New Jersey is now the third state in which Tesla is banned from selling cars directly to consumers. The other two are Texas and Arizona. Tesla has been successful in knocking down legislative efforts in other states to block its direct-to-consumer sales.
Tesla operates two retail stores in New Jersey with 27 employees and had plans for more. It is unclear whether the Tesla stores would revert to "galleries," showrooms in which consumers can check out vehicles but not buy them.
Tesla's problems have their roots in decades of mistrust between independent car dealers and auto makers. Over the years, dealers have fended off efforts by the auto makers to set up company-run stores that could compete with them. The dealers have pushed for—and won—state legislation to protect their franchises.
Dealers fear Tesla's model could cause directing selling to spread to other manufacturers, ending a century-old system that protects the sales territories and investments of many independent businesspeople.
Tesla officials have defended the model, saying that electric-car technology is new and requires the manufacturer to play a hands-on role in educating consumers. Tesla, which is based in Palo Alto, Calif., sells just one electric-car model, which starts at $71,000. Last year, it sold 22,400 cars globally.
Tesla also is facing new challenges in Ohio, where legislation has been proposed to prevent direct sales. Tesla officials worry that the approach taken in New Jersey could eventually be adopted by dealer groups in other states if it works in shutting down its stores.
Diarmuid O'Connell, Tesla's vice president of business development, said Tuesday that "They've found it difficult to advance their arguments in the light of day," Mr. O'Connell said. "They have increasingly gone underground."
Tesla hasn't ruled out countering the state-by-state opposition with an appeal to the federal courts or pursing legislative action in Congress.
"Certainly that's one of the strategies we've discussed," Mr. O'Connell said. But no decision has been made, and the company wouldn't likely pursue action at the federal level unless it was shut out of one of its core markets, he said. |