PhillyDeals: It's Tesla's Musk vs. New Jersey's Christie

Posted: March 13, 2014

Tesla, the small but growing electric-car maker whose stock-market value has zoomed so high on hype that it is already worth half as much as auto giants General Motors and Ford, is blaming Gov. Christie for blocking its plans to bypass neighborhood auto dealers and sell cars directly to New Jersey drivers through company-owned stores in shopping malls.

"Tesla is under attack in New Jersey," Diarmuid O'Connell, vice president of business development at Tesla, said in an open letter to the press Tuesday.

Tesla's direct-to-buyer sales approach threatens traditional car dealerships.

The dealers, like insurance agencies, real estate agents, and other licensed middlemen, form an influential local business network. They have no intention of rolling over and vanishing like corner butchers just because some 21st century upstart has designed a simpler way of delivering high-tech cars to customers.

Tesla boss Elon Musk is trying to make them obsolete. But at least in New Jersey, one of the states that gives tax breaks to electric-car makers - along with the federal government, whose financing got Tesla started - Musk is going to have to work harder if he wants to get around local businesses.

"With the support of the special-interest New Jersey Coalition of Automotive Retailers, the New Jersey Motor Vehicle Commission under Gov. Christie has expedited the proposal of Rule 2013-138, which could effectively cause the American carmaker to shutter all operations, including Tesla's two retail locations and affiliated jobs," the company said in a statement.

According to Tesla, the rule would "impose stringent licensing rules that would, among other things, require all new motor vehicles to be sold through middlemen and block Tesla's direct sales model."

Tesla says the stricter rule would force it to close its two shopping-mall offices in Paramus and Short Hills, laying off 27 workers, and suspend plans to open two service centers and hire 20 more workers. The company also has a regional store in King of Prussia.

Christie's office says the rule wouldn't change the status quo. It just makes it plainer that new-car sales offices still have to be run by dealers, who hold franchises from auto manufacturers, in offices larger than 1,000 square feet, and in compliance with other basic requirements that look more like your local Ford, Chevy, or Honda showroom and service department, bustling with salespeople and mechanics, than Tesla's boutique stores.

Says Christie spokesman Kevin Roberts: "Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the legislature on a bill to establish their new direct-sales operations under New Jersey law."

The governor "does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation, and Tesla has been aware of this position since the beginning," Roberts added.

At least one Democratic assemblyman is backing Tesla against Christie. Tim Eustace (D., Bergen) said Christie was "serving as a roadblock as the electric-car industry attempts to expand its presence in New Jersey."

Eustace, an electric-car driver who backs taxpayer subsidies for battery buggies, added that the state's "capricious decision may effectively shut down Tesla's operations," and urged the governor to instead "cut out the middleman" for the sake of "consumers and the environment."



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