Tesla Motors Inc. is on the verge of winning its fight to sell its electric cars directly to the public in New Jersey, reported The Detroit News.
The Palo Alto, Calif., automaker has been fighting dealers and their lobbyists in multiple states over its efforts to sell electric cars through company-owned stores rather than through traditional dealer franchises.
Some dealers see the model as a threat to their business, especially if major automakers seek to sell directly to consumers.
The New Jersey Assembly voted 77 to 0 last week to allow Tesla to sell its electric cars at up to four showrooms as long as it also operates at least one service center. The legislation, which still must be approved by the state’s Senate, strikes a compromise in clearing the way for Tesla but effectively prohibiting other automakers from direct sales.
The law would limit direct sales to makers of zero-emission vehicles, such as electric or fuel-cell cars, that were licensed by the State Motor Vehicle Commission before Jan. 14.
Some states allow automakers to open their own outlets if they don’t already have existing franchises for their brand. But others, including Texas, Arizona and New Jersey, prohibit direct sales. Ironically, Texas is competing against California and other states for the location of a giant Tesla battery factory even as it prohibits Tesla from selling cars within its borders.
Elon Musk, Tesla’s chief executive, has advocated for direct sales because he believes company-owned stores will do a better job than traditional car dealerships selling new technology vehicles such as electric cars. Car dealers, he has argued, focus on vehicles with gasoline engines, which make up more than 99 percent of their sales, and won’t take the time to educate consumers about electric cars.
At the urging of dealers, the New Jersey Motor Vehicle Commission forced Tesla to close two stores this year, reversing a previous decision that allowed the electric car company to sell directly to consumers. Tesla converted the showrooms in Paramus and Short Hills to information centers, but is expected to resume sales at both sites if the legislation is approved.
Wedbush Securities analyst Craig Irwin called the legislation a good resolution to Tesla’s fight with dealers in New Jersey and will pave the way for the company to open up two additional stores there. He said there will be “strong support” for the bill in New Jersey’s Senate and that Gov. Chris Christie is expected to sign the legislation.
Development of Tesla’s second model had suffered through some delays as the company worked through the design of the vehicle’s distinct gull-wing doors and other features.
The Model X will give Tesla a much-needed second model while it continues to develop a less expensive, smaller electric car that it expects to help ramp up its sales to hundreds of thousands of vehicles annually, Irwin said.
Tesla currently sells only the Model S, an electric sports sedan that starts at about $71,000 and climbs above $100,000 depending on options and features. The Model X is expected to sell in the same price range as the Model S.
The New Jersey legislation comes as National Automobile Dealers Association is rolling out a new publicity initiative touting the benefits of the franchised dealership sales model.
“Franchised new-car dealers provide the best, most efficient and most cost-effective way to sell and distribute new cars in America, and we’re proud of our businesses and business model,” said Peter Welch, president of the trade group.
The association issued a report Tuesday by auto industry consultant Maryann Keller that defended dealers.
“The franchised dealer network benefits consumers and manufacturers alike by providing fierce price competition among dealers and an extremely efficient distribution network that is acutely sensitive to local markets,” Keller said.
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