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New Jersey bans Tesla direct sales in last-minute move

Tesla Model S Rain

Tesla lost a battle in its ongoing war with the auto dealers this week, as the New Jersey Motor Vehicle Commission approved a new rule that will effectively block Tesla’s direct sales model in the state.

The new law, which will go into effect in April, requires new motor vehicles to be sold through middlemen in showrooms of at least 1,000 square feet, which must also have service facilities on site. Tesla’s two current New Jersey outlets, in Paramus and Short Hills, are smaller than that, and its service centers are in separate locations.

In a statement, Tesla characterized the move as a sneaky end run, saying in part:

Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.

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.

Having previously issued two dealer licenses to Tesla, this regulation [is] 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 move comes in spite of discussions with the Governor’s staff as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature.

Neither Tesla nor the taxpayers of New Jersey have been able to participate in any of the analysis or been granted a hearing as requested last year when this was first proposed. Despite being the subject of the regulation, we were only able to obtain information about today’s meeting with less than 24 hours’ notice and in direct contravention of assurances by the Governor.

The anti-Tesla legislation was approved without allowing public comment, despite the fact that over 100 people showed up in support of Tesla (InsideEVs reported that the Commission allowed audience members to comment after the legislation had already been approved).

In December, a former strategic planning leader for Apple offered an interesting perspective on the conflict. As reported by Green Car Reports, Chris Riley, speaking at a panel on global trends sponsored by Ford, said that Tesla’s sales model could end up changing the way people buy cars. According to Riley, younger buyers find that dealing directly with a manufacturer makes their transactions more “meaningful.” That sounds like exactly what the auto dealers are afraid of.

The pithiest comment of all may have been one made by New Jersey Governor Chris Christie at a gathering sponsored by the American Conservative Union, a Washington-based group that promotes smaller government, about a week before his administration approved the anti-Tesla rule: “We need to talk about the fact that we are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.”


Sources: Green Car Reports, Bloomberg, Tesla, InsideEVs, re/code
Image: Isaac Z. Ortiz/Flickr

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