Tesla EV stores could be banned in New Jersey

New Jersey has become the third U.S. state to halt the sales of Tesla cars sold directly through Tesla from company-owned outlet stores. New Jersey follows in the steps of Arizona and Texas in implementing a rule that would ban Tesla from operating its stores, which are alleged to violate state dealer-franchise laws mandating vehicles sales through third-party dealerships.

The state's motor-vehicle commission implemented a new rule on March 11 that, in effect, prohibits Tesla from continuing to sell cars out of their two outlet stores. Tesla claims that it had previously reached an agreement with Gov. Chris Christie's office to delay implementing the rule, and it is claiming the governor's office went back on its word. Tesla says that it had discussions with the governor's departing and incoming chief counsels, reaching an agreement that the issue would be decided by the state legislature, not by the state's motor-vehicle commission's issuance of a rule.

The governor's office issued a statement alleging that Tesla had known all along that it would need to petition the legislature to change the state laws, though Tesla disputes this. The automaker issued a statement in response:

"The statute in New Jersey plainly allows Tesla to be licensed to sell cars there," said Diarmuid O'Connell, Tesla's vice president of business development, in an email to Automotive News. "Indeed, the Motor Vehicle Commission has licensed Tesla under that statute ever since October 2012, and any suggestion that Tesla was told 'since the beginning' about any problem with its ability to be licensed there is false. The only thing that has changed is the Christie Administration's sudden decision to go around the Legislature in an attempt to enact a rule that the statute doesn't permit. Worse, it has done so without any reasonable notice or even a public hearing."

As in the cases of two previous states where Tesla stored were banned, Tesla is claiming that special-interest groups, namely automotive-dealer associations, are backing state efforts to revoke Tesla store licenses.

While Tesla is no longer able to sell the Model S in the three states mentioned above, the company has defeated efforts to ban its stores in Minnesota, North Carolina, and New York.

The New Jersey ban is set to go into effect on April 1, and it could deal a heavy blow to the company in one of its most important regional markets.

By Jay Ramey