New Jersey did a 180 today on its stance about whether or not electric-car maker Tesla Motors (NASDAQ:TSLA) should be able to sell its vehicles directly to consumers. One year ago, New Jersey Gov. Chris Christie finalized an unexpected ban on direct sales of Tesla vehicles in the state. Today, the ban was reversed, sending shares up more than 3% as of market close.
A heated battle
Last year, after the Christie administration unexpectedly turned against Tesla in a last-minute deal, Tesla CEO Elon Musk blogged some vicious words toward the Christie administration, in a post titled "To the People of New Jersey."
On Tuesday, under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the Governor, ended your right to purchase vehicles at a manufacturer store within the state. Governor Christie had promised that this would be put to a vote of the elected state legislature, which is the appropriate way to change the law. When it became apparent to the auto dealer lobby that this approach would not succeed, they cut a backroom deal with the Governor to circumvent the legislative process and pass a regulation that is fundamentally contrary to the intent of the law.
The friction between Tesla and New Jersey officially ended today when Christie signed a bill into law enabling Tesla to open up to four stores where it can sell its cars directly to consumers.
Tesla provided this statement, attributable to Tesla VP of Corporate Business Development Diarmuid O'Connell, to The Motley Fool:
Tesla is pleased that Governor Christie today signed into law legislation that will allow the Company to reopen sales operations in New Jersey. As promised, the Governor ratified bill A3216 / S2098 approved earlier by both the House and Senate by overwhelming margins. Tesla thanks House Majority Leader Lou Greenwald, Senate President Steve Sweeney, Representative Tim Eustace, and Senator Shirley Turner for their leadership in sponsoring and pushing the bill through the legislature. We also wish to thank Tesla owners and supporters for their ongoing help. We are proud to tell New Jersey that we are open for business!
Tesla makes a number of arguments for selling its vehicles directly to consumers, but two stand out as key. First, Tesla argues that selling electric cars is an education-intensive process. Second, Tesla says a low-maintenance profile for its battery-powered cars means dealerships, who make most of their profit from service, wouldn't have incentive to sell Tesla vehicles.
Tesla's biggest win yet
In light of the heated history between Tesla and New Jersey, today was a key win for Musk & Co. And considering that New Jersey is the fourth-largest market for luxury vehicles, the win is a clear boon for Tesla sales. Last year, Model S sales increased 41% from 2013, reaching about 31,700. About 55% of these deliveries were in North America. Tesla said in its third-quarter letter to shareholders that it expects Model S deliveries to increase 50% in 2015 from 2014.
A similar bill is advancing in Georgia, which would allow Tesla to sell cars directly to consumers at up to five dealerships in the state. Tesla is probably hoping its high-profile win in New Jersey will encourage other states blocking Tesla direct sales to be more open to change.
Tomorrow, Tesla will make headlines again when the company announces its plan to "end range anxiety" with an over-the-air update to its entire Model S fleet.