New Jersey Votes To Block Direct Sales Of Tesla Vehicles

The two Tesla stores in New Jersey might soon be locking up their doors, after the state’s Motor Vehicle Commission unanimously approved a proposal yesterday that blocks the electric-car maker from selling vehicles directly to customers.

Instead of working with franchised dealers to sell its cars, Tesla works on a direct model that allows customers to decide what kind of Tesla they want, order it and buy it from the company.

Tesla says this whole thing was a surprise to the company, and that it only learned a day before the vote after some time spent going back and forth, that this could be coming.

Tesla’s CEO Elon Musk wrote in a company blog that Governor Chris Christie — who has cabinet members on the New Jersey Motor Vehicle Commission — “has gone back on his word.” He writes that there had been an expectation that the regulation would get “fair process” in the legislature.

“The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey,” he writes. “This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. “

He adds that the two stores in New Jersey may shut down as soon as today, “under pressure from auto dealers.”

But a Christie spokesman says this shouldn’t be a surprise to Tesla.

“Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law,” said the spokesman, via Bloomberg. “This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning.”

The president of the New Jersey dealer association says Tesla either needs to change to fit the law or try to make changes.

The New Jersey “statute is on the books to protect consumers,” he said, while “Tesla’s business model crushes competition.”

Tesla’s legal team says the company is already talking to state lawmakers about amending the law and is also mulling litigation. It’s worth pointing out that not only do many New Jersey residents shop for cars in the state, but it’s also an important market for New York City sales.

“New Jersey is one of our larger markets for Model S and so it’s an important market for us,” a Tesla lawyer said. “But really, any market is an important market for us.”

Auto dealers in states like Ohio, New York, Minnesota, Georgia and North Carolina have all made similar efforts to block Tesla, saying its better for shoppers to go through independent retailers instead of company stores. Which, while cars are certainly not iPads, this conjures up a scenario where licensed Apple product resellers might claim only they should sell iPads, not Apple stores.

Tesla Stores May Be Closed After N.J. Blocks Direct Sales [Bloomberg]

Read Comments10

Edit Your Comment

  1. MathManv2point0 says:

    Can someone tell me how eliminating a middle-man is not in the best interest of consumers? “Tesla’s business model crushes competition.” Well… it crushes competition in that Tesla can only be bought from Tesla so… I guess there’s less competition to find a Tesla cheaper one place over another but that argument still feels pretty bogus to me.

    Are Ford, Toyota… etc, not allowed to sell direct to consumers? Does the law force car manufacturers to sell to a middleman who takes his cut by marking up the vehicle even more for the end consumer?

    • CommonC3nts says:

      Eliminating the middle man will always benefit consumers.

      Dealers are NOT competition. They cannot sell less than the mfg price.
      You wont find any significant savings between any dealer.
      The only savings you can have is if you get a loan and you find a loan with a lower interest rate, but you dont need a dealer to get a loan.

      Also, yes, most state laws force car manufactures to sell through dealers which just inflates the price of cars for no good reason. It is really dealership corporate welfare and it is wrong.

      • MathManv2point0 says:

        I thought I was taking crazy pills for a second in that I saw nothing favorable to a law that mandates the creation of a middle man. Between “Bridge-Gate” and making consumer-unfriendly moves like this, Christie is really hurting his future…

  2. CommonC3nts says:

    Why would anyone want to buy from a middle man instead of straight from the factory?
    This law is anti-competitive and should be illegal.
    I would rather either pay a lower price or have the manufacture keep more of the profits.
    There is no reason to have a franchise on such high dollar items like cars as people usually only buy one or two off. You dont need local stock.

  3. wsuschmitt says:

    Part of the problem is that the old system pays a LOT of taxes into the governmental system. The government doesn’t want to give up the tax stream so it won’t change its laws. The old system becomes a monopoly, so that new and innovative systems can’t disrupt the old system, and the status quo is kept.

    UberX is having a similar issue in Seattle. The regulated (and taxed) taxi system fought to make sure that UberX couldn’t disrupt their monopoly on crappy taxi service and the city counsel bought into it because they stood to loose tax revenue. It happens a lot more than we realize in our system of law.

    • MathManv2point0 says:

      Ding ding ding!! We have a winner. My gut told me NJ’s move was more about tax revenue and less about what’s best for the consumer.

      • jokerfla says:

        Did I miss something here? When did the law go into place that buying a new Tesla car was exempt from sales taxes?

        Its all about the middlemen.

        • C0Y0TY says:

          Not tax exempt, but the taxes are lower on a less expensive car. Dealers make a car more expensive and more taxes are charged on it. The state wants more taxes, so it’s forcing higher prices to get them.

  4. oomingmak says:

    The liquor industry in RI is even more backwards with layers of middlemen.

    Breweries and wineries are required to sell to distributors who then sell to liquor stores who then sell to consumers. This all mandated by law therefore making it illegal for consumers or stores to buy directly from a liquor producer. Thanks liquor lobby!

    • MathManv2point0 says:

      NH is the best for liquor. They only have state run stores. Sure, you can buy beer and wine nearly anywhere but hard liquor can only be bought at these stores. The funny thing is that prices in NH are generally lower than surrounding states in spite of stores being run by the government. Is this an example of gov’t doing something right? hmmm…