Tesla Motors (NASDAQ: TSLA ) was recently banned from selling vehicles through its direct sales model in the state of New Jersey. The state's decision to strip Tesla's New Jersey sales license came suddenly when the Christie administration caved to pressure stemming from a New Jersey auto dealer lobby. Should investors fear that other states' dealer groups will be emboldened by New Jersey's move and that a domino effect against Tesla's sales efforts will ensue?
While there are a number of reasons Tesla is choosing the direct model over the franchise system to sell its vehicles, there is one key reason for Tesla's choice of business model that is very difficult to counter -- especially if the company is given a fair legislative process to defend itself. But with rational reasons for the direct model like the one outlined in the video below, Fool contributor Daniel Sparks doesn't see New Jersey's move as one that will spark other states to do the same.
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