Tesla to Appeal NJ Sales Rule - Analyst Blog

Tesla Motors, Inc. TSLA wants to file a petition against the stringent licensing rules imposed by the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie's administration. These regulations ban direct vehicle sales and necessitate the use of middlemen.

Tesla has been selling vehicles through two dealership licenses in New Jersey for the last two years. The company sells electric vehicles for about $60,000 before incentives.

Tesla stated that NJMVC while amending the regulation was under pressure from the New Jersey Coalition of Automotive Retailers representing the new-car dealers. Tesla alleged that the new regulation is adopted to protect the monopoly of a special interest group and is against free market operations. The law will hinder the growth plans of Tesla in New Jersey which will not only mar its results but will also affect customer interest in the state.

Tesla also said that franchise dealers are reluctant in selling electric vehicles and are not interested in promoting electric vehicle sales as gasoline vehicles account for a considerable part of their revenues. However, Tesla believes that electric vehicles offer more fuel efficiency and better emission standards compared to the gasoline counterpart.

However, the leader of the New Jersey dealers' group, Jim Appleton was against Tesla's appeal. He said the direct selling model of Tesla restricts access to warranty and safety recall services for the buyer. Appleton said that Tesla should follow the same rules followed by other automakers.

Tesla currently carries a Zacks Rank #2 (Buy).

Some other well-performing automobile stocks worth considering are Daimler AG (DDAIF), Tata Motors Ltd. TTM and Toyota Motor Corp. TM. Daimler and Tata Motors carry a Zacks Rank #1 (Strong Buy) while Toyota carries the same Zacks Rank as Tesla.