Tesla was dealt a crushing blow in New Jersey today after the state's Motor Vehicle Commission passed a rule that will prevent the company from selling its electric cars directly to consumers starting in April. Unlike other automakers, Tesla sells its Model S through company-owned retail stores — a business model that cuts out the franchised auto dealerships that have ruled the market for decades. New Jersey is the third US state to ban car manufacturers from selling directly to customers, joining Texas and Arizona. But unlike those two states, New Jersey is home to a booming luxury vehicle market, making this a major loss for Tesla.
As you might guess, Tesla is outraged by the decision. In a blog post, the company blasted Governor Chris Christie's administration for deceitful tactics. Tesla claims that Christie previously agreed to delay the proposed amendment, which would have allowed "a fair process" in the state legislature. But yesterday — just 24 hours before the amendment was hurriedly passed — Tesla says it abruptly received word that Christie's administration "had gone back on its word." Tesla says the amendment "is an affront to the very concept of a free market." And the company insists this isn't just about cutting out the middleman; Tesla says full control over the buying experience is necessary to properly educate car buyers about the benefits that come with going electric.
We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.
CEO Elon Musk took to Twitter with harsh words for the auto dealers that have lobbied against Tesla's strategy.
Criticism of New Jersey's decision is coming from all corners. Paul Graham, the influential Silicon Valley startup investor, also voiced frustration with what he perceives to be an attack on innovation. "Banning Tesla is an index of the corruptness of state governments as banning Uber is of city governments," he tweeted.