Tesla Evaluating ‘Judicial Remedies’ To Oppose Direct Sales Ban In New Jersey

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Tesla Motors CEO Elon Musk has taken to the company blog today to oppose a ruling by the New Jersey Motor Vehicle Commission that it would no longer be able to sell directly to customers. The ban was put into place utilizing a law designed to protect franchise owners from outside pressures by car manufacturers.

Musk says that this law is being used incorrectly — and too broadly — in New Jersey, and says that Tesla is considering legal action in order to open sales back up in the state.

“We are evaluating judicial remedies to correct the situation. Also, if you believe that your right to buy direct at a Tesla store should be restored, please contact your state senator & assemblyman…” says Musk in the post.

Musk gives a brief overview of the law and its history, but says that it simply doesn’t apply to Tesla, which isn’t an incumbent.

“The intent was simply to prevent a fair and longstanding deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear,” writes Musk. “In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.”

Musk also takes some swipes at Governor Chris Christie’s recent troubles with bridges — and New Jersey’s history of mob activity.

The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.

One of the issues that Musk has with the decision, which will go into effect on April 1, is that Governor Christie said it would be put to a vote of the state legislature, rather than being put into place in a meeting of the commission.

New Jersey is the third state, after Arizona and Texas, to ban Tesla’s direct sales model.

I am, unfortunately, addicted to cars, and Musk’s statements about the motivations of car dealers ring all too true. He notes that there is little incentive for a dealer to carry or push electric cars when the majority of their revenue comes from gasoline vehicles.

Musk notes that Fisker and Coda both attempted to use the old model to sell their vehicles and both have failed. Gasoline vehicles contribute more to the bottom line because of the regular maintenance needed. Tesla vehicles don’t need oil changes and smog tests as they don’t use combustion engines. All of that eats into the dealer’s bottom line. Not to mention that car dealership servicing departments in general (yours might be fine, I dunno) have a pretty poor and well-deserved reputation for ripping people off.

So, on one side we have the commission enacting what it says is a protective measure that will prevent undue leverage being put on franchise owners from car manufacturers. On the other side we have Tesla who is selling directly, rather than using a franchise model.

Musk’s argument is that lobbyists for the auto industry are conducting “back room deals” to pervert the original purpose of those laws. If Tesla succeeds in convincing policy makers of that in New Jersey, it could set the template for other states with similar protection laws.