New Jersey to Tesla (TSLA) : You’re Out of Here

Tesla (TSLA)’s unique retail concept of selling its popular electric cars through its stores and website rather than use the traditional dealer model, has turned sour in the State of New Jersey. According to an official press release by Tesla this morning, Governor Chris Christie’s administration backed by the New Jersey Motor Vehicle Commission (NJMVC) have turned their back on months of negotiations with the company as the try to push through a new regulation that would curtail the electric car’s ability to conduct sales in the Garden State.

In its press release Tesla says that it has been working effectively with the NJMVC and Governor Christie’s administration “to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers.” The legislative process on the fate of Proposal PRN 2013-138, which “seeks to impose stringent licensing rules that would, among other things, require all new motor vehicles to be sold through middlemen and block Tesla’s direct sales model,” has been continuing and Tesla says it thought everyone was acting in good faith, but now it’s not so sure.

In the release Tesla points out that on Monday it “received news that Governor Christie’s administration has gone 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”. Tesla also says that “The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey. This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state.” Tesla calls this political maneuvering “an affront to the very concept of a free market.”

Tesla Motors, which has faced resistance in the past from car dealership groups across the U.S. as it has expanded its stores, has had success in blocking similar legislation proposals (like PRN 2013-138) in other states, but New Jersey may prove to be a tough nut to crack.

Update: Bloomberg reports that Governor Christie’s administration has blocked Tesla from direct auto sales in a move the company said could shutter its only two showrooms in New Jersey.

Christie “has gone back on his word,” Tesla CEO Elon Musk said early today on Twitter (TWTR). “His administration, under pressure from auto dealers, may shut down Tesla in NJ as soon as today.”

A Christie spokesperson responded to Musk’s tweet, saying that “since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law. This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation, and Tesla has been aware of this position since the beginning.”

Tesla now has until April 1st to cease sales operations at the two stores the company operates in the state, according to Bloomberg.

TSLA shares were down $1.25, or 0.55%, at $233.50 in late trading Tuesday.

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