On Tuesday, the New Jersey Motor Vehicle Commission (NJMVC) approved a new rule requiring that all new-car dealers have a franchise agreement in order to sell cars in New Jersey. This effectively blocks Tesla Motors, who directly operates two gallery stores in New Jersey, from selling the Tesla Model S in that state.
The announcement came as a surprise, because Tesla had been working in good faith with New Jersey's regulators to on an agreement for regulations that would be handled through the Legislature.
Tesla Motors believes it must sell electric cars directly to the public, rather than through independently owned dealerships, so that customers get the best education possible. In the past, Tesla's management have said electric car sales at traditional car dealers are impractical, because the EV sales pitch contradicts the sales pitch for gasoline cars. Where Tesla Motors can staff its stores with true believers, other automakers don't control the hiring at dealerships, and individual sales persons may redirect those seeking to buy an electric car to something else.
The problem Tesla faces is regulations in most states (in the U.S.) requiring car sales through independent dealers. That gives the car dealer associations a lot of power over the car sales process, power that they don't want to give up.
The regulations vary from state to state, with some states having stricter rules than others. In Texas, for example, Tesla operates at least one gallery store, but the staff is not allowed to say anything about selling the Tesla Model S.
For their part, the car dealers associations claim that sales through independent dealers protect car buyers from gouging by the car manufacturers. SiliconBeat quoted Jim Appleton, president of NJ CAR, as saying that Tesla should never have been granted a license to sell cars in the first place. “Someone at the New Jersey Motor Vehicle Commission screwed up and issued Tesla licenses, and they never should have. Tesla has been allowed to operate for a year and a half, when they shouldn’t have been operating at all. Tesla is accusing everyone in the world of backroom dealing, yet they indicated they had backroom discussions that led them to believe they could continue to operate.”
Kevin Roberts, a spokesman for NJ Governor Chris Christie told Bloomberg News “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. 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.”
Despite learning of the hearing until yesterday, electric vehicle advocates in New Jersey scrambled to attend with over 100 in attendance. Tom Moloughny, a prominent EV advocate, told Inside EV's that the meeting room was packed, but that the decision had already been made before anybody had a chance to speak. While the attendees were each given 3 minutes to speak, it was strictly for show since the decision was announced beforehand.
Tesla issued the following statement on their blog today.
Defending Innovation and Consumer Choice in New Jersey
By The Tesla Motors Team
Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.
Unfortunately, Monday we received news that Governor Christie’s administration has 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 Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey. This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market.
Proposal PRN 2013-138 seeks to 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. This move comes in spite of discussions with the Governor’s staff as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature. Instead, rather than engage in an open debate on such a significant policy issue, the Administration has expedited the implementation of a new law that the Commission intends to stealthily approve at a meeting in Trenton today at 2:00 PM EDT.
We are disappointed in the actions of the NJMVC and the Christie Administration, which come on the heels of more than nine months of unexplained delays in the issuing of a new sales license for Tesla, despite our numerous requests, calls, and letters. In addition, the NJMVC has also delayed the annual renewal of Tesla’s current dealer licenses without indication of the cause of the delay. The delays have handicapped Tesla in New Jersey, where, without clear licensing procedures and fair enforcement of existing law, we have been forced to delay our growth plans. This is an issue that affects not just Tesla customers, but also New Jersey citizens at large, because Tesla would be unable to create new jobs or participate in New Jersey’s economic revival.
At the same time, neither Tesla nor the taxpayers of New Jersey have been able to participate in any of the analysis or been granted a hearing as requested last year when this was first proposed. Despite being the subject of the regulation, we were only able to obtain information about today’s meeting with less than 24 hours notice and in direct contravention of assurances by the Governor.
We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.
We urge the Christie administration to act in good faith and withdraw the proposed amendment, or amend it so that it reflects the true intent of the Legislature and the people of New Jersey.