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New Jersey May Block Tesla's Direct Sales

Car company calls the proposed change an "affront" to the free market.


The New Jersey Motor Vehicle Commission is set to vote Tuesday afternoon on a last-minute rule change that would effectively block Tesla’s direct sales model, in the latest battle of a long-running war between the electric vehicle company and auto dealers.

(Update: This new rule passed. For more, please see our more recent story here.)

Franchise laws around the nation frequently prohibit manufacturers from selling vehicles directly to consumers. Auto dealers and their trade groups have fought vigorously to protect or strengthen those regulations as Tesla builds its own stores throughout the United States, with mixed results from state to state.

New Jersey’s Proposal PRN 2013-138 would require new motor vehicles to be sold through middlemen in showrooms of at least 1,000 square feet, with space and equipment for servicing the automobiles as well. Tesla’s retail operations would be in violation of each of these clauses — indeed they appear tailored for that purpose — putting the Palo Alto, Calif. company’s existing licenses and stores in the state into legal jeopardy.

In a blog post on Tuesday morning, Tesla said it had been working in good faith with New Jersey Governor Chris Christie’s administration and the New Jersey Motor Vehicle Commission “to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model.” The company said it was shocked to learn of the rule proposal on Monday.

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

Having previously issued two dealer licenses to Tesla, this regulation would be 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 is an affront to the very concept of a free market.

… 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.

Gov. Christie’s office didn’t immediately respond to an inquiry from Re/code.

Tesla has won recent legislative battles in states like Washington, Ohio, New York and Minnesota, but states such as Texas, Arizona and Virginia have retained or added laws limiting the company’s ability to operate stores.

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