Next Hurdle For Tesla Motors Inc: A Possible Ban In New York


Tesla Motors Inc (NASDAQ:TSLA) may face another big setback. According to Jeff Morganteen of CNBC, New York could be the next state to ban the electric vehicle maker’s direct sales model. Last week, New Jersey Governor Chris Christie banned the company from selling its vehicles directly to consumers. Tesla Motors CEO Elon Musk and thousands of fans lashed out at Christie, accusing him of a backroom deal with auto dealers. Anyway, Tesla is now converting its two stores in New Jersey into showrooms.

Five states have banned Tesla

The Palo Alto-based company’s direct sales model is now banned in five states in the U.S: Arizona, Texas, Maryland, Virginia and New Jersey. Two more states, Georgia and Colorado, have set some restrictions rather than a complete ban. And auto dealers in New York and Ohio are pushing for a ban on selling vehicles directly to consumers.

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In New York, new legislation has been proposed which seems to be intended at preventing Tesla Motors Inc (NASDAQ:TSLA) from selling its cars directly to consumers. In November 2013, representatives of the automobile dealers association in New York met with Governor Andrew Cuomo to gain his support for the legislation.

New York auto dealers confident

Greater New York Automobile Dealers Association President Mark Scheinberg told The New York Post last week that he is confident that New York will follow New Jersey in blocking Tesla Motors Inc (NASDAQ:TSLA). Dealers argue that the dealership model is far better for consumers than the direct sales platform. It also gives entrepreneurs an opportunity to grow their businesses.

Mercedes-Benz of Brooklyn dealership owner Doug Wells told CNBC that if consumers are traveling and their vehicle breaks down, they can simply go to a local dealer that’s the same franchise. Dealers argue that the franchise model increases competition and accountability. But opponents say that dealers have created a monopoly on car sales.

Tesla Motors Inc (NASDAQ:TSLA) shares rose 1.29% to $237 in pre-market trading Tuesday.