After facing sales restriction in New Jersey and Ohio, doors
Tesla Motors, Inc.
) in Arizona. According to a bill approved by the Senate
committee of Arizona, Tesla will be allowed to directly sell its
vehicles in the state without any dealer network.
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However, the House Bill 2123 supporting direct sales of Tesla,
has been opposed by the traditional auto manufacturers and
dealers. They believe that this will adversely affect consumers'
interest if the company goes bankrupt.
However, the Senate believes that this bill will simplify the
process of vehicle purchase. Tesla has a showroom in Scottsdale,
which only displays vehicles but is not allowed to sell under a
2000 law. Thus, Tesla is only able to sell in the state through
online orders. This, to some extent, hampers the sales of the
Recently, Tesla faced licensing problem in setting up additional
direct-sales galleries in Ohio. The issue will impede Tesla's
expansion in Ohio, eventually affecting its presence in the
state. The implementation of the new law will not only mar the
company's results but will also affect customers. The law was
supported by the argument that dealers play an important role,
which is lost in case of direct sales. Dealers take care of
warranty, recall and other service-related issues with the
manufacturer for the customers.
The new regulations approved recently in New Jersey also ban the
direct sales of vehicles by any automaker and necessitate the use
of middlemen. Thus, Tesla's sales will be restricted in New
Jersey and its existing retail licenses will be cancelled. The
automaker faces sales restriction in New Arizona and Texas as
well. These two states have also banned direct selling of cars by
Tesla currently carries a Zacks Rank #2 (Buy).
Some other automobile stocks which are performing well and are
worth considering include
Tata Motors Limited
Toyota Motor Corporation
). Daimler and Tata Motors carry a Zacks Rank #1 (Strong Buy)
while Toyota is Zacks Rank #2 stock.