It's clear now that Tesla Motors is a threat to traditional automakers. The company's luxury Tesla Model S receive the highest safety rating ever from the National Highway Traffic Safety Administration and was recently named Consumer Reports top car of 2014. All this from an electric car that is pushing the auto industry toward future technology.
More than just pressuring the auto industry, however, the very way that Tesla is doing business is threatening to flip the U.S. car sales industry on its head. While most car companies in the U.S. use dealership franchises to sell vehicles, Tesla instead prefers to sell directly to consumers. Tesla this week was banned from doing just that by a New Jersey regulation requiring car sales be performed through franchises, rather than through company stores or online.
The New Jersey Motor Vehicle Commission (NJMVC) this week passed a new regulation requiring the dealership middlemen for car sales. This is despite the fact that New Jersey had already issued two dealer licenses for Tesla store locations within New Jersey. Under the new regulation Tesla may be forced to stop selling its vehicles out of those stores.
Shortly before the new rule was approved Tesla released a missive on its blog condemning Governor Chris Christie's administration for going back on assurances that the matter would be settled in the New Jersey legislature. From the blog post:
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.
New Jersey is not the only state to require car companies to use middlemen for car sales. Though Tesla is working hard with state governments to change current law throughout the nation, other groups such as the New Jersey Coalition of Automotive Retailers are fighting just as hard to keep the current car sales model alive.
For its part, the New Jersey Coalition of Automotive Retailers has issued a response to Tesla's accusations via its Facebook page. The organization suggests that Tesla either start using dealership middlemen like everyone else or work to change New Jersey law.
Image via Tesla