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Tesla talking legislative battle over dealership regulations

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The Tesla Model S has been selected “Best Overall” car for 2014 by Consumer Reports.
The Tesla Model S has been selected “Best Overall” car for 2014 by Consumer Reports. - (FACEBOOK)

A meeting of the state’s Motor Vehicle Commission sparked a heated battle last week, when the board unanimously passed regulations that would essentially ban Tesla from doing business in the state as of April 1.

The electric car manufacturer lashed out, claiming the decision was a targeted assault on its business model. The Christie administration fired back, arguing that Tesla knew it needed to engage the Legislature on a bill that would legitimize the company’s direct sales operations under the law.

Well, consider the Legislature engaged.

Assemblyman Tim Eustace (D-Paramus), an electric car driver himself, said he intends to look into possible legislative remedies to fight the commission’s ruling. He hopes to draft something in the near future.

“If this administration were really serious about promoting job creation, economic growth and innovation in our state, then it should be demonstrating a good faith effort to work with Tesla rather than erecting obstacles,” he said following the vote.

Eustace is also looking at the decision from a personal level. If Tesla’s Paramus location goes under, that means “two dozen jobs in my district go away,” he noted.

“We can’t say on one hand we support New Jersey businesses and on the other hand say we only support certain New Jersey businesses,” Eustace said.

The commission passed the new set of regulations last week in a unanimous vote. Those rules impact Tesla more than every other automobile dealer in the state in two important ways.

First, the rules include a requirement that all new cars be sold through a franchised dealer rather than directly through the manufacturer itself, a core element of Tesla’s business model.

The other is a stipulation that all dealerships offer at least 1,000 square feet for their showrooms and maintenance areas. That’s a problem for Tesla, which does not incorporate service centers at all of its stores and often occupies space in high-end shopping malls.

In New Jersey, for instance, Tesla has stores in the Garden State Plaza mall in Paramus and at the Mall at Short Hills but only offers service at a completely separate location in Springfield.

“There’s no question this rule was aimed directly at Tesla,” the company’s associate general counsel, Jonathan Chang, said.

With possible legal action on the way, it’s still unclear what will happen to the company’s New Jersey locations in the immediate future, Chang added.

But Chang said it is the company’s belief that Gov. Chris Christie’s office is trying to drive Tesla out of the state.

That sentiment was echoed in a company blog post published before the meeting. In it, the company said that, as recently as January, it had been agreed upon with Christie’s former Chief Counsel Charles McKenna and new Chief Counsel Chris Porrino that the two parties would air out their issues in the Legislature, where it “could be handled through a fair process.”

Calling the move “an affront to the very concept of a free market,” the company also called out the administration for what it sees as an implementation of state law “at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers.”

That special interest group is the New Jersey Coalition of Automotive Retailers and its president, James Appleton, who was also in attendance at last week’s meeting.

Appleton argued that allowing manufacturers to cut out dealers in the car-buying process “puts the fox in charge of the chicken coop.” Still, Appleton says his organization is “willing and open” to work with Tesla — as long as it agrees to change its business model to meet state regulations.

And there is a market in New Jersey for Tesla’s high-end electric vehicles, which start around $70,000.

That was obvious during last week’s Motor Vehicle Commission meeting.

One by one, Tesla enthusiasts came up to the podium to protest the board’s decision.

Many were Tesla owners, with several even sporting company apparel to hammer home the point that they were indeed satisfied customers.

But then there were also folks such as Thomas Moloughney, a Chester resident who, despite being an avid supporter of electric cars, is not a Tesla owner. Moloughney said he decided to make the trek to Trenton on a whim, to voice his distaste for what he deemed to be a “very troubling” case of over-regulation.

“Let the market decide what works best,” Moloughney said.

E-mail to: andrewg@njbiz.com
On Twitter: @andrgeorge

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Andrew George

Andrew George

Andrew George covers the Statehouse from NJBIZ's Trenton bureau. Born and raised in N.J., Andrew has also spent time as a reporter in D.C., Texas and Pa. His email is andrewg@njbiz.com and he is @AndrGeorge on Twitter.

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