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N.J. Gov. Christie Burns Another Bridge, This Time With Tesla Motors

By Tamara Walsh – Mar 11, 2014 at 1:35PM

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New Jersey threatens to block Tesla Motors from selling its cars in the garden state.

Tesla Motors (TSLA 0.72%) could lose the ability to sell its all-electric cars in New Jersey after the state's Coalition of Automotive Retailers, or NJ CAR, challenged the company's disruptive business model of selling its vehicles directly to consumers. The upstart electric-vehicle maker knows this conflict all too well. Tesla has been fighting similar battles across the country as the company tries to revolutionize the way we buy cars today.

Tesla has been aggressively growing its retail footprint by opening up showrooms in busy malls around the country. As of November, the EV maker had 47 stores open in the U.S. and Canada, 22 in Europe, and four in the Asia-Pacific region.

Unfortunately, this retail strategy has made Tesla enemy No. 1 to the country's big auto dealers. Tesla's retail aspirations in New Jersey came to a head today after the company accused Gov. Chris Christie's administration of going back on its word to "delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature."

Up to this point, Tesla has been working with both the New Jersey Motor Vehicle Commission and Christie's administration to sell its cars legally in the state. Tesla operates two retail stores and one service station in New Jersey. However, it warned that adoption of the regulation "would curtail Tesla's sales operations and jeopardize our existing retail licenses in the state." 

Ultimately, this law would ban Tesla from selling cars directly to consumers in New Jersey. On top of this, Tesla claimed that the New Jersey Motor Vehicle Commission has unjustly delayed the renewal of Tesla's current sales licenses. As a result, Tesla said it has been forced to delay its growth plans in the state. Not only do these actions hurt Tesla, but they also affect New Jersey citizens because the automaker would no longer be creating jobs in the state or investing in new store openings or service centers there.

New Jersey approved this rule to ban direct auto sales this afternoon. That means Tesla may be forced to close up operations in New Jersey.

New Jersey is the third state in the U.S. to ban Tesla from selling directly to consumers, following Texas and Arizona, which have sided with the vehicle dealerships that spend millions of dollars each year lobbying for auto franchise rules.

Shares of Tesla were down less than 1% on this news. While Tesla may have lost this battle, it certainly hasn't lost the war.

Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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