everything about economics, or much of anything about economics in the real world.
In econ 101, most of your examples include ideal conditions like perfect competition and perfect information. Last time I looked, shipping big, heavy cars is expensive. If you have more information about local markets that lets you order just the right amount, you can save money on unreturned stock.
Now if you have a method that instead lets GM know perfectly how many cars to make (perfect information) and lets them build them on demand for the same cost as producing them continuously in a production line, I'm sure they'd gladly throw millions of dollars at you.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke

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