Tesla vs. dealer issue creates political firestorm in N.J.

Customers look at a Tesla Model S at the company's store in the Short Hills Mall in Short Hills, N.J.
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TRENTON, N.J. (Bloomberg) -- When Philip Blackwood of Lincroft, N.J., bought his Tesla Model S electric sedan from Tesla Motors Inc. about a year ago, a big selling point was how he did it: online and direct from the California company.

No worrying about whether the buyer before him got a better deal. No salesman to make mysterious trips to a back office to “see what my boss can do.”

All that may come to an end after a panel of Gov. Chris Christie’s cabinet members and appointees voted March 11 to block Tesla from direct sales. While auto dealers said the move would protect consumers, Blackwood said it looked to him like the dealers’ business interests were being protected.

“This was some sort of back-room politics,” said Blackwood, 60, an enterprise architect for AT&T Inc.

Christie, a 51-year-old Republican who may seek the presidency in 2016, came to office four years ago promising to revive the private sector and rein in benefits for public workers. His approval ratings have plunged on accusations he punished mayors who didn’t support his re-election by withholding aid for hurricane recovery and that aides caused huge traffic jams at the George Washington Bridge for the same reason.

Opponents say Christie used the Port Authority of New York and New Jersey, which runs the bridge, as a weapon to reward cronies and further his political goals. Now, they say the Motor Vehicle Commission has become another cudgel.

Dealer pressure

“This is a reversal of what all Republicans say they are about,” Assemblyman Tim Eustace, a Democrat from Maywood, said of the ban on direct sales. “The car dealers put pressure on the powers-that-be and they tried to kill an industry. That’s antithetical to the idea of American free enterprise.”

Tesla is battling dealers state by state over direct-to- consumer sales. Auto dealers in Ohio, New York, Minnesota, Georgia and elsewhere in the past year have fought Tesla, arguing that independent retailers are better for shoppers and vehicle owners. Texas dealers successfully backed a law setting the nation’s toughest restrictions on Tesla. Arizona, Colorado and Virginia also imposed limits.

Car dealers have political and financial sway in New Jersey. The New Jersey Coalition of Auto Retailers spent more than $155,000 on lobbying last year, according to state records.

Christie received campaign contributions of at least $64,700 from people associated with the auto industry during last year’s primary and general election campaigns, according to the state Election Law Enforcement Commission. Of that, about $45,100 collected in the general campaign was matched 2-for-1 by public funds, for a total of about $135,300.

The issue came before the state Motor Vehicle Commission, an eight-member board composed of three members of Christie’s cabinet and four appointees of the governor. The panel is led by non-voting Chairman Raymond Martinez, who was appointed by Christie in February 2010.

The panel voted unanimously to require that all new vehicle sales go through franchised retail dealers. A Tesla attorney said the decision may force Tesla to close its two stores in the state.

Kevin Roberts, a spokesman for Christie, said the administration renewed Tesla’s sales license monthly for the past year as it gave the company time to lobby lawmakers.

Should’ve known

"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," Roberts said. "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."

Liz Jarvis-Shean, a Tesla spokeswoman, didn’t respond to a request for comment on the decision.

“This is an affront to the very concept of a free market,” the company said in a statement after the vote.

Senator Raymond Lesniak, a Democrat from Elizabeth who heads the Senate Economic Growth Committee, said he plans to introduce legislation giving Tesla two years to conform to the requirement that sales go through a middleman. Lesniak, who supports the ban on direct sales, said the company has successfully conducted business in Virginia with a similar rule.

Paramus Mayor Richard LaBarbiera, whose town includes one of Tesla’s two dealerships in the Garden State, said he’s had no direct contact with the company before or after the decision.

“It’s an innovative company and a company that really thought outside the box,” the mayor said. “We’d be sorry to see them go.”

Brian Schweppe, a 34-year-old props manager for a Broadway show, drives a black 2013 Model S with a 60-kilowatt battery pack. He bought it for $73,000 a year ago, he said, after first making reservations on the manufacturer’s Internet site. To stifle an American car company with a new business model is wrong when there’s a shortage of plug-in vehicles available, he said.

“All the auto manufacturers that are represented by dealerships don’t seem concerned about offering legitimate electric-car options,” Schweppe, who lives in Bloomingdale, N.J., said by telephone. “For New Jersey to step away from that -- it’s just mind-boggling.”

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