New Jersey Becomes Third State To Ban Tesla’s Direct Sales Model

Today the New Jersey Motor Vehicle Commission passed a rule that will end Tesla’s direct sales of cars to consumers. Tesla, a manufacturer of all-electric cars, does not lean on dealerships to sell its vehicles as other car companies do.

The rule goes into effect in April.

New Jersey is the third state to ban the practice of selling cars directly to consumers, joining Arizona and Texas in preventing their residents from easily buying a more environmentally friendly ride. The New Jersey Coalition of Automotive Retailers was in favor of the rule change, unsurprisingly.

Tesla is furious, claiming in a blog post released today — in advance of the meeting in which the rule change was enacted (which Tesla was informed of yesterday) — that Governor Chris Christie’s administration had “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 company also alleged that New Jersey had been sitting on the “renewal of [its] current dealer licenses without indication of the cause of the delay.” Given that delay, and the quick change in the wind from a legislative discussion to a squashing of its model, it appears that Tesla has just run face-first into New Jersey politics.

Tesla’s shares slipped 1.85% in regular trading.

New Jersey residents can still buy Teslas, but will likely have to leave the state to do so, which is a burden. Tesla is looking to expand its manufacturing processes this year, to allow it to sell more of its Model S sedans. However, if more states follow in the footsteps of New Jersey et al., the company could have to scale back its growth plans.

I don’t doubt that moves to block Tesla sales are merely short-term pauses — raise your hand if you actually think that local dealer groups can hold back the tide of change. But they are setbacks to a company that operates on a quarterly, and not half-decade, reporting cycle.