Tesla Motors Inc Detour In New Jersey Just A Temporary Setback

Tesla Motors Inc Detour In New Jersey Just A Temporary Setback
<a href="https://pixabay.com/users/Blomst/">Blomst</a> / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) continues to battle auto dealers in multiple states over its direct to consumer sales model. The automaker was dealt a major setback in New Jersey when state lawmakers there passed a bill which requires a franchise license in order to sell new cars there. However, Wedbush analysts see this as just a “minor lane diversion for the company.

Outperform rating on Tesla reiterated

Analysts Craig Irwin and Min Xu issued a note this morning reiterating their bullish $295 a share price target and Outperform rating on Tesla Motors Inc (NASDAQ:TSLA). They note that the automaker currently has two stores in New Jersey which are operating under dealer licenses. Tesla had requested a third dealer license, but state officials had delayed it.

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The automaker also said that it had been working with Gov. Chris Christie’s administration and that they had an agreement to allow the issue to be settled in the legislature.

Why this isn’t a big deal for Tesla

The Wedbush team doesn’t see this as a major issue for Tesla Motors Inc (NASDAQ:TSLA) because of pending litigation and the fact that the company doesn’t have that many sales in the state. In addition, those who truly wish to purchase a Tesla can just go around the new rule by purchasing the cars online and then accepting delivery of them in a location outside the state.

Interestingly enough, New Jersey is the third state to ban direct sales of vehicles to consumers. The other two states are Arizona and Texas, which is particularly interesting because both are competing for Tesla Motors Inc (NASDAQ:TSLA)’s gigafactory to be located within them. Of course it is likely that if either of those two states make the final list of considerations, they will have to make their state laws more amenable to Tesla’s sales model.

Positives seen in Tesla’s battery cost reduction

The analysts continue to see “strong positives” in Tesla Motors Inc (NASDAQ:TSLA)”s “credible path” toward reducing the cost of its batteries in the long term. They also see positives in the target costs for the Generation III vehicle and believe that the public will be “receptive” in terms of buying electric vehicles when the Gen III comes out. They also believe that the company’s multi-year lead over “credible competition” means it is well-positioned to aggressively ramp up volume.


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