Tesla Motors May Get Reprieve in New Jersey Dealership Battle
June 6, 2014 8:52 AM
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Tesla CEO Elon Musk
Assembly Consumer Affairs Committee votes 4-0 to allow Tesla to sell cars directly to customers
Tesla Motors has been the subject of a statewide ban on
direct car sales in the state of New Jersey since April 1
. The ban was the result of the state Motor Vehicle Commission’s (MVC) decision to
enforce a 1970s law that required new vehicles to be sold through a dealership
However, a new bill by the New Jersey Assembly Consumer Affairs Committee would allow Tesla to resume its direct cars sales in the state. The bipartisan committee voted 4-0 to give Tesla a reprieve as long as the company follows a few simple rules. Tesla would be limited to just four stores in the state (for now) and would be required to have at least one facility to service Tesla vehicles.
“New Jersey prides itself as being pro-business, pro-innovative and pro-jobs. And this is a company that is an American company, an American idea,” said bill sponsor Tim Eustace (D-Bergen). “I think we would be mistaken if we didn’t’ reverse the idea that the MVC made, making it illegal to sell Teslas in New Jersey.”
Tesla Model S
Tesla CEO Musk has long rallied against the dealership model and says that these “middlemen” don’t have customers’ best interests in mind. Musk points to the fact that dealerships make a large portion of their profits from vehicle services (repairs, routine maintenance, etc.), but electric vehicles like the Model S require far less maintenance than conventional automobiles, lessening the need for middlemen.
This latest move by New Jersey comes after
Musk lashed out at Governor Chris Christie
, stating, “Anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.” Musk even invoked “
” by stating that if selling through dealerships ensures “consumer protection”, then “Gov. Christie has a bridge closure he wants to sell you.”
New Jersey Governor Chris Christie
More recently a number of directors for the Federal Trade Commission have come out in direct support for Tesla’s direct sales model in
. The FTC noted that the market should determine if a direct sales model is beneficial to customers. “Our point has not been that new methods of sale are necessarily superior to the traditional methods—just that the determination should be made through the competitive process,” said the FTC directors in an April blog posting.
“We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are—expressions of a lack of confidence in the competitive process that can only make consumers worse off.”
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RE: Here's an idea
6/6/2014 11:22:30 AM
"Why don't we make a federal law to allow direct sales throughout the country?"
We don't make laws, our representatives do. Tesla doesn't have enough money to entice them to do anything.
"Federal law will always Preempt state laws if there's conflict."
This is incorrect. The federal government only has those powers enumerated in the constitution (the Obamacare ruling certainly has torn this apart, but the language is still very clear in the constitution). All others are reserved for the states. However, since this particular issue deals with interstate commerce (which is one of the enumerated powers for the federal govt), that would be possible in this case. Personally, I disfavor this idea though. Tesla will crack their way into some states, and then residents/voters in other states will start to pressure their own government.
If the federal government did intervene, you can rest assured that the car dealers would have enough lobbying power to make sure that the legislation put many restrictions on direct sales - just look at the New Jersey bill with limits on numbers of stores and requirements for certain numbers of service centers. Then there would be no way for any of the states to allow a true direct-sales approach.
"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation
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