Tesla Faces Sales Restriction in Missouri - Analyst Blog

After facing sales restrictions in New Jersey, Arizona and Ohio, Tesla Motors, Inc. TSLA is now faced with challenges in directly selling its vehicles in Missouri. Legislators are considering to impose a ban on direct sales of vehicles to the public in the state. According to a bill, customers can only purchase new vehicles through middleman franchised dealers.

The original bill, HB 1124, has been in circulation since Dec 2013 and was passed by the House on Apr 17, without any ban on direct sales. Recently, the bill was passed by the Senate with altered language, which is entirely different from the original bill. The original bill dealt with laws regarding all-terrain vehicles, recreational off-highway vehicles, and utility vehicles. While the present law restricts franchisors from competing against their franchisees, the amendment in the bill would prohibit direct selling by any auto manufacturer.

Tesla argues that the new law will help dealers to create a monopoly. Earlier it was put forward that dealers play an important role for the customers by taking care of warranty, recall and other service-related issues with the manufacturer, which is lost in case of direct sales.

Tesla offers its customers a relatively new technology which provides sustainable transportation. Electric vehicles offer more fuel efficiency and better emission standards compared to their gasoline counterparts. It believes that direct sales reduce the price of electric vehicles and facilitate higher sales.  

Tesla has a service center in St Louis, MO, employing 15 people. To date, the company has invested $2 million in the state. The automaker intends to open a larger service center in Kansas City, MO, later in 2014, employing 15 people and thus investing an additional $1 million in the state.

The bill, which is passed by the Senate, needs to have the final vote from the House. Tesla opines that the bill should be properly discussed in public keeping consumer interest on priority, before it is passed.

Tesla designs and manufactures electric vehicles and electric vehicle powertrain components for partners such as Toyota Motor Corp. TM and Daimler AG (DDAIF).

Tesla currently carries a Zacks Rank #5 (Strong Sell). Volkswagen AG (VLKAY), a Zacks Rank #1 (Strong Buy) stock, is currently performing well in the automobile industry.