Tesla Grabs the New Jersey Bull By the Horns

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Fresh off a win in Massachusetts where the State’s highest court authorized the electric vehicle maker’s business model of selling directly to the consumer, Tesla is having another go at New Jersey, which has posed some obstructionist issues in the past due to a determined league of dealerships that fear that Tesla’s model will be disruptive to the conventional franchise model.

The New Jersey Motor Vehicle Commission, in what Tesla described as back room type dealings, made a change in the rules back in March that blocked Tesla’s New Jersey locations from selling vehicles as of April 15, when the company’s licenses expired. Tesla is now appealing the decision, arguing that New Jersey’s franchise statute — which regulators purported to rely on, Automotive News said —  doesn’t apply to Tesla because it has no franchisor-franchisee relationships.

The briefing was filed in March, but Tesla’s reasoning for appeal is now coming to light. The company also says that the commission “has limited powers and is not entitled to enforce the franchise statute anyway” and “certain elements of the rule previously have been found to violate the New Jersey Constitution. Those are requirements on minimum square footage, multiple car models on display, and on-site servicing equipment,” Automotive News said, citing the brief.

“We believe the regulatory action was made in error,” Diarmuid O’Connell, Tesla’s vice president of business development, told Automotive News. “We’ve prepared a legal action to deal with that, and I’m feeling pretty good about that.”

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Though court action may be on the horizon, Jim Appleton — who spearheads the dealership coalition — said that the issue could potentially be resolved well before any court time is logged. “Something may be on the governor’s desk and signed before they even decide to grant oral arguments at all,” he said, adding that, “It appears that Tesla’s best and shortest route to relief is part of a package that addresses both Tesla’s concerns and the dealers’ concerns.”

This could mean that Tesla will be allowed more showrooms in the state — as many as four (it has two currently). There are at least two bills that have passed in the New Jersey Assembly that would give Tesla an exemption to sell directly as well, and Automotive News says that one of those bills also would update the state’s auto franchise law.

Tesla has been facing ongoing fights in various states as dealer organizations have been pushing for legislation to ban direct-to-consumer sales, which it feels is threatening to its own model. Tesla argues that its products are not conducive to the dealer model, because dealers rely heavily on the revenue generated by services that electric cars don’t need. It also argues that when put together side-by-side, electric cars and gasoline cars cannot be sold without highlighting the shortcomings of the other.

Dealers in New Jersey, for their part, have also stated that Tesla should never have been given the licenses in the first place, and that the commission was “merely bringing regulations in line with long-standing state law that requires franchised dealerships,” Automotive News said.

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