Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Hope for Tesla Motors Inc. in New Jersey and a Green Light in New York?

In a handful of states, Tesla (NASDAQ: TSLA  ) is still threatened by lobby-backed legislation that opposes the electric car-maker's direct sales model in favor of the franchise system. The latest updates come from New York and New Jersey.

New Jersey
Last month, New Jersey took Tesla by surprise when Gov. Chris Christie suddenly decided to support an auto dealer lobby group's efforts to ban Tesla from selling vehicles directly in the state. Swiftly approving new regulation that required all new car dealers to obtain franchise agreements, Tesla had until April 1 to comply before Tesla would be forced to shut down its retail operations there.

But April 1 came and went, and Tesla is still selling vehicles directly at its Tesla-branded retail stores. It turns out, Gov. Chris Christie's administration granted Tesla a last-minute extension to acquire its dealer license.

Of course, Tesla won't be obtaining a license, and Christie probably knows this; the underlying reason for the extension was likely to provide time for a new bill submitted by state assemblyman Tim Eustace to get approval. The new bill would allow dealers to sell cars directly in the state under the conditions that they sell only zero-emission vehicles and vehicle sales in the state make up less than 4% of total vehicles sold -- two conditions Tesla easily qualifies for.

New York
While New York was already allowing Tesla to sell its vehicles directly in the state, proposed legislation was set to block Tesla's efforts for direct sales. But a March 28 agreement between Tesla Motors and the New York State Automobile Dealer Association will enable Tesla to continue to sell vehicles directly at its five retail locations in the state.

The agreement, of course, is not without conditions. Any new stores beyond the current five must "be established under a strengthened dealer franchise law." Whatever the strengthened dealer franchise law entails is not clear yet. New York says the legislation will be introduced in the near future.

"Today's agreement reaffirms New York's long-standing commitment to the dealer franchise system, while making sure New York remains a leader in spurring innovative businesses and encouraging zero emissions vehicle sales," said New York Governor Andrew Cuomo in the statement outlining the new agreement. "The agreement is a win-win for consumers, for the franchised auto dealers and manufacturers who play such a vital role in New York's economy, and for cutting edge companies like Tesla."

Small steps in a long journey
As Tesla grows, objections from dealers will likely continue. While Tesla investors should at least keep an eye on the progress of Tesla's effort to sell cars directly in the U.S., investors shouldn't fret about a disappointing outcome. Given that it's mostly dealer lobby groups and not consumer groups protesting Tesla's attempt to sell vehicles directly, Tesla will likely continue to win small battles, one at a time.

As Tesla has repeatedly argued,selling its vehicles through the franchise model wouldn't work. Given that dealers make the majority of their money from service and Tesla's electric cars require very little service, dealers wouldn't have fair incentives to sell Tesla's vehicles. Further, selling an electric car requires a car salesperson to educate the consumer -- a step that has certain conflicts of interest with selling gas-powered cars on the same lot.

Three stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 03, 2014, at 12:34 AM, DrDauger wrote:

    We're seeing a sea change in Tesla's favor and against the traditional dealer model. It's not over yet, but once it is consumers will be better off.

  • Report this Comment On April 04, 2014, at 10:00 AM, melissabrittany wrote:

    It’s really astonishing how Tesla has been able to battle with the ongoing lawsuits and controversies. Despite engaged in so many controversies, it is again on the winning side.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2900323, ~/Articles/ArticleHandler.aspx, 8/30/2015 8:50:27 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
TSLA $248.48 Up +5.49 +2.26%
Tesla Motors CAPS Rating: **