Tesla may be forced to shut N.J. stores after state commission vote

UPDATED: 3/11/14 5:46 pm ET

Come April 1, electric-vehicle maker Tesla Motors may have to shut down its factory-owned stores in New Jersey after the state’s motor vehicle commission adopted new rules on dealership licensing.

The commission approved the new rules this afternoon over Tesla’s objections that the changes would curtail its sales operations and jeopardize licenses for its existing two stores in the state.

Tesla earlier today accused Gov. Chris Christie’s administration of going back on its word to delay the regulation, a move favoring the car dealers represented by the New Jersey Coalition of Automotive Retailers.

Tesla said that it had discussions with the governor’s departing and incoming chief counsels as recently as January, and “it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature.”

In response, the governor’s office said it was made clear to Tesla since the company first began operating in New Jersey that it “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,” said the statement issued by Kevin Roberts, a spokesman for Christie’s office.

Diarmuid O’Connell, Tesla’s vice president of business development, disputed the administration’s statement.

“The statute in New Jersey plainly allows Tesla to be licensed to sell cars there,” O’Connell said in an e-mailed statement to Automotive News. “Indeed, the Motor Vehicle Commission has licensed Tesla under that statute ever since October 2012, and any suggestion that Tesla was told ‘since the beginning’ about any problem with its ability to be licensed there is false. The only thing that has changed is the Christie Administration’s sudden decision to go around the Legislature in an attempt to enact a rule that the statute doesn’t permit. Worse, it has done so without any reasonable notice or even a public hearing.”

The commission proposed the rule changes in October and opened a period of comment. Both NJ CAR and Tesla submitted comments.

Tesla, which has two stores and a service center in New Jersey, says the administration and motor vehicle commission are going beyond their authority “to implement the state’s laws at the behest of a special interest group looking to protect its monopoly.”

Jim Appleton, president of the retailers’ coalition, disputed that. He said the commission did what it is legally bound to do: conform its regulation and licensing procedures to the New Jersey statute. That leaves Tesla with two choices, Appleton said: conform to New Jersey law and use franchised dealers or try to get the law changed.

Dealers aren’t looking to put Tesla out of business, Appleton said.

“I don’t want to see Tesla close their doors,” he said. “I want to find a way to keep Tesla in New Jersey. I just want them to operate in a manner consistent with the law.”

Tesla has dealt with resistance from dealers across the country, including Ohio, Texas and Arizona.

In 2013, Tesla battled dealers in several states including Massachusetts, New York, Texas, North Carolina, Minnesota and Virginia. The company lost a prominent showdown with Texas dealers over Tesla-backed bills that would have carved out an exemption to current state law restricting factory-owned dealerships.

But Tesla was able to hold at bay dealer-backed legislation in Minnesota, North Carolina and New York. The company also won court decisions in dealer lawsuits in Massachusetts and New York.

Tesla CEO Elon Musk has said he will consider seeking action on the national level, either through federal legislation or a federal lawsuit.

According to the National Automobile Dealers Association, 48 states have restrictions on factory-owned dealerships. Of those, around 20 have statutes that make Tesla's direct sales model difficult, Tesla has said.

You can reach Amy Wilson at awilson@crain.com

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