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What New Jersey’s Tesla Motors Sales Ban Means for Motorists

Efforts to expand Tesla Motors sales were dealt a blow this week when New Jersey officials decided to ban the premium electric car manufacturer from selling directly to consumers.

Tesla is now forced to sell through independent franchise dealerships like mainstream automakers, essentially barring all sales in the state for now. But the loss or benefit to consumers has been lost in finger-pointing between Tesla CEO Elon Musk and the administration of Gov. Chris Christie.

The bulk of new car sales in the United States go through independently owned dealerships, which act as a middle man between the big manufacturers and the consumer. Most states have regulations restricting direct sales, according to the National Automobile Dealers Association (NADA), though New Jersey is now one of the few that ban the practice outright.

The relatively tiny Tesla pursued a different model. Tesla “stores” are small, sometimes fitting inside a shopping mall, with only a handful of cars. Buyers order their cars direct from the factory and have maintenance performed at regional service centers. The strategy keeps overhead costs down for Tesla. But as Karl Brauer of Kelley Blue Book explained, it is not necessarily a benefit to the consumer.

“The current franchise system helps maintain consistent selling practices for dealers while it contributes to the local economies, so there are definite upsides to the franchise system,” he told ABC News.

“However, a direct-to-buyer system would allow manufacturers greater control over the entire process while making it more efficient, meaning automakers wouldn’t just design, engineer and price the cars but also control the sales atmosphere and the specific transaction pricing,” Brauer added.
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