Tesla Motors Calls New Jersey Out on New Rule Against Its Direct Sales Model
March 11, 2014 12:01 PM
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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.
, 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
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.
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3/11/2014 4:13:58 PM
They aren't asking for special treatment. They are trying to have a rule that applies to everyone. But certain groups don't want that rule that applies to everyone because it's against their self interest.
Really the only way to have everyone somewhat happy WOULD be for Tesla to ask for special treatment. Request a law that, for instance, if you sell below X units of cars per year in the state/country, you are exempt from having to use a dealer network, that way the large companies are still forced to use a dealer network, but small car companies can have their own direct to consumer sales where they are more able to reflect the value of their product.
Tesla's argument is that they aren't big enough for a dealership to only sell Tesla cars, which means it would be a shared dealership. And in said shared dealership, the other parties would be better represented as people have a better understanding of the product on offer, and the salespeople wouldn't properly be able to sell Tesla's cars.
Or that's how I understand the situation.
3/11/2014 4:14:32 PM
Also the law they are fighting in the NJ instance doesn't exist. They are TRYING to get one in place.
3/13/2014 10:23:04 AM
Also the dealership would have an incentive to sell a gas/diesel vehicle because dealerships make a fair deal of money doing maintenance work. Pure electric vehicles don't require anywhere near the maintenance normal vehicles do.
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