Tesla Motors Inc Strikes Deal With NY On Direct Sales; Stock Soars

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) and the New York Automobile Dealers Association have finally reached an agreement that allows the EV maker to keep selling its cars directly to consumers in the state. New York Governor Andrew Cuomo signed legislation on agreement between the two parties. The report sent Tesla stock soaring 8.81% to $224.61 on Monday.

Tesla dodges yet another bullet

New York’s move comes just days after neighboring New Jersey overturned a ban on Tesla Motors Inc (NASDAQ:TSLA)’s direct sales. New Jersey’s Assembly Consumer Affairs Committee passed a bill that gives the San Francisco-based company the right to resume sales at its two existing showrooms. It also allows Tesla to open two more stores in New Jersey. The bill allows any company selling zero-emission vehicles directly to consumers to operate as many as four stores in the Garden State, reports Engadget.

Tesla Motors Inc (NASDAQ:TSLA) has five showrooms in the New York City and neighboring suburbs. Just like laws in many other states, New York has also attached some strings. The electric vehicle company can pursue direct sales only through its existing five stores. If Tesla wants to expand, it will have to go through dealerships. The legislation also strengthens auto dealer franchise protections.

Was Tesla trying to save its skin?

Governor Andrew Cuomo said the state economy needs auto dealers, manufacturers as well as innovative companies like Tesla Motors Inc (NASDAQ:TSLA). The bill strikes a balance where “both sides will thrive.” However, things aren’t as rosy as they appear. History suggests that the Elon Musk-led company risked losing direct sales if it didn’t reach some kind of compromise. For Tesla, the agreement in New York was more about saving its skin than developing equal opportunities. Unless the FTC steps in, auto dealers will still have an upper hand.

Tesla Motors Inc (NASDAQ:TSLA) shares were down 0.49% to $223.50 in pre-market trading Tuesday.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

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