Uncharged: Tesla Hits Another Speed Bump As New Jersey Might Also Ban Sales

Today, the New Jersey Motor Vehicle Commission is expected to pass a rule change that will forbid direct-from-manufacturer sales to consumers. If it passes, NJ will become the 5th state to have such a ban.

Tesla's battle with auto dealers goes on. Today, the New Jersey Motor Vehicle Commission is expected to vote on a proposal that would require car manufacturers to enter a franchise agreement in order to sell their vehicles. According to reports, the proposed rule change would also require car companies to "maintain facilities of at least 1,000 square feet with room to display two cars."

Tesla, of course, generally eschews the car dealership model and instead opts to sell its vehicles directly to consumers online. Sometimes it opens showrooms, where potential buyers can test drive vehicles like the award-winning Model S. Only these spaces are typically much smaller than New Jersey's proposed 1,000-foot mandate, and tend to operate in places like high-end shopping malls.

If the proposed rule change is signed and passed when the commission votes on it this afternoon--as it is expected to--New Jersey would become the fifth state to essentially ban Tesla sales, alongside Arizona, Colorado, Virginia, and Texas. This despite evidence from the Department of Justice's antitrust research group, which found in 2009 that state bans on manufacturer direct sales of vehicles are unequivocally bad for fueling economic engines such as competition and innovation. But, hey! Look on the bright side, New Jersey: At least you'll still get to deal with pushy car salespeople?

What do you think, does the NJMVC have a point or is their argument running on fumes?

Update 3:51 p.m. ET: Yup--it happened. New Jersey's Tesla ban will go into effect on April 1st.

[Image: Flickr user Steven Reynolds]

Add New Comment

4 Comments

  • Tesla should send a big thank you note to the NJ Legislature, how better to add mystique to the brand than to "ban" the sale of the vehicles in the state. Surely no hedge fund trader would dare to consider buying such an exclusive symbol of status now...

    Here's the situation in a nutshell: Tesla has already achieved the most coveted status any company can aspire to: that of a charismatic brand (i.e. one for which there is no perceived substitute-M. Neumeier). They have done so by delivering genuine innovation with superb execution and quality. Their stock price reflects this success. The car dealers who have lobbied for this legislation will likely rue the day they gave Tesla motivation to disrupt their antiquated business model, as they surely will if such obstacles continue to be erected. I'm equally sure the western states will drop these barriers as soon as Tesla makes that a precondition to bid for the Gigafactory.

  • Woody Welch

    Tesla is dangling their new best of breed battery factory in front of Texas right now which would only be built if Texas allows direct sales. Smart leverage politician as well? Wow? Mr. Musk is Henry ford, Thomas Edison, Thomas Jefferson, Richard Branson, and Steve Jobs wrapped in one. A true iconoclastic American. We could use a few more of him...to run our country!

  • I smell bullshit. What large companies who are in love with their archaic business models don't realize is that these types of rules just make consumers want the product even more.

    I bet this will spur new micro businesses. Delivery driver for Tesla? Not a bad gig if you ask me...

  • Aza Allen

    The dealership model is an outdated dinosaur and NEEDS to GO AWAY! I shouldn't be forced to pay a middle man for a car I already know I want. Dealerships are gonna pay hard and fast if they don't learn a new model... just like Blockbuster.