When Better Customer Service is Seen as…Anticompetitive?Posted: March 12, 2014
NJ Governor Chris Christie has banned Tesla’s direct sales model in NJ. Now, I understand completely why an auto manufacturer would want to use franchise dealerships rather than tying up all that capital themselves — they can focus on what they do best. I have absolutely no idea, however, how one could argue that the decision to sell directly is anti-competitive. Selling electric cars is extremely complicated — it takes way more effort and education than selling traditional vehicles. There’s plenty of evidence that salespeople at traditional dealerships are not equipped to (nor interested in) investing the extra effort it takes to pitch electric cars. (Imagine your car salesman explaining how you get a city permit to install a 220 volt charger in your garage and you start to get the idea…) Thus there’s a strong case for Tesla deciding to run the dealerships themselves. They want to make the experience smooth, slick, and iPhone like. And when someone goes into a Tesla dealership, it’s not because they were hoping the salesperson would compare the Tesla’s benefits with those of the Volt or Leaf, so where is the harm to competition?
Christie, what gives? Did NJ ban GM Saturn dealerships in the 1990s? Strange move for a Republican…
New Jersey To Tesla: You’re Outta Here
The New Jersey Motor Vehicle Commission voted Tuesday to ban the direct sale of vehicles in the state, becoming the third state in the nation to prevent Tesla from selling to consumers. That would force Tesla, founded by billionaire Elon Musk, to sell its cars through dealers.
Instead, Tesla will stop selling cars in New Jersey on April 1, according to Dow Jones. That means the auto company won’t have access to one of the nation’s most lucrative markets for luxury vehicles, while well-heeled New Jerseyites will have to pick up their Teslas somewhere else.
The commission’s vote followed month of discussions between Tesla and members of Gov. Chris Christie’s administration, according to a post on Tesla’s blog. The auto company said it thought that the commission and the administration were working to help it in the face of opposition from the New Jersey Coalition of Automotive Retailers.
Like many other dealer groups across the country, New Jersey dealers did not want Tesla to be able to sell cars directly to customers. On Monday, Tesla said it learned that “Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature.”
Tesla said it had already been issued two licenses to open dealerships in New Jersey. “This is an issue that affects not just Tesla customers, but also New Jersey citizens at large, because Tesla would be unable to create new jobs or participate in New Jersey’s economic revival,” the Tesla blog said.
Meanwhile, a spokesman for Gov. Christie said Tesla officials would need to convince the state legislature to reverse the New Jersey ban on direct sales.
Christie spokesman Kevin Roberts said, “Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law. This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation, and Tesla has been aware of this position since the beginning.”
The other two states to have banned Tesla from direct sales are Arizona and Texas. Coincidentally, both states are on Tesla’s consideration list for its massive battery factory. The other states in the running are New Mexico and Nevada.
Texas’ auto dealers have said they would still fight to keep the company from being able to sell directly to customers, even though the $5 billion plant is considered one of the biggest industrial prizes ever.
The New Jersey action comes after the Tesla Model S was named the top car for 2014 by Consumer Reports magazine.