Tesla Motors, Inc.
) is facing 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. Tesla is striving to prevent the implementation of this
policy by the Ohio legislative body.
Tesla obtained the license to set up stores in Cincinnati and
Columbus in Ohio from the Bureau of Motor Vehicles. However,
these licenses have been cancelled. In addition, the Ohio
Automobile Dealers Association has taken legal action against the
existing stores of Tesla.
The implementation of the new law will not only mar the company's
results but will also affect customers and dealers. It is put
forward that dealers play an important role, which are lost in
case of direct sales. Dealers take care of warranty, recall and
other service-related issues with the manufacturer for the
Tesla has a good market in Ohio. It sold around 500,000 cars
annually in the state. The two most popular cars of the automaker
are Roadster, priced at $100,000, and Model S sedan worth
$75,000. The company also plans to offer a $35,000 economy model
for its customers in Ohio.
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. Tesla believes that direct sales reduces
the price and facilitates electric vehicle sales.
Not only in Ohio, last week, stringent licensing rules imposed by
the New Jersey Motor Vehicle Commission (NJMVC) and members of
Governor Christie's administration have placed Tesla in a
difficult position. The new regulations 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.
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.
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 (Buy) stock.
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