New York's Assembly set aside a bill that Tesla Motors Inc. had said would shut down its operations in the state.
The lower chamber adjourned its legislative session late Friday without acting on the measure. Lawmakers in the Assembly aren't scheduled to reconvene until January.
Tesla Motors founder Elon Musk had blasted New York auto dealers for the new proposed legislation.
"NY auto dealers are trying to ram the bill thru quickly while no one is looking," Musk tweeted earlier on Friday.
A pair of bills filed in the New York Assembly and Senate this month would cause Tesla's New York employees to lose their jobs, and its New York suppliers would lose business, the company said in a statement Friday.
Passage of the legislation also would have robbed New Yorkers of marketplace choice and would be a victory for special interests, the statement said.
Senator Lee Zeldin, the Long Island Republican who sponsored the bill in the upper chamber, proposed a separate measure to carve out an exception for Tesla. Had both measures passed, the company wouldn't have been affected, he said.
"Our goal is not to adversely impact any business operating in the state of New York," Zeldin said in an interview in Albany.
The New York bills would make it illegal for vehicle manufacturers or related entities to operate a dealership. Licenses for any existing dealership under manufacturer control would be ineligible for renewal unless the original license was issued prior to July 1, 2006.
Tesla has three stores and two service centers in the state of New York, all of which opened after 2006. All would have to close if the bills passed, a Tesla spokeswoman said. Tesla's New York stores are due for license renewal this fall.
Mark Schienberg, president of the Greater New York Automobile Dealers Association, told Automotive News late Friday that the state's dealer groups offered Tesla a compromise in recent days: They would extend the grandfathering date in the legislation to allow continued operation for Tesla's existing stores. Tesla turned down the offer, Schienberg said.
But despite the earlier grandfathering date, "we're not putting them out of business," Schienberg said.
Even if the bill passes, Tesla could still operate freely in New York by setting up a franchised dealer network like other vehicle manufacturers, he said.
But Musk has "just chosen that he'd rather not follow any of the rules and regulations and standards that each state has, and that's why there's a pushback right now," Schienberg said.
Diarmuid O'Connell, Tesla's vice president of business development, told Automotive News later Friday that the dealers' offer to extend the grandfathering date never made it to him -- the point man for Tesla on this issue. But even if it had, O'Connell said he would have said no.
"I don't care what the nature of the grandfather clause is," O'Connell said. "We do not accept that as a valid solution to this problem."
Tesla maintains its New York stores already have clear rights to operate that were validated by two separate judges who dismissed dealer lawsuits against the stores.
The New York bills are the latest in a string of legislative challenges for Tesla.
The company is trying to defeat a North Carolina bill that would prevent it from selling its electric vehicles through the Internet. That bill has passed the North Carolina Senate and is awaiting action in the House.
In May, Tesla lost a showdown with Texas dealers when Tesla-backed bills that would have created an exemption to current state law restricting factory-owned dealerships failed to move before the end of the state's legislative session. The next regular session isn't until 2015.
Earlier, Tesla won a legislative round in Minnesota. The company also won court decisions in dealer lawsuits in Massachusetts and New York.
But in late April, Tesla's bid for a dealership license in Virginia was rejected.
If state-level losses stack up, Musk has said he will consider seeking action on the national level, either through federal legislation or a federal lawsuit.
Amy Wilson and Bloomberg contributed to this report.