Stringent licensing rules imposed by the New Jersey Motor
Vehicle Commission (NJMVC) and members of Governor Christie's
administration have placed
Tesla Motors, Inc.
) in a difficult position. The new regulations approved yesterday
ban the direct sales of vehicles by any automaker and necessitate
the use of middlemen. However, Tesla employs the direct selling
model for its cars. Thus, its sales will be restricted in New
Jersey and its existing retail licenses will be cancelled.
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Tesla alleged that the new regulation is adopted to protect the
monopoly of a special interest group and is against free market
operations. After the law is implemented, Tesla will have to sell
all motor vehicles through middlemen or auto franchise.
At present, Tesla owns two dealership licenses in New Jersey.
Over the last 9 months, Tesla was striving to obtain a new sales
license. Meanwhile, the NJMVC delayed the annual renewal of
Tesla's current dealer licenses without mentioning any reason
behind it. Now with the approval of the new regulations, these
dealerships will have to stop selling Tesla's cars.
The new laws will hinder the growth plans of Tesla in New Jersey.
This will not only mar the company's results but will also affect
the customers and the citizens of New Jersey. Tesla's planned new
dealership would have created job opportunities and helped in
economic revival of the state.
Tesla offers its customers a relatively new technology which
provides sustainable transportation. Electric vehicles offer more
fuel efficiency and better emission standards compared to the
Apart from New Jersey, Tesla faces sales restriction in New
Arizona and Texas as well. These two states have also banned
direct selling of cars by Tesla.
Tesla currently carries a Zacks Rank #2 (Buy). Some other
automobile stocks worth considering are
Tata Motors Limited
Toyota Motor Corporation
). Daimler and Tata Motors carry a Zacks Rank #1 (Strong Buy)
while Toyota is a Zacks Rank #2 stock.