Tesla’s Elon Musk: State ban on direct sales of EVs is ‘twisted’

April 11, 2014 – 04:06 pm
Tesla Motors CEO Elon Musk at a Senate Appropriations subcommittee hearing in Washington, D.C. in March

FORTUNE — Tesla Motors CEO Elon Musk accused New Jersey Gov. Chris Christie on Friday of cutting a “backroom deal” with the state’s auto dealer lobby to push through a rule change that effectively bars the electric car company from selling vehicles directly to consumers.

In response to the rule change, Tesla Motors will convert its two sales centers into “galleries” after April 1, Musk wrote in a comprehensive post on the company’s blog.

Consumers will be allowed to see the car and ask questions, but staff will not be able to discuss price or complete a sale in the store. Interested buyers can still purchase Tesla’s Model S sedan at its Manhattan store and order vehicles from New Jersey for delivery via the company’s website.

Tesla Motors is also considering legal action to open sales back up in the state, Musk wrote.

On Tuesday, the New Jersey Motor Vehicle Commission amended a rule to prevent auto manufacturers from selling cars directly to consumers. The rule change, which was approved in a 6-0 vote, was made to “clarify our regulations to conform to state statute, ” said NJMVC spokeswoman Elyse Coffey.

Musk insists Gov. Christie promised the issue would be put to a vote before the state legislature, not a commission comprised of political appointees. Musk said the regulation is “fundamentally contrary to the intent of the law.”

A spokesman with Gov. Christie’s office says since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to work with the legislature on a bill to establish new direct-sales operations under New Jersey law.

“This administration 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, ” spokesman Kevin Roberts said in an e-mail to Fortune.

The New Jersey Coalition of Automotive Retailers argues the regulation change conforms to state law, which was originally enacted to serve the public interest. The lobby group says Tesla’s factory-model creates a “vertical monopoly and limits competition” and places the “fox in the charge of the chicken coop” as well as limits consumer access to a qualified, independent source for warranty and safety recall service.

“Unless they are referring to the mafia version of ‘protection, ’ this is obviously untrue, ” Musk wrote.

A new approach

Tesla Motors’ business model is a departure from the status quo in the auto industry, in which manufacturers sell vehicles using franchised dealers.

Source: fortune.com

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