Tesla, state regulators sued by New Jersey dealer association

The New Jersey Coalition of Automotive Retailers is suing Tesla and the state for what it says are violations of franchise laws, among other claims.

In a filing Wednesday with the Superior Court of New Jersey, the trade association accused the New Jersey Motor Vehicle Commission and other state agencies of failing to enforce consumer protection laws, franchise and dealer licensing laws and advertising laws regarding Tesla.

"It may appear ironic that the head of a trade association that represents new car dealers is suing the State of New Jersey to urge enforcement of the strict laws that regulate new car dealers," Jim Appleton, president of the coalition, said in a statement "But NJ CAR has spent decades advocating for firm and fair rules that create a level playing field and promote a competitive marketplace that benefits consumers and honest business owners, alike. Neighborhood new car dealers don't fear competition from Tesla — which accounts for less than 1 percent of the new car market in New Jersey — they simply object to unfair competition which places consumers at risk and local businesses at a competitive disadvantage."

New Jersey in 2015 allowed Tesla to operate four direct-sales locations in the state. The coalition's complaint states Tesla should have never been allowed to do so because of dealer franchise laws and that Tesla is violating the rule by operating five locations and planning a sixth.

The complaint claims that while Tesla's fifth location is classified as a "gallery" instead of a "store," the distinction doesn't mean anything. It claims Tesla still does a number of sales-related actions there, such as allowing customers to configure a vehicle online for eventual purchase.

"Whether or not any sales are finalized at Tesla's gallery, the above-mentioned activities that take place at the gallery are designed and intended to lead to a sale and certainly constitute 'offering vehicles for sale,' " the complaint said.

Beyond that, the association alleges the state refuses to enforce consumer protection laws after Tesla pulled a "bait and switch" with sales of the Model 3 sedan by promising a low-priced $35,000 variant and then attempting to get customers who put down deposits to purchase more expensive vehicles.

The complaint also accuses Tesla of Internet advertising violations, including erroneously describing the Autopilot driver-assistance system as "self-driving" and listing Model 3 incentives and estimated gas savings without listing who is eligible or how the estimates were calculated.

Tesla does offer an explainer on incentives on its website and offers a description of how savings are calculated under the "learn more" link on its order page. It also has a blog post with details of the $35,000 Model 3.

"There is simply no justifiable basis for the State to continue to permit Tesla's conduct here," the coalition said in the complaint, adding that, when taken together, the actions make it "clear that state defendants have chosen to actively ignore Tesla's unlawful acts and have permitted them to continue."

A Tesla spokesman did not immediately respond to a request for comment. The New Jersey Motor Vehicle Commission said it had no comment.